War Profiteering Starts at the Top

By Chris Hartman and David Martin (June 24, 2003)

According to a new report by United for a Fair Economy (More Bucks for the Bang: CEO Pay at Top Defense Contractors) in 2002 median pay for defense contractor CEOs shot up 79 percent, while overall CEO pay inched forward just 6 percent.

Source: Center for Popular Economics


Back in 1940, on the eve of America's entry into World War II, President Roosevelt warned, "I don't want to see a single war millionaire created in the United States as a result of this world disaster."

Fast-forward 60 years. It is early April, 2003, and American soldiers are fighting their way toward Baghdad. The New York Times asks retired general Jay Garner, whom President Bush had just appointed to direct the civilian administration of occupied Iraq, what he likes about his job as CEO of defense contractor SyColeman. "Most of the guys are former military," Garner replies. "And you make a lot of money."

Well, it seems that times have changed since FDR's day.

In this recession, workers have seen their real wage gains of the late 1990s erode, while the galloping, outrageous CEO pay of the roaring 90s has slowed to a trot---that is, unless the CEOs were in the defense industry. According to a new report by United for a Fair Economy (More Bucks for theBang: CEO Pay at Top Defense Contractors) in 2002 median pay for defense contractor CEOs shot up 79 percent, while overall CEO pay inched forward just 6 percent.

The typical CEO for a defense contractor made $5.4 million in total compensation in 2002. That's 45 percent more than the median American CEO, who earned $3.7 million, according to Business Week.

Granted, weapons of war are in demand nowadays, but a larger defense budget is only a small part of the story. From 2001 to 2002, defense spending rose 14 percent, but median CEO pay in the defense industry grew more than five times as fast. All told, the top 37 defense contractors have taken home more than $1.35 billion in total compensation since 2000.

In contrast, an Army private in Iraq earns, including extra combat pay, about $19,600 a year. That's a far cry from $25.3 million, which Vance Coffman, CEO of the leading defense contractor Lockheed Martin, made in 2002 - 433 percent increase over his 2000 pay.

It would take a G.I. 1,293 years of combat just to earn Coffman's 2002 haul. Even the Commander-in-Chief, who earns $400,000 a year, would need 63 years in office to match Mr. Coffman's 2002 compensation.

There's no reason the Pentagon must tolerate such excess. In the name of shared sacrifice, we ought to build limits on CEO pay into defense contracts. The Pentagon could stipulate that all defense contractors limit their CEO's pay to no more than 25 times the salary of the lowest-paid worker in the firm.

Is that unfair government meddling in the marketplace? Not when taxpayer dollars are at stake. As part of the 2001 airline industry bailout, Congress prohibited pay raises for airline CEOs. That sensible approach ought to apply to all government contractors, especially during times of national emergency.

FDR wasn't the only president to take a dim view of war profiteers. In 1953, at the height of the Cold War, President Dwight Eisenhower said, "Every gun that is made, every warship launched, every rocket fired, signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed." Can anyone deny that the millions of dollars paid to defense executives represents no less a theft?

* To measure CEO pay in the defense industry, we examined the 37 publicly-traded corporations with at least $1 billion in total defense contracts from 2000 through 2002. The list includes well-known defense contractors like Lockheed Martin, Boeing, Raytheon, Northrop Grumman, and General Dynamics, as well as some companies not usually associated with military spending, such as Fedex, and Dell Computer, and Humana.

Chris Hartman is research director and David Martin is Media Coordinator at United for a Fair Economy in Boston. They are co-authors of "More Bucks for the Bang: CEO Pay at Top Defense Contractors," which can be found at www.faireconomy.org.


For the purposes of this study, the authors followed Business Week's method of calculating total compensation, which includes salary, bonus, "other compensation," restricted stock awards, long-term incentive payouts, and the value realized from the exercise of stock options.

Stuart D. Brandes, Warhogs: A History of War Profits in America (University Press of Kentucky, 1997) p. 227. Jane Perlez, "A Nation At War: The Postwar Task; U.S. Overseer Set to Remake Iraq," New York Times, April 15, 2003. Chris Hartman, David Martin and Ben Robinson, More Bucks for the Bang: CEO Pay at Top Defense Contractors United for a Fair Economy "Executive Pay" Business Week April 16, 2001, April 15, 2002, and April 21, 2003; company proxy statements. Congressional Budget Office Department of Defense, Defense Finance and Accounting Service, 2002 Military Pay Rates. Army private: $1,239.30 per month for the E-2 pay grade, plus $242.81 monthly subsistence allowance and $150 monthly Imminent Danger/Hostile Fire pay. See chart on p. 4 of More Bucks for the Bang at United for Fair Economy

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