The average compensation package of the chief executive officer for one of the top five Pentagon contractors is roughly $21.5 million, according to an analysis by the Project on Government Oversight.
Ben Freeman, an investigator for the government watchdog group, looked at the compensation packages of CEOs at Lockheed Martin, Boeing, General Dynamics, Northrup Grumman, and Raytheon reported in the firms’ Securities and Exchange Commission filings.
The Defense Department — and therefore, taxpayers — pay for part of contractors’ executive compensation, which is billed as part of the indirect overhead rates on contracts. Some lawmakers are pushing measures to reduce how much contractors can receive for executive compensation.
(To be clear, the highest paid defense contractor wasn’t among the five in POGO’s analysis, Freeman said. David Cote, the CEO of Honeywell, received a $35.7 million compensation package last year, according to an Associated Press study.)
But the $21. 5 million in average executive compensation among the top defense contractor is still enough to pay for:
– the salaries of 475 American workers. “The average worker in the U.S. earned $45,230 last year,” Freeman said in his blog post. “These CEO’s were paid more in an average day than the average American worker was paid all of last year.”
– the salaries of 335 soldiers. “According to a 2011 Congressional Budget Office analysis, the median compensation (including basic pay, allowances for food and housing, and tax advantages) for enlisted U.S. military personnel with ten years of experience was about $64,000. ”
– the salaries of 268 defense and aerospace industry workers. “According to a Deloitte study, the average wage (just salary, not benefits) for the entire aerospace and defense industry in 2010 was $80,175.”
Taking an idea from the White House, New York Gov. Andrew Cuomo signed an executive order Wednesday limiting how much contractors can charge the state for executive compensation.
The order limits the maximum contractors can charge New York state agencies for their executive’s’ compensation to Level I of the federal government’s executive pay schedule, about $200,000.
“In certain instances providers of services that receive state funds or state-authorized payments have used such funds to pay for excessive administrative costs and outsized compensation for their senior executives, rather than devoting a greater proportion of such funds to providing direct care or services to their clients,” the order reads.
The Obama administration proposed a similar change last year regarding federal contractors but was unsuccessful in getting it through Congress.
The Office of Management and Budget has said the current federal cap of $693,951 is excessive. The federal cap, which is calculated annually based on compensation rates in the private sector, is expected to increase to $750,000.
Cuomo’s order also requires agencies to ensure that at least 75 percent of the money paid to contractors is spent on direct care or serivces, not administrative costs. That percent will increase 5 percentage points for the next two years so that by 2015 at least 85 percent of contractor payments will have to go to services.