Pentagon Profiteers: Executive Compensation In The Arms Industry

If Congress has its way, funding for the Department of Defense and related work on nuclear weapons at the Department of Energy will reach more than $850 billion in Fiscal Year 2023, far higher than spending at the height of the Cold War or the peak years of the Korean and Vietnam conflicts. While advocates of spending these enormous sums often argue that the money is needed to “support the troops,” more than half of the Pentagon’s yearly budget goes to private contractors, many of whom are making hefty profits at taxpayer expense while producing flawed products at exorbitant prices. One telling example of how these companies waste taxpayer dollars is how much they pay their top executives.

In 2021, the most recent year for which full figures are available, the top five weapons makers – Lockheed Martin LMT -0.7%, Boeing BA +0.5%, Raytheon, General Dynamics GD -0.1%, and Northrop Grumman NOC -1.4% – received over $116 billion in Pentagon contracts while paying their top two dozen executives a total of $287 million, according to data from the the Pentagon and company proxy statements. The CEOs of the top five contractors received compensation ranging from $18 million to $23 million each, including James Taiclet of Lockheed Martin, $18.1 million; David Calhoun of Boeing, $21.1 million; Gregory Hayes of Raytheon, $21.8 million; Phebe Novakovic of General Dynamics, $23.5 million; and Kathy Warden of Northrop Grumman, $19.9 million.

Since these firms receive a large share of their revenue from U.S. government contracts, much of this excessive executive compensation is essentially subsidized by the taxpayers. The figure for dependency on government contracts range from roughly half for Boeing (49%) and Raytheon (48%) to roughly three-quarters or more for Lockheed Martin (71%), General Dynamics (70%), and Northrop Grumman (85%). Huge CEO compensation does nothing to advance the defense of the United States and everything to enrich a small number of individuals.

It is useful to put the $287 million the top five contractors pay their top executives in some perspective. In the national security arena, average arms industry CEO pay of $21 million is 95 times the $221,000 that an active duty general makes, and 463 times the $45,000 in pay and allowances made by a beginning enlistee in the armed forces.

Read the full piece in Forbes.