Report documents runaway American CEO pay and war profiteering

By Michael de Socio
9 September 2005

A recently released study on CEO compensation in the US reveals that chief
executives at the largest US defense contractors are profiting greatly from
the Bush administration's "war on terror" and the Iraq war, bringing in
paychecks that have more than doubled since 2001.

According to the study, CEOs at the largest defense contractors have
received a 200 percent raise since the September 11, 2001 terrorist attacks,
compared to a 7 percent increase for chief executives at other large
companies.

The August 30 report, released to coincide with Labor Day, makes clear that
the "war on terror" and the Iraq war are a financial bonanza for the US
ruling elite.

The study states, "As the casualty count in Iraq continues to rise, top
executives of defense contractors are cashing in on the war and the
post-9/11 boom in overall defense spending." Expenditures for defense rose
nearly 25 percent since 2001 to $406 billion in 2004, with half of that
amount spent on private contractors.

The report, entitled "Executive Excess 2005: Defense Contractors Get More
Bucks for the Bang," was conducted jointly by the Washington-based Institute
for Policy Studies and the Boston-based United for a Fair Economy. The
definition of CEO compensation used by the report, which is the same as that
traditionally used by BusinessWeek, includes salary, bonuses, restricted
stock awards, payouts on other long-term incentives, and the value of
options exercised in a given year. It does not include the estimated value
of options granted but not exercised.

The study looked at the 34 publicly traded companies with at least 10
percent of their revenues from defense contracts in 2004. While most of the
top 100 defense contractors were privately held, the 34 included in the
report were publicly traded, meaning that their financial results were
easier to research, since privately held corporations have lower reporting
requirements for transparency and their financial information is not usually
open to public scrutiny.

Excluded from the study, besides privately held companies and those firms
that received less than 10 percent of their revenues from defense contracts,
were defense contractors such as universities, joint ventures and
corporations headquartered outside the US.

The 34 firms covered by the report include United Technologies, DHB
Industries, Halliburton, Textron, Rockwell Collins, General Dynamics and
Raytheon.

The report pointed out some of the worst of the war profiteers:

* "Body armor profiteer" David H. Brooks, the CEO of bulletproof vest maker
DHB Industries, personally earned $70 million in 2004, a 13,349 percent
increase from his 2001 compensation of $525,000. The report notes, "Brooks
also sold company stock worth about $186 million last year, spooking
investors who drove DHB's share price from more than $22 to as low as
$6.50."

The US Marines recalled over 5,000 DHB armored vests issued to troops in
Iraq and Afghanistan after their effectiveness to stop bullets was called
into question. "By that time, Brooks had pocketed over $250 million in war
windfalls," the study notes.

* David Lesar, CEO of Halliburton, formerly headed by Vice President *****
Cheney, received a 171 percent pay increase between 2003 and 2004, "the
period when government auditors were tallying up $1.4 billion in 'questioned'
or 'unsupported' charges by the company for work in Iraq."

* United Technologies CEO George David raked in $88 million in 2004, the
same year the Pentagon terminated its Comanche helicopter program. After
investing $6.9 billion and 21 years of effort into the helicopter-"including
10 years with David at the helm"-the project was scrapped upon
recommendation by the Army after projected costs for the helicopter
continued to balloon.

* J.P. London, CEO of CACI, whose employees served as interrogators and were
involved in the torture scandals at the notorious US-run Abu Ghraib prison
complex in Iraq, saw his pay jump 170 percent to $3 million in 2004.

According to the study, the average CEO-to-worker pay in the US also
increased greatly, from 301-to-1 in 2003 to 431-to-1 in 2004. By contrast,
in 1990 the average CEO pay was "only" 107 times more than the pay for the
average production worker.

The report notes that if the average pay of workers had risen as fast as CEO
pay since 1990, the lowest paid workers in the US would be earning $23.03 an
hour, not $5.15 an hour, and the average production worker would make
$110,126 annually, rather than the $27,460 average earned in 2004.

Other key findings of the report include:

* "Book Cookers": Between 1995 and 2004, CEOs of firms accused of using
shady and/or fraudulent accounting practices appeared 18 times on the top 10
lists of the highest paid CEOs each year.

* "Tax Dodgers": The $12.6 million average CEO pay of the 46 companies that
paid no federal income tax in 2003 was 55 percent more than the $8.1 million
received by the average CEO that year.

* "Gross Pay": The cumulative pay over the last 15 years of the 10 highest
paid CEOs in each year, taken together, totals more than $11.7 billion.

The entire ruling class stands exposed as a criminal class profiting from
war and capitalizing on natural disasters that bring calamity and massive
human suffering. As this report and others have documented, the wholesale
looting continues unabated, and Washington's war drive has increased the
feverish rate at which the financial elites exploit workers, whose social
and living conditions continue to deteriorate.

http://wsws.org/articles/2005/sep2005/ceos-s09.shtml


--
Virtually all of the specific economic policies advocated by the Italian and
German fascists of the 1930s have also been adopted in the United States in
some form, and continue to be adopted to this day. Sixty years ago, those
who adopted these interventionist policies in Italy and Germany did so
because they wanted to destroy economic liberty, free enterprise, and
individualism. Only if these institutions were abolished could they hope to
achieve the kind of totalitarian state they had in mind.

http://www.banned-books.com/truth-seeker/1994archive/121_3/ts213l.html


--
The number of Americans living in poverty increased by 1.3 million
last year (2003), while the ranks of the uninsured swelled by 1.4 million,
the Census Bureau reported Thursday (August 27, 2004).

http://www.cnn.com/2004/US/08/26/census.poverty.ap/