On January 5, 2013,
Even as federal government workers’ pay is repeatedly targeted for reductions and average Americans’ wages have either stagnated or declined, the amount the government pays to the executives of firms that live off of government contracts has soared over the past 15 years.
Currently, federal government contractors can charge taxpayers up to almost $1 million annually for each contractor employee’s compensation. This is up from $250,000 in 1998 when it was set by law — this cap has increased at a pace that regularly exceeds the rate of inflation.
Large corporate contractors — many of which subsist almost entirely off of government largesse, mostly from the Pentagon — pay their executives many times the amount they charge the government for reimbursement, but the public still pays for their compensation because of their high profit margins.
For instance, in just CEO pay in 2012 alone, Lockheed Martin’s Robert Stevens made $27.5 million (82 percent of Lockheed Martin’s revenue is from government contracts), Northrop Grumman’s Wesley Bush made $24.4 million (90 percent of the firm’s revenue is from government contracts), and Huntington Ingalls’s C. Michael Petters made $14.9 million (his company gets 100 percent of its revenue from government contracts).
These enormous salaries are possible because the profits military contractors get from government work are huge.
Excessive CEO compensation is one of the factors making inequality worse — in 2012, the average CEO-to-worker pay ratio at companies in the S&P 500 was 354-to-1. Government contracting policies should be bucking this trend not making income inequality worse.
This is sinister and unjust. Also sinister and unjust is our government does not require that private sector companies who bid on taxpayer-supported government contracts demonstrate that their companies are 100 percent employee owned and managed so that 100 percent of all profit earnings are paid out fully to the company owners, subject to personal taxation rates.
