Top Defense CEOs Cashing In On The War?

“I don’t want to see a single war millionaire created in the United States as a result of this world disaster.”

- President Franklin Delano Roosevelt, 1940

If he were alive today, the commander in chief of the “Great War” would be appalled. As the conflict in Iraq rages on, CEOs of the nation’s top defense contractors are cashing in on the military spending boom that began with the Sept. 11 terrorist attacks.

Total pay for these modern-day Daddy Warbucks has ballooned 200 percent, according to a study I co-authored for the Institute for Policy Studies and United for a Fair Economy. By contrast, the average large-company chief executive officer got a 7 percent pay hike between 2001 and 2004.

The head of a Long Island-based body-armor maker received the biggest pay raise among the 34 leading defense CEOs included in the study. David H. Brooks, CEO of the company he named after his initials, DHB Industries, made more than $70 million in 2004, 3,349 percent more than he made in 2001.

Brooks also billed the company for $87,500 in compensation for what he called “foregone vacation.” That kind of perk might be hard to stomach for the 50,000 or so military personnel who have looked forward to earned breaks, only to receive orders extending their periods of duty in Iraq.

On top of all that, Brooks sold DHB stock late last year worth about $186 million. His sudden move spooked investors, who drove DHB’s share price from a high of more than $22 to as low as $6.50. It has hovered around $7 this month.

Some might argue that Brooks is worth every penny if his products are saving lives in Iraq. But in May, the Marine Corps recalled 5,277 DHB Interceptor armored vests after questions were raised about the vests’ ability to stop 9-mm pistol rounds. By that time, Brooks had personally pocketed $250 million-plus in war windfalls.

Brooks isn’t the only example of an executive cashing in on the war. Hartford-based United Technologies CEO George David made $88 million last year, up from $22 million in 2001, mostly from exercising stock options. David’s big payoff came in a year when his company faced the humiliating cancellation of its Comanche helicopter program. The estimated cost of the helicopters had quadrupled during the 21 years that had been invested in the project, and the U.S. Army finally decided it wasn’t worth the expense.

Then there’s Halliburton’s top man, David Lesar. He made $11.4 million last year – although auditors have questioned more than a billion dollars’ worth of the company’s charges to the government for work in Iraq.

CEOs sometimes argue that their extreme pay packages are justified because of their tremendous responsibilities in overseeing complicated business activities. That argument doesn’t hold up when their pay is compared to military generals’.

Although the military leaders are responsible for the lives of thousands of personnel and command highly complex operations, their pay is minuscule by comparison. In 2001, defense CEOs made 12 times as much as military generals. By 2004, the ratio had grown to 23 to 1. Generals with 20 years’ experience earned $168,509 in 2004, including housing allowances and extra combat pay. Median pay for top defense CEOs was $3.9 million.

Lower down the hierarchy, pay gaps between military personnel and private contractors are also enormous. Private American security contractors working in Iraq earn up to 12 times an Army private’s annual pay of $24,278. Such gross disparities encourage military brain drain at a time of record-low enlistment rates.

FDR’s strong feelings about war profiteering were shared by his successor, Harry Truman. As a senator, Truman had traveled around the country going from one defense industry factory to another to investigate charges that executives were reaping unfair rewards. He later formed an investigative committee that saved billions in military costs.

War profiteering is as old as the history of war itself. But we can learn from Truman to strengthen oversight of wartime contracting. As the death toll mounts among Americans and Iraqis, it is all the more important to eliminate the profit motive for war.

Sarah Anderson is co-author of this year’s Executive Excess, an annual report published by the liberal think tanks Institute for Policy Studies and United for a Fair Economy. She’s a fellow of the Institute for Policy Studies in Washington.