For One California Profiteer, Iraq is Going Great

November 12th, 2006 - by admin

Sarah Anderson/ AlterNet – 2006-11-12 22:50:52

(November 2, 2006) — “War is hell,” Gen. William Tecumseh Sherman once stated. This Civil War giant clearly did not hold stock in a major defense contractor.

For soldiers on the frontlines in Iraq, Sherman’s words might still resonate. But for defense executives and their shareholders, the open-ended “War on Terror” has been anything but hell for the bottom line.

A look at the San Francisco-based URS Corp., a major provider of Pentagon engineering and equipment repair services, can help illustrate this hell-only-for-some reality.

URS recently ran a help-wanted ad for experienced mechanics to work in Iraq. The ad made the job sound only slightly less brutal than Sherman’s March.

“Extreme danger, stress, physical hardships, and possible field living conditions are associated with this position,” the ad read. “You should expect to work 12 hour days, seven days a week.”

For mechanics who agree to these terms, URS offers $80,000 a year. Meanwhile, company CEO Martin Koffel made 180 times that amount last year in his somewhat less hazardous office environs on San Francisco’s Montgomery Street.

The pay gap stretches even wider between Koffel and soldiers on the battlefield. Army privates made about $25,000 last year, extra combat pay and housing allowances included.

Koffel and URS are booming. One big reason: Equipment under war-time stress, as URS officials happily report, wears out five times as fast as equipment in peacetime. In all, the defense contracts that URS has snared have brought in over $1 billion in each of the three years since the Iraq invasion, compared to only a few hundred million in 2002.

URS stock, not surprisingly, is worth nearly five times what it was before the war started.

These stock gains have bloated CEO Koffel’s personal bottom line. Last year, he cashed in more than $10 million worth of stock options, bringing his total compensation to $14.4 million.

In his good fortune, Koffel hardly stands alone, according to a study from the Institute for Policy Studies and United for a Fair Economy (PDF). According to the report, CEOs at the top 34 publicly held defense contractors have doubled their averaged pay during the four years since the “War on Terror” began.

The highest-paid defense executive — George David, the CEO of helicopter maker United Technologies — has hauled in more than $200 million total over the past four years. The CEO of another company laden with Pentagon contracts, Health Net’s Jay Gellert, has seen his pay leap over 1,000 percent during the post-9/11 period.

Health Net, thanks to Pentagon outsourcing, provides lucrative managed care services for military personnel and their families. The company is currently crowing about particularly strong demand for its mental health counseling services.

Some would argue that as long as defense executives keep their shareholders happy we shouldn’t begrudge them their millions in compensation. But such excessive pay levels during wartime actually imperil our nation. War requires shared sacrifice, not personal aggrandizement. What kind of message do those on the front lines get when they see defense industry executives strike it fabulously rich year after year?

Massive payoffs for defense executives also muddy our nation’s policymaking waters. We are creating, with these incredibly excessive rewards, an incentive for powerful, often politically connected corporate leaders to want to continue the war in Iraq — or to start new ones.

So what should we do? For starters, we can overhaul government procurement standards. Current U.S. laws already deny government contracts to companies that discriminate against women and people of color. Why should we let our tax dollars subsidize war profiteering?

Congress could put an end to this by requiring that all defense contractors restrain executive pay to reasonable levels during wartime. This restraint wouldn’t need to be a fixed dollar cap. Procurement rules could instead deny defense contracts to companies that pay their top executives more than 20 times what their lowest-paid worker receives.

Today, unlike in William Tecumseh Sherman’s day, we are fighting battles far from home, in Baghdad and Fallujah, not Atlanta and Gettysburg. But we shouldn’t let these great distances from the hell of war blind us to this most basic of democratic truths: In times of war, no one ought to get rich off someone else’s sacrifice.

Sarah Anderson is a Fellow of the Institute for Policy Studies and a coauthor of the report “Executive Excess 2006: Defense and Oil Executives Cash in on Conflict,” published by IPS and United for a Fair Economy.