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WASHINGTON — On the same day in March that Lockheed Martin warned that sequestration could lead to thousands of employee furloughs and layoffs, America’s largest federal contractor disclosed it had just boosted the compensation of its former chief executive officer by more than $2 million.
Former Lockheed CEO Robert Stevens, who retired as CEO on Jan. 1 but remains chairman, saw his overall compensation rise from $23.4 million in 2011 to $27.5 million in 2012, according to US Securities and Exchange Commission forms.
The disclosure shows how — even with a looming sequester, budget standoffs and defense cutbacks — federal belt-tightening hasn’t yet lightened the wallets of top executives for some of the nation’s largest contractors.
“I don’t think you’re going to start seeing that until companies’ numbers are going flat and negative,” said Paul Dorf, managing director of Compensation Resources Inc. And despite its eventual warnings of sequester-related layoffs, Lockheed officials said the company performed well last year. The company also reported an increase in first quarter profits last week.
“We reached record levels for sales, segment operating profit, segment operating margin, earnings per share … orders and backlog,” the company said in a March 8 SEC filing.
Critics say the use of total compensation figures — a number required in SEC filings that factors in the value of an executive’s stock options and pension contributions and other less direct compensation in addition to salary and bonus values — is unfair because several of the figures are hypothetical based upon future performance of stock, among other factors. But, with companies frequently using different accounting language to describe how they pay their executives, the total compensation figure is the only standardized measure available.
Lockheed officials declined to comment on the firm’s compensation policies other than to refer to the company’s proxy statement, which noted the company’s total stockholder return outperformed both the Standard & Poors index and the S&P aerospace and defense index.
While his base salary of $1.8 million remained flat, Stevens’ compensation included a bonus, stock and option awards, non-equity incentive plan compensation, deferred compensation and other compensation.
Likewise, at Boeing, the second-largest defense contractor in 2012, CEO James McNerney saw his base salary remain flat at $1.9 million. But with stock and option awards and boosts in pension and incentive earnings, his overall compensation rose from $22.9 million in 2011 to $27.5 million in 2012.
Boeing spokesman John Dern said that Boeing’s compensation, too, is based on pay for performance and that the company performed “extremely well” against targets with record revenues in 2012. He said more than half of Boeing’s business is based on commercial airplane sales.
The company reported total revenues of $81.7 billion in 2012 compared with $68.7 billion in 2011. In its annual report, the company said one-third of its revenues came from federal contracts, including foreign military sales through the US government.
Among other top federal contractors, Raytheon has not yet filed a proxy statement detailing 2012 compensation with the SEC.
General Dynamics’ CEO Phebe Novakovic took over Jan. 1. The company’s former CEO, Jay Johnson, saw his overall compensation rise from $16.1 million to $18 million from 2011 to 2012, SEC forms show.
Bucking the trend, overall compensation for Northrop Grumman CEO Wes Bush dropped last year, from $26.6 million to $24.4 million.
Ben Freeman, an investigator for the Project On Government Oversight, said the numbers aren’t surprising. Last year, he found CEO compensation for the top five federal contractors averaged $21.5 million during 2011.
“If you’re going through a time of austerity, you’d hope the heads of these organizations would lead by example,” Freeman said.