DEFENSE CONTRACTORS. Congress examines defense-exec salaries
In 1986 a taxpayer-supported vacation for a dog meant trouble for defense contractors. In 1987, a $58,000 executive bonus may have the same effect. Congressional investigators who last year focused on overhead abuses such as charging kennel fees to Pentagon contracts have made defense-industry compensation their latest target. ``Salaries that beggar a cabinet officer's seem unreasonably bloated,'' said Rep. John Dingell (D) of Michigan in a March 11 letter to Defense Secretary Caspar Weinberger. ``This year, you must deal with compensation.''Skip to next paragraph
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Dingell complained in particular about the case of Merv Wallace, a mid-level manager at TRW who received a $58,000 bonus in 1984 even though he oversaw a division since charged with numerous counts of fraud.
In recent years defense contractors have become convenient punching bags for many members of Congress. Representative Dingell, however, is a heavyweight who seldom attacks just for show. As chairman of the House Energy and Commerce Committee, he is one of the most powerful legislators on Capital Hill and commander of an investigating staff larger than that of the House Armed Services panel.
A congressional probe of alleged illegalities at TRW led to Dingell's concern with pay. The company itself has pointed out fraud at divisions from Pennsylvania to San Diego. It is being investigated by several federal grand juries.
While such things as double bookkeeping were going on at TRW divisions, chairman Ruben Mettler was being paid about $1 million a year. In addition, his contract included a ``golden parachute'' clause which would pay him over $4 million if TRW was taken over and he lost his job. Bonuses were being handed out to TRW managers, such as Mr. Wallace, whose actions now appear questionable.
Dingell levels similar criticism at General Dynamics, which has also been charged with defrauding the government on numerous occasions in recent years.
The 60th-ranking General Dynamics manager receives more in bonus than Secretary Weinberger does in salary, according to figures compiled by the Energy and Commerce panel staff.
In the defense industry ``lavish executive compensation seems unrelated to facts or merit,'' Dingell concludes.
Further congressional hearings on the issue are planned. Dingell's letter to Secretary Weinberger requests the Pentagon's observations and recommended changes in policy by March 27.
A Pentagon spokesman acknowledges receipt of the letter and says only, ``We're working on it.''
Defense contractor profits, as well as salaries, are under congressional fire.
Last week the congressional General Accounting Office recommended the establishment of a government office to monitor how much money the defense industry makes. The GAO claims that between 1980 and 1983 contractors' profits were more than double those of firms making civilian products.
The Pentagon says it already watches profits, and at Congress's direction has begun a program to roll back contractor profit margins 1 percent. Deputy Assistant Defense Secretary Eleanor Spector says the GAO proposal goes too far, and that comparing defense and civilian profits is ``extremely judgmental.''
Contractors themselves call the GAO proposal the first step toward nationalization of the industry.
``You've got to look at these things over a longer period of time. Sometimes we make less money than other types of companies,'' says a defense-industry lobbyist.