Economy  
comments_image Comments

Ripoff CEO Pay for Private Contractors: the Budget ‘Waste’ Deficit Hawks Never See

In 2009, the top 100 private purveyors of public services gobbled up $130 billion in federal contracts. In 2003, nine CEOs at for-profit colleges took in over $45 million each.
 
 
Share
 
 
 
 

Americans don’t like the idea of their tax dollars making anybody rich. That’s why TV ads bashing members of Congress for voting themselves pay raises flood our airwaves every campaign season.

But if you really want to find people profiteering off our tax dollars, don’t look at Congress. Look into the “private” sector -- at executives like Ralph Shrader, the CEO of Booz Allen Hamilton, a consulting company that gets 98 percent of its revenue from the federal government.

Shrader took home $4.2 million last year. The top five Booz Allen execs together pocketed just under $20 million. They averaged 23 times what members of Congress take home.

Or consider Howard Lance, the top exec at Harris, a Florida company that took in $2.2 billion in federal contracts last year for projects like overhauling the billing at veterans hospitals. Lance has collected, over the past five years, $46.1 million for his CEO labors, over 50 times congressional pay during that same time span.

And we certainly shouldn’t overlook Robert Stevens, the chief exec at Lockheed Martin, the top federal contractor of them all. Stevens made $20.4 million last year running a company that takes in 84 percent of its revenue from the U.S. government. A member of Congress would have to serve 58 two-year terms to make that much.

This list -- of private sector execs currently making fortunes from public sector tax dollars -- could go on quite a bit longer. Federal contracting has become a mammoth operation. In 2009 alone, the top 100 private purveyors of public services gobbled up $130 billion in federal contracts.

But you don’t have to grab a government contract to profiteer off tax dollars. A hefty number of corporate concerns have developed highly lucrative business plans that exploit our tax dollars indirectly. For-profit institutions of higher “learning” have evolved this exploitation into a morally indefensible art form.

For-profit colleges have been around, of course, for generations, but mostly at the margins of higher education. Two decades ago, less than 1 percent of college students attended for-profit institutions.

That figure has since multiplied over tenfold. The secret to the for-profit higher ed sector’s success: Corporate educational empires like the Apollo Group, operator of the University of Phoenix, aggressively recruit low-income students who qualify for federal student loans.

The students use these loans to pay their tuition. But many never graduate, and many of those who do don’t have the skills they need to make enough money to pay back their loans. So they default -- and taxpayers get stuck with the tab.

The top execs at these for-profit education corporations, in the meantime, get rich. Last week, a Bloomberg news report documented, for the first time ever, the incredible extent of these riches. Top execs at the nation’s biggest 15 for-profit colleges, notes the new Bloomberg report, have together pocketed $2 billion since 2003 selling off shares from their personal stashes of company stock.

Nine of these execs took in windfalls over $45 million each.

The vice-chair of the Apollo Group, Peter Sperling, cashed out an amazing $574.3 million. He currently owns a $20 million estate in California’s Santa Barbara and a “neoclassical villa and guest house” in San Francisco worth $47 million.

“For-profit colleges,” says Columbia University education analyst Henry Levin, “are reaching into the public trough to finance luxurious lifestyles at the expense of people who are going to have to pay back loans.”

All this feeding at the public trough, we need to keep in mind, comes at a time when local and state government budget cuts have public colleges and universities laying off faculty, raising tuition, and axing academic programs.

The really sad part of all this? We could easily end this executive feasting at the public’s expense. A simple model for protecting our tax dollars already exists.

In higher education, for instance, federal legislation has long denied our tax dollars to colleges and universities that discriminate by race or gender. As a society, we’ve made the determination that our tax dollars shouldn’t be subsidizing racial or gender inequality.

That same principle could be -- and should be -- extended. Our tax dollars should not be subsidizing economic inequality, by going to corporations that regularly and excessively overpay their top executives.

At what point does corporate executive compensation become excessive? Back in the 1960s, only a handful of U.S. corporations paid their top execs over 25 times what their workers took home. The President of the United States currently makes just under 25 times what the lowest-paid full-time federal worker makes.

Last year, the CEO of Strayer Education Inc., a for-profit college chain “that receives three-quarters of its revenue from U.S. taxpayers,” took home $41.9 million, over 2,000 times the take-home of a worker making $10 an hour.

That sort of profiteering off our tax dollars could not take place if federal law denied our tax dollars to enterprises that pay their executives over 25 or 50 or even 100 times what their lowest-paid workers are making.

Several members of Congress, most notably Rep. Jan Schakowsky from Illinois and Rep. Barbara Lee from California, have introduced legislation that would move us in that direction. Their legislation made sense In the “good times” before 2008. Their legislation makes even more sense today.

Sam Pizzigati is the editor of the online weekly Too Much, and an associate fellow at the Institute for Policy Studies.
 
See more stories tagged with: