United States General Accounting Office

GAO Briefing Report to Congressional

Requesters

October 1995 DEFENSE

CONTRACTORS

Pay, Benefits, and

Restructuring During

Defense Downsizing

GAO/NSIAD-96-19BR

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-259287 

October 10, 1995

The Honorable Floyd D. Spence

Chairman

The Honorable Ronald V. Dellums

Ranking Minority Member

Committee on National Security

House of Representatives

The Honorable Jack Reed

House of Representatives

In response to your request, we have developed information on (1) the

compensation provided to executives and employees of the top 10 defense

contractors and the amounts executives realized through the exercise of

stock options, (2) the nature and extent of restructuring efforts due to

defense downsizing, and (3) the assistance provided to workers being

separated as a result of defense contractor downsizing.

Results in Brief

Compensation and Value of

Stock Options Exercised

For 1989 through 1994, we examined the salary, bonus, and other cash

payout received by the 5 highest paid executives at each of 10 defense

companies. We also examined the net value realized from the executives’

exercise of stock options. The stock options may have been provided to

them in prior years. The salary, bonus, and other cash payout paid to these

executives ranged from about $230,000 in 1989 to $17.92 million in 1993.

The net realized value of exercised stock options for the top five

executives varied greatly. In most cases, at least one of the executives at

each company did not exercise stock options in a given year. For those

times when stock options were exercised, the amount realized ranged

from about $27,000 to $26 million.

In 1989, the average annual compensation paid by different defense

contractors to salaried employees (as reported by 6 out of the 

10 companies) ranged from $35,900 to $48,700. By 1994, the figures had

increased to $48,100 and $55,000, respectively. In 1989, the average annual

compensation for hourly employees ranged from $24,700 to $35,200, and in

1994 these figures ranged from $30,200 to $39,500.

Page 1 GAO/NSIAD-96-19BR DOD Contractors
B-259287 

Restructuring Strategies

and Commercial Use of

Military Technology

The restructuring strategies companies have used to adjust to the

decreases in Department of Defense (DOD) procurement have included, to

varying degrees, the following:

• acquiring and/or merging with competitors,

• divesting themselves of units no longer considered to be part of their core

business,

• consolidating production facilities to reduce excess capacity, and

• commercializing military technologies.

Assistance to Separated

Employees

The categories of assistance usually available to all separated employees

consist of

• termination pay based upon salary level and length of service;

• outplacement services such as job counseling, help on resume writing,

interviewing techniques, and listings of job opportunities; and

• extension of employee health, dental, and insurance benefits for a time

period after separation.

Nine out of the 10 companies we surveyed provided incentives to

encourage voluntary separation. The incentives usually included a

combination of

• years added to age and length of service computations to give the

employee a higher retirement annuity,

• continued medical insurance benefits, and

• cash buyout.

Agency Comments In commenting on a draft of this report, DOD indicated that (1) DOD’s share

of a contractor’s total sales does not necessarily represent the percentage

of compensation costs charged to DOD contracts; (2) significant portions of

an executive’s compensation paid and claimed by the contractor may not

be allowable under government laws and regulations, contract terms, and

advance agreements; and (3) any compensation based on increases in the

price of corporate securities is unallowable and not recoverable against

DOD contracts, nor are any amounts determined to be unreasonable.

The Aerospace Industries Association of America, Inc. (AIA), in

commenting on our draft as the representative for the companies involved

Page 2 GAO/NSIAD-96-19BR DOD Contractors
B-259287 

in our review, stated that the information we presented was fair and

objective.

Scope and

Methodology

For our study, we selected the top 10 defense contractors (see app. I for

the list of contractors) awarded DOD contracts in 1993 where the value of

the contracts was equal to at least one-third of each company’s total sales

in 1993. We reviewed, for the period 1989 to 1994, data on executive

compensation and stock options exercised, data on employee

compensation, restructuring strategies, and assistance to separated

employees at these contractors. The data on executive compensation and

stock options exercised is that of the top five executives of the

corporations as reported in the companies’ annual proxy statements that

are publicly available. In response to our requests, each of the companies

provided data on employee compensation, corporate restructuring efforts,

and assistance to separated employees. We did not independently verify

this data. Our work on this assignment also included visits to some of

these companies and discussions with AIA officials. We performed the

work from August 1994 through August 1995.

Unless you publicly announce the contents of this report earlier, we plan

no further distribution until 30 days from its issue date. At that time, we

will send copies of this report to the Secretary of Defense, DOD Inspector

General, Defense Contract Audit Agency, and officials of the AIA. We will

also make copies available to others upon request.

Please contact me on (202) 512-4587 if you or your staff have any

questions regarding this report. Major contributors to this briefing report

were Charles F. Rey, Gordon W. Lusby, Frederick E. Lundgren, and 

Allen D. Westheimer.

David E. Cooper

Director, Acquisition Policy, Technology,

 and Competitiveness Issues

Page 3 GAO/NSIAD-96-19BR DOD Contractors
Contents

Letter 1

Briefing Section I 

Information on

Executive and

Employee

Compensation at Top

10 Defense

Contractors

6

Executive Compensation Elements 6

Range of Salary, Bonus, and Other Compensation for Top Five

Executives

8

Range of Net Value of Exercised Stock Options for Top Five

Executives

10

Highest and Lowest Average Annual Compensation of Salaried

Employees

12

Highest and Lowest Average Annual Compensation of Hourly

Employees

13

Briefing Section II 

Information on

Restructuring

Strategies at Top 10

Defense Contractors

14

Restructuring Strategies at Top 10 Defense Contractors 14

Acquisitions and Mergers, 1994-95 16

Acquisitions and Mergers, 1989-93 17

Major Divestitures 18

Examples of Consolidation Efforts, 1989-94 19

Commercial Use of Military Technology 20

Briefing Section III 

Information on

Assistance to

Separated Employees

at Top 10 Defense

Contractors

22

Assistance Available to Separated Salaried and Hourly

Employees

22

Examples of Termination Pay for Involuntarily Separated

Employees

24

Examples of Outplacement Services Offered Salaried/Hourly

Employees

25

Examples of Benefits for Voluntarily or Involuntarily Separated

Employees

26

Voluntary Separation Programs 28

Examples of Voluntary Separation Programs for Salaried

Employees

29

Examples of Voluntary Separation Programs for Hourly

Employees

30

Appendixes Appendix I: List of Top 10 Contractors 32

Appendix II: Total Sales of Top 10 Defense Contractors 33

Appendix III: Total Employees of Top 10 Defense Contractors 34

Appendix IV: Compensation of Top Five Executives 35

Page 4 GAO/NSIAD-96-19BR DOD Contractors
Contents

Appendix V: Net Realized Value of Exercised Stock Options 39

Related GAO Reports 44

Abbreviations

AIA Aerospace Industries Association of America, Inc.

DOD Department of Defense

GAO General Accounting Office

SEC Securities and Exchange Commission

Page 5 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section I 

Information on Executive and Employee

Compensation at Top 10 Defense

Contractors

GAO Executive Compensation Elements

Salary

Bonus

Other compensation

Cash equivalent

Stock options

Page 6 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section I 

Information on Executive and Employee

Compensation at Top 10 Defense

Contractors

The three major elements of a typical executive compensation package are

salary, annual bonus plans, and other compensation arrangements.

Typically, a company’s compensation committee (composed of members

of the Board of Directors) determines the amount and form of executive

compensation to be awarded each year. In general, this committee

considers such factors as company performance indicators or goals,

historical practices, and the current competitive environment (the

compensation practices of the marketplace). Salary is typically established

by determining the value of the executive’s duties and comparing it to

salaries paid to similar executives of similar firms. An executive’s bonus is

usually based on a comparison of the goals set for the executive to the

actual performance achieved by the company for the time period being

evaluated. Other compensation may include the cash value of perquisites

such as life insurance, club memberships, and relocation reimbursements.

Executives may also receive various types of stock awards, including

stock options, stock appreciation rights, and restricted stock. However,

we did not determine the present value of unexercised stock awards or the

total number of shares executives held. We are reporting the net realized

value of stock options exercised during a particular fiscal year. The stock

options may have been awarded in previous years.

The Securities and Exchange Commission (SEC) changed its compensation

reporting requirements during the period being evaluated. For 1989

through 1992, it required corporations to report compensation for their top

five executives as a single amount that included base salary, bonus, and

other compensation. In October 1992, the SEC issued new rules that

required proxy statements to provide a more detailed, 3-year history of

compensation for the five most highly paid executives earning more than

$100,000 annually in salaries and bonuses. The SEC also required firms to

report estimates of the value of stock options and stock appreciation

rights granted.

Page 7 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section I 

Information on Executive and Employee

Compensation at Top 10 Defense

Contractors

GAO Range of Salary, Bonus, and Other 

Compensation for Top Five Executives

Company 1989 1990 1991 1992 1993 1994

McDonnell 

Douglas

$0.23 - $0.63 $0.35 - $0.58 $0.49 - $0.85 $0.41 - $0.72 $0.63 -$1.09 $0.99 -$1.65

Lockheed 0.34 - 0.76 0.41 - 1.08 0.49 - 1.31 0.56 - 1.48 0.60 - 1.65 0.77 - 2.17

Martin 

Marietta

0.41 - 1.03 0.40 - 1.12 0.43 - 1.26 0.49 - 1.40 0.53 - 1.65 0.73 - 1.87

Raytheon 0.49 - 1.22 0.50 - 1.34 0.53 - 1.22 0.56 - 1.39 0.55 - 1.75 0.59 - 1.85

Northrop 0.24 - 0.80 0.43 - 1.13 0.40 - 1.26 0.40 - 1.16 0.37 - 1.13 0.61 - 1.61

General 

Dynamics

0.46 - 1.20 0.50 - 1.05 0.53 - 4.45 1.75 - 7.90 5.53 - 17.92 0.48 - 2.75

Loral 0.41 - 1.74 0.48 - 3.21 0.64 - 2.98 0.64 - 5.82 0.63 - 4.47 0.65 - 4.59

Grumman 0.23 - 0.56 0.26 - 0.44 0.27 - 0.60 0.35 - 0.77 Not available Acquired by 

Northrop

Litton 0.53 - 1.11 0.61 - 1.34 0.53 - 1.41 0.57 - 1.59 0.60 - 1.94 0.62 - 1.20

E-Systems 0.40 - 0.75 0.43 - 0.88 0.37 - 0.96 0.45 - 0.97 0.46 - 1.01 0.47 - 0.91

Dollars in millions

Page 8 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section I 

Information on Executive and Employee

Compensation at Top 10 Defense

Contractors

The table shows the range (lowest and highest) of annual executive salary,

bonus, and other types of cash or equivalent compensation at all 

10 companies for their top 5 executives for the period 1989 to 1994. The

lowest amount received by any of the top 5 executives at the 10 defense

contractors we examined was about $230,000 paid in 1989. In turn, the

highest amount received was about $17.92 million in 1993. More detailed

information is available in appendix IV.

Page 9 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section I 

Information on Executive and Employee

Compensation at Top 10 Defense

Contractors

GAO Range of Net Value of Exercised Stock 

Options for Top Five Executives

Company 1989 1990 1991 1992 1993 1994

McDonnell 

Douglas

$0 - $534 None None None $0 - $1,635 None

Lockheed 0 - 27 None None $0 - $417 0 - 1,300 $0 - $198

Martin 

Marietta

0 - 381 $104 - $348 $436 - $2,681 82 - 465 272 - 794 0 - 1,098

Raytheon 0 - 918 0 - 1,826 0 - 238 0 - 843 188 - 1,783 0 - 822

Northrop None None None 0 - 975 None 0 - 423

General 

Dynamics

None 0 - 153 None 2,968 -21,166 None 0 - 8,533

Loral 0 - 285 0 - 131 0 - 380 0 - 7,085 0 - 25,989 0 - 769

Grumman None None 0 - 4 None Not available Acquired by 

Northrop

Litton 0 - 667 0 - 1,271 0 - 457 0 - 235 0 - 5,263 0 - 3,569

E-Systems 0 - 68 None 0 - 242 0 - 63 0 - 1,625 0 - 187

Dollars in thousands

Page 10 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section I 

Information on Executive and Employee

Compensation at Top 10 Defense

Contractors

The table shows the range (the smallest and largest amount) of net

realized value of stock options exercised in the year by the top 

5 executives at all 10 companies for the period 1989 through 1994. The

approximate largest amount realized in each of the years is as follows:

• 1989 $918,000,

• 1990 $1,826,000,

• 1991 $2,681,000,

• 1992 $21,166,000,

• 1993 $25,989,000, and

• 1994 $8,533,000.

In most of the cases during 1989 through 1994, at least one executive at

each company did not exercise stock options during a fiscal year. In

addition, for almost one-third of the time none of the executives exercised

any stock options at the companies we examined. More detailed

information is available in appendix V.

Page 11 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section I 

Information on Executive and Employee

Compensation at Top 10 Defense

Contractors

GAO Highest and Lowest Average Annual 

Compensation of Salaried Employees

0

10,000

20,000

30,000

40,000

50,000

60,000

Year

Highest paid

Lowest paid

1989 1990 1991 1992 1993 1994

48,700 50,900 53,000 55,100 55,800 55,000

35,900 38,700 42,500 43,700 46,800 48,100

Actual dollars

Note: Data reported by 6 out of the 10 companies for 1989-93 and 4 companies for 1994.

The chart represents the range of average annual compensation for

salaried employees at the companies that reported data. The company

with the lowest average employee annual salary in 1989 reported the

amount of compensation at $35,900. The company with the highest

average annual salary in 1989 reported an amount of $48,700. In 1994, the

figures were $48,100 and $55,000, respectively.

Page 12 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section I 

Information on Executive and Employee

Compensation at Top 10 Defense

Contractors

GAO Highest and Lowest Average Annual 

Compensation of Hourly Employees

0

10,000

20,000

30,000

40,000

50,000

60,000

Year

Highest paid

Lowest paid

1989 1990 1991 1992 1993 1994

35,200 34,900 39,500 38,700 42,700 39,500

24,700 26,300 27,500 28,700 30,200 30,200

Actual dollars

Note: Data reported by 6 out of the 10 companies for 1989-93 and 4 companies for 1994.

The chart represents the range of average annual wages for hourly

employees at the companies that reported data. The company with the

lowest average employee annual wages in 1989 reported the amount of

compensation at $24,700. The company with the highest average annual

wages in 1989 reported an amount of $35,200. In 1994, the figures were

$30,200 and $39,500, respectively.

Page 13 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section II 

Information on Restructuring Strategies at

Top 10 Defense Contractors

GAO Restructuring Strategies at Top 10 

Defense Contractors

Acquisition and merger

Divestiture

Consolidation

Commercial use of military technology

Page 14 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section II 

Information on Restructuring Strategies at

Top 10 Defense Contractors

With the end of the Cold War starting in the late 1980s, defense contractors

have generally faced a declining demand for their defense products. As

government defense contracts were completed, defense contractors found

that new orders were smaller or nonexistent and in general, they needed

to make adjustments to restructure, convert, consolidate, and/or eliminate

excess production capacity.

We found that the restructuring strategies companies have used to adjust

to the decreases in DOD procurement have included, to varying degrees,

(1) acquisition and/or merger with competitors, (2) divestiture of units no

longer considered to be part of the core business, (3) consolidation of

production facilities to reduce excess capacity, and (4) commercialization

of military technologies.

Page 15 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section II 

Information on Restructuring Strategies at

Top 10 Defense Contractors

GAO Acquisitions and Mergers, 1994-95

Mergers and acquisitions within the

 U.S. defense industry

Buyer Unit acquired

Loral Unisys Defense Group

Martin Marietta Lockheed

Northrop Grumman

Loral IBM Federal Systems

Martin Marietta General Dynamics Space Systems

Northrop Carlyle Group Vought Aircraft

Litton Teledyne Electronic Systems

Page 16 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section II 

Information on Restructuring Strategies at

Top 10 Defense Contractors

GAO Acquisitions and Mergers, 1989-93

Other major defense industry mergers and acquisitions

Buyer Unit acquired

Lockheed General Dynamics Aircraft Division

Raytheon British Aerospace Corporate Jets

Martin Marietta GE Aerospace

Loral LTV Missiles Division

GM Hughes General Dynamics Missiles Division

Textron General Dynamics Cessna Aircraft

Northrop/Carlyle LTV Vought Aircraft

Loral Ford Aerospace

Of the 10 companies we reviewed, 8 have participated in a major

acquisition or merger event between 1989 and 1995. Some of these

companies participated in several separate acquisition events.

Page 17 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section II 

Information on Restructuring Strategies at

Top 10 Defense Contractors

GAO Major Divestitures

Company Division divested Year of event

General Dynamics Missile 1992

Cessna Aircraft 1992

Tactical Military Aircraft 1993

Space Launch Systems 1994

Litton Industries Western Atlas 1994

Note: Data as reported by the companies.

Two companies have used the strategy of divestiture. One sold some of its

defense business units. The other split its organization into two separate

companies, one primarily commercial, the other primarily defense.

Page 18 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section II 

Information on Restructuring Strategies at

Top 10 Defense Contractors

GAO Examples of Consolidation Efforts, 

1989-94

General Dynamics Consolidation of facilities of the 

Pomona Division

Northrop Consolidation of Electronics and 

Electro-Mechanical Division

Raytheon Consolidation of Missile Systems 

Division as well as Equipment and 

Electromagnetic Systems Division 

into one Electronic Systems Division

Based upon the information provided, some of the companies have

undergone a form of consolidation. This strategy may involve

consolidating any or a combination of (1) business units, (2) management

layers, and (3) organizational activities or functions.

Page 19 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section II 

Information on Restructuring Strategies at

Top 10 Defense Contractors

GAO Commercial Use of Military Technology

Lockheed Commercial satellite 

 program

Martin Marietta Air traffic control 

 systems 

Raytheon Environmental 

 monitoring system

Northrop Advanced Technology 

 Prototype Bus 

Page 20 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section II 

Information on Restructuring Strategies at

Top 10 Defense Contractors

GAO Commercial Use of Military Technology 

(cont.)

Loral Medical diagnostic 

imaging support system

Litton Commercial double hull 

tankers

E-Systems Data storage systems

The chart represents examples of efforts at the some of the top 10

contractors to find commercial uses for military technologies they have

developed. The list is not comprehensive. These companies may have

additional examples, and companies not shown may also have examples.

Page 21 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section III 

Information on Assistance to Separated

Employees at Top 10 Defense Contractors

GAO Assistance Available to Separated 

Salaried and Hourly Employees 

Termination pay

Outplacement services

Other additional benefits

Incentives for voluntary separation

Page 22 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section III 

Information on Assistance to Separated

Employees at Top 10 Defense Contractors

Sharp reductions in defense expenditures have led to significant

downsizing of defense contractors and resulted in substantial reductions

in defense-related employment. Overall defense spending and employment

peaked in the mid-to-late 1980s and have steadily declined since then. The

most dramatic spending drops, and those that have most directly affected

the defense industry, have been in the procurement accounts. Total

defense-related employment at its peak in 1987 was about 7 million

workers and has declined to an estimated 4.8 million in 1995. The

Department of Labor estimates that defense industry employment will

continue to decrease for the next 2 years.

The top 10 defense contractors we reviewed reported a total of about

188,000 employees being either voluntarily or involuntarily separated

between 1989 and 1994. At these companies, separations of employees

ranged from less than 2,000 to over 51,000. While data is limited on the

number of voluntary or involuntary separations, available information

indicates that a substantial percentage were involuntarily separated.

Insufficient data is available to determine a breakdown of separations of

executives or salaried and hourly employees.

The following figures describe the types of assistance those top 10 defense

contractors provide to either voluntarily or involuntarily separated

salaried and hourly employees. Data was not available on assistance

provided to executives. Voluntarily separated employees typically received

incentives to leave a company. Involuntarily separated employees are

those who were laid off.

Page 23 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section III 

Information on Assistance to Separated

Employees at Top 10 Defense Contractors

GAO

Salaried employees--ranged from 

nothing to 1 week's pay for each year of 

service, up to a maximum of 26 weeks

Hourly employees--ranged from nothing 

to 1 week's pay for each year of service, 

up to a maximum of 6 weeks

Examples of Termination Pay for 

Involuntarily Separated Employees

Page 24 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section III 

Information on Assistance to Separated

Employees at Top 10 Defense Contractors

GAO Examples of Outplacement Services 

Offered Salaried/Hourly Employees

Federally and state funded company 

retraining programs

Job search assistance

Temporary work space

Workshops on interview skills and 

resume preparation

Access to computers, telephones, and 

job search library

Page 25 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section III 

Information on Assistance to Separated

Employees at Top 10 Defense Contractors

GAO Examples of Benefits for Voluntarily or 

Involuntarily Separated Employees

Salaried and hourly employees

Medical coverage up to 1 year

Dental coverage up to 1 year

Life insurance up to 1 year

Retraining tuition reimbursement

Pay for unused vacation time

Page 26 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section III 

Information on Assistance to Separated

Employees at Top 10 Defense Contractors

GAO Examples of Benefits for Voluntarily or 

Involuntarily Separated Employees (cont.)

Salaried employees

Short-term disability insurance 

coverage

Hourly employees

Rehiring priority or rights for 

involuntarily separated

Pay for unused sick leave

Page 27 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section III 

Information on Assistance to Separated

Employees at Top 10 Defense Contractors

GAO Voluntary Separation Programs

Nine out of 10 companies reported 

incentive programs between 1989 and 

1994

Incentives included some combination of

years added to age and length of 

service for computing retirement 

annuity

continued medical insurance benefits

cash buyouts

Page 28 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section III 

Information on Assistance to Separated

Employees at Top 10 Defense Contractors

GAO Examples of Voluntary Separation 

Programs for Salaried Employees

Minimum age of 59, with option of either 

enhanced pension or severance pay 

based on years of service

Minimum age of 55, with 1 week of 

severance pay for each year of service 

Minimum age of 52, with $400 per month 

supplemental benefit until age 62

Page 29 GAO/NSIAD-96-19BR DOD Contractors
Briefing Section III 

Information on Assistance to Separated

Employees at Top 10 Defense Contractors

GAO Examples of Voluntary Separation 

Programs for Hourly Employees

Minimum eligible retirement age of 55, 

with severance pay

Minimum eligible retirement age of 55, 

with enhanced pension

Page 30 GAO/NSIAD-96-19BR DOD Contractors
Page 31 GAO/NSIAD-96-19BR DOD Contractors
Appendix I 

List of Top 10 Contractors

GAO List of Top 10 Contractors in 1993 With 

at Least One-Third DOD Business

McDonnell Douglas $14.5 $7.5 52

Lockheed 13.1 6.9 53

Martin Marietta 9.4 4.7 50

Raytheon 9.2 3.2 35

Northrop 5.1 3.0 59

General Dynamics 3.2 2.1 66

Loral 3.3 1.7 52

Grumman 3.2 1.7 53

Litton Industries 3.5 1.6 46

E-Systems 2.1 .8 38

Dollars in billions

Total

sales

 DOD

contracts

Percent

 DOD

Page 32 GAO/NSIAD-96-19BR DOD Contractors
Appendix II 

Total Sales of Top 10 Defense Contractors

GAO Total Sales of Top 10 Defense 

Contractors, 1989-94

Company 1989 1990 1991 1992 1993 1994

McDonnell 

Douglas

$13.938 $15.497 $18.061 $17.365 $14.487 $13.176

Lockheed 9.891 9.958 9.809 10.100 13.071 13.130

Martin 

Marietta

5.796 6.126 6.075 5.954 9.436 9.874

Raytheon 8.796 9.268 9.274 9.058 9.201 10.166

Northrop 5.248 5.490 5.694 5.550 5.063 6.711

General 

Dynamics

10.043 10.173 8.751 3.472 3.187 3.058

Loral 1.187 1.274 2.127 2.882 3.335 4.009

Grumman 3.559 4.041 4.038 3.504 3.249 Acquired by 

Northrop

Litton 5.023 5.156 3.526 3.711 3.474 3.446

E-Systems 1.626 1.810 1.991 2.095 2.097 2.028

Dollars in billions

Page 33 GAO/NSIAD-96-19BR DOD Contractors
Appendix III 

Total Employees of Top 10 Defense

Contractors

GAO Total Employees of Top 10 Defense 

Contractors, 1989-94

Company 1989 1990 1991 1992 1993 1994

McDonnell 

Douglas

127,900 121,200 109,100 87,400 70,000 65,800

Lockheed 82,500 73,000 72,300 71,700 88,000 82,500

Martin 

Marietta

65,500 62,500 60,500 55,700 92,800 90,300

Raytheon 77,600 76,700 71,600 63,900 63,800 60,200

Northrop 41,000 32,800 36,200 33,600 29,800 42,400

General 

Dynamics

102,200 98,100 80,600 56,800 30,500 24,200

Loral 12,700 26,100 24,400 26,500 24,200 32,400

Grumman 28,900 26,100 23,600 21,200 17,900 Acquired by 

Northrop

Litton 50,800 50,600 52,300 49,600 46,400 42,000

E-Systems 17,900 18,400 18,600 18,600 16,700 16,000

Page 34 GAO/NSIAD-96-19BR DOD Contractors
Appendix IV 

Compensation of Top Five Executives

GAO Total Current Compensation of Top 5 Executives 

at 10 Defense Contractors, 1989-94 

Company Executive 1989 1990 1991 1992 1993 1994

McDonnell 

Douglas

1

2

3

4

5

$0.634

 0.378

 0.371

 0.345

 0.228

$0.578

0.527

0.410

0.376

0.347

$0.851

0.741

0.537

0.519

0.487

$0.715

0.629

0.441

0.427

0.411

$1.088

0.970

0.637

0.637

0.626

$1.647

1.645

1.636

1.633

0.994

Lockheed 1

2

3

4

5

0.764

0.663

0.434

0.354

0.342

1.082

0.982

0.487

0.421

0.411

1.315

1.022

0.531

0.519

0.494

1.482

1.219

0.645

0.578

0.556

1.653

1.328

0.796

0.694

0.605

2.173

1.682

0.940

0.876

0.767

Martin 

Marietta

1

2

3

4

5

1.033

0.789

0.511

0.423

0.411

1.122

0.697

0.467

0.465

0.401

1.262

0.789

0.514

0.498

0.430

1.405

1.010

0.571

0.557

0.486

1.653

1.078

0.925

0.639

0.528

1.872

1.217

0.874

0.741

0.731

Dollars in millions

Page 35 GAO/NSIAD-96-19BR DOD Contractors
Appendix IV 

Compensation of Top Five Executives

GAO Total Current Compensation of Top 5 Executives 

at 10 Defense Contractors, 1989-94 (cont.)

Company Executive 1989 1990 1991 1992 1993 1994

Raytheon 1

2

3

4

5

$1.215

0.745

0.543

0.525

0.493

$1.340

0.925

0.605

0.541

0.499

$1.217

0.756

0.575

0.568

0.531

$1.389

0.855

0.633

0.587

0.557

$1.750

0.969

0.714

0.674

0.555

$1.848

1.022

0.849

0.709

0.595

Northrop 1

2

3

4

5

0.796

0.413

0.261

0.261

0.235

1.125

0.655

0.650

0.601

0.428

1.261

0.677

0.652

0.462

0.396

1.159

0.705

0.509

0.453

0.402

1.134

0.688

0.405

0.390

0.370

1.613

1.011

0.624

0.612

0.612

General

Dynamics

1

2

3

4

5

1.199

0.775

0.551

0.507

0.464

1.050

0.795

0.686

0.577

0.499

4.450

3.597

2.713

1.618

0.532

7.903

3.904

3.017

2.627

1.749

17.918

14.899

11.549

6.525

5.534

2.746

1.247

0.937

0.630

0.483

Dollars in millions

Page 36 GAO/NSIAD-96-19BR DOD Contractors
Appendix IV 

Compensation of Top Five Executives

GAO Total Current Compensation of Top 5 Executives 

at 10 Defense Contractors, 1989-94 (cont.)

Company Executive 1989 1990 1991 1992 1993 1994

Loral 1

2

3

4

5

$1.742

0.919

0.533

0.421

0.412

$3.213

1.568

0.623

0.524

0.478

$2.984

1.398

0.779

0.687

0.641

$5.816

2.088

0.782

0.689

0.643

$4.471

1.826

0.739

0.637

0.629

$4.586

2.395

0.764

0.657

0.650

Grumman 1

2

3

4

5

0.564

0.280

0.280

0.255

0.228

0.435

0.310

0.301

0.286

0.260

0.595

0.410

0.407

0.368

0.266

0.765

0.545

0.495

0.380

0.348

Not 

available

Acquired 

by 

Northrop

Litton 1

2

3

4

5

1.110

0.713

0.648

0.550

0.531

1.336

0.853

0.738

0.608

0.606

1.406

0.899

0.678

0.667

0.529

1.592

0.996

0.917

0.596

0.571

1.940

1.251

1.145

0.658

0.596

1.203

0.803

0.786

0.626

0.616

Dollars in millions

Page 37 GAO/NSIAD-96-19BR DOD Contractors
Appendix IV 

Compensation of Top Five Executives

GAO Total Current Compensation of Top 5 Executives 

at 10 Defense Contractors, 1989-94 (cont.)

Company Executive 1989 1990 1991 1992 1993 1994

E-Systems 1

2

3

4

5

$0.753

0.593

0.408

0.396

0.396

$0.884

0.681

0.465

0.430

0.426

$0.958

0.724

0.518

0.446

0.370

$0.967

0.732

0.517

0.510

0.452

$1.007

0.760

0.522

0.463

0.462

$0.907

0.549

0.524

0.481

0.470

Dollars in millions

Note: Data as reported in company proxy statements. Total current compensation comprised of

salary, bonus, and other types of cash or equivalent compensation.

Page 38 GAO/NSIAD-96-19BR DOD Contractors
Appendix V 

Net Realized Value of Exercised Stock

Options

GAO Net Realized Value of Exercised Stock Options of 

Top 5 Executives at 10 Defense Contractors, 

1989-94

Company Executive 1989 1990 1991 1992 1993 1994

McDonnell 

Douglas

1

2

3

4

5

$534

0

0

41

62

$0

0

0

0

0

$0

0

0

0

0

$0

0

0

0

0

$0

1,635

0

606

123

$0

0

0

0

0

Lockheed 1

2

3

4

5

0

27

0

25

0

0

0

0

0

0

0

0

0

0

0

165

417

107

0

0

0

641

161

1,300

29

198

0

0

0

143

Martin 

Marietta

1

2

3

4

5

235

0

160

381

219

235

299

139

348

104

2,681

1,155

1,213

745

436

465

276

99

82

130

794

499

293

272

498

0

1,098

0

429

366

Dollars in thousands

Page 39 GAO/NSIAD-96-19BR DOD Contractors
Appendix V 

Net Realized Value of Exercised Stock

Options

GAO Net Realized Value of Exercised Stock Options of 

Top 5 Executives at 10 Defense Contractors, 

1989-94 (cont.)

Company Executive 1989 1990 1991 1992 1993 1994

Raytheon 1

2

3

4

5

$918

0

0

0

0

$1,826

0

0

0

154

$0

60

0

238

113

$843

0

0

268

0

$935

1,783

286

370

188

$822

96

0

148

0

Northrop 1

2

3

4

5

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

975

0

0

35

0

0

0

0

0

0

423

0

0

0

General

Dynamics

1

2

3

4

5

0

0

0

0

0

0

0

0

153

0

0

0

0

0

0

21,166

10,422

2,968

7,006

4,788

0

0

0

0

0

8,533

0

4,464

3,282

1,759

Dollars in thousands

Page 40 GAO/NSIAD-96-19BR DOD Contractors
Appendix V 

Net Realized Value of Exercised Stock

Options

GAO Net Realized Value of Exercised Stock Options of 

Top 5 Executives at 10 Defense Contractors, 

1989-94 (cont.)

Company Executive 1989 1990 1991 1992 1993 1994

Loral 1

2

3

4

5

$0

0

0

285

0

$0

0

0

0

131

$0

0

0

380

131

$7,085

0

568

557

349

$25,989

0

1,087

312

1,035

$0

355

0

466

769

Grumman 1

2

3

4

5

0

0

0

0

0

0

0

0

0

0

0

0

0

0

4

0

0

0

0

0

Not 

available

Acquired 

by 

Northrop

Litton 1

2

3

4

5

16

0

0

667

362

0

1,271

0

61

108

0

0

0

0

457

0

0

0

235

104

5,263

0

0

0

0

22

342

3,569

0

834

Dollars in thousands

Page 41 GAO/NSIAD-96-19BR DOD Contractors
Appendix V 

Net Realized Value of Exercised Stock

Options

GAO Net Realized Value of Exercised Stock Options of 

Top 5 Executives at 10 Defense Contractors, 

1989-94 (cont.)

Company Executive 1989 1990 1991 1992 1993 1994

E-Systems 1

2

3

4

5

$57

53

57

68

0

0

0

0

0

0

$92

92

0

117

242

$63

38

0

0

0

$1,625

787

0

214

0

0

0

0

0

$187

Dollars in thousands

Note: Data as reported in company proxy statements.

Page 42 GAO/NSIAD-96-19BR DOD Contractors
Page 43 GAO/NSIAD-96-19BR DOD Contractors
Related GAO Reports

Defense Sector: Trends in Employment and Spending (GAO/NSIAD-95-105BR,

Apr. 19, 1995).

Defense Downsizing: Selected Contractor Business Unit Reactions

(GAO/NSIAD-95-114, May 3, 1995).

Overhead Costs: Defense Industry Initiatives to Control Overhead Rates

(GAO/NSIAD-95-115, May 3, 1995).

(705073) Page 44 GAO/NSIAD-96-19BR DOD Contractors
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