Ever since Dwight D. Eisenhower warned about the dangers of the military-industrial complex, defense contractors and their friends at the Pentagon have taken a lot of guff for their political influence and spendthrift habits. So let’s pause to applaud one corporation in the military hardware business when it does the right thing.
My Bloomberg News colleague Tony Capaccio reports that Lockheed Martin (LMT) won’t ask the Pentagon to reimburse part of the $3.5 million it is paying the chief operating officer who left the company in disgrace last month after it was disclosed that he had an extramarital affair with a subordinate. In other words: Taxpayers will not have to pay millions to an executive drummed out of his job for sexual hanky-panky. The patriotism of it all!
Let’s review: Lockheed’s Christopher Kubasik, who had been in line to be chief executive officer of the world’s largest defense contractor on Jan. 1, departed after an inquiry confirmed a “lengthy, close and personal relationship” with someone who worked for him, said Robert Stevens, the company’s chairman and CEO, on Nov. 9. Kubasik was promised $3 million in severance and an additional $500,000 for waiving any claims against the company.
Military contractors are eligible to seek Pentagon reimbursement for a portion of executive compensation. Showing heroic restraint, Lockheed has notified the Defense Department that it does not plan “to seek government reimbursement for any part of Mr. Kubasik’s separation payment,” a company spokeswoman told Bloomberg News via e-mail. “It’s good to see the contractor take action so that no tax dollars are involved in any severance pay,” Senator Charles Grassley, an Iowa Republican, said in a separate e-mail.
One can’t argue with Grassley that this is a good outcome. Still, it raises a couple of questions:
1.) Why would a large company pay a shamed COO $3.5 million to honor his firing? (Is that what would happen to you if your boss showed you the door for some kind of impropriety?)
2.) Doesn’t this make you wonder if the Pentagon has defrayed the cost of cashiering other disgraced defense executives in the past?
By the way, the $631.4 billion defense authorization bill the Senate passed on Dec. 4 includes an amendment that would set the maximum executive-comp reimbursement at $230,700, down from the current cap of $763,029. The proposed lower figure is what we pay the vice president of the United States annually. The House version of the defense authorization bill does not contain the reduction. Lawmakers are expected to discuss the issue this week when they work out compromise legislation.