Defense Bill Would Lower Reimbursement Cap for Contractor Executive Pay

December 6, 2012

Executive compensation for top defense contractors may continue to be in the millions of dollars, but less of it will be coming from taxpayers if a clause in the U.S. National Defense Authorization Act (NDAA) survives conference and is signed into law by President Obama.

The language, passed by the Senate Dec. 4, restricts the top amount the government will reimburse a defense company for the cost of an executive, pegging the number to limits set by the Office of Management and Budget for most federal employees. The effect would be a cut from a maximum of about $763,000 per employee today, to roughly $231,000, using 2012 numbers.

The three-quarters of a million dollar limit is currently set as an average of the compensation for large publicly traded companies. The limit does not stop companies from paying well above the reimbursable figure, rather, it caps the amount taxpayers contribute.

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