The Big Business of American Defense

With the Trump Administration moving towards conflict in at least one or two foreign theatres, a quick look at the some of the biggest individual beneficiaries of war is in order, taking a closer look at how much of the business of each of these five companies is attributable to the spending of U.S. tax dollars and how much the named executive officers at each company make, thanks to spending by the Pentagon.

Let's start by listing the five biggest defense contractors in the United States along with their global position:

1.) Lockheed Martin (also 1st globally)

2.) Boeing (also 2nd globally)

3.) Raytheon (also 4th globally)

4.) General Dynamics (also 5th globally)

5.) Northrop Grumman (also 6th globally)

Let's look at their net earnings for the most recent full fiscal year:

1.) Lockheed Martin - $5.302 billion (2016) up from $3.605 billion in 2015

2.) Boeing - $4.895 billion (2016) down from $5.176 billion in 2015

3.) Raytheon - $2.174 billion (2016) up from $2.067 billion in 2015

4.) General Dynamics - $2.995 billion (2016) down from $2.965 billion in 2015

5.) Northrop Grumman - $2.2 billion (2016) up from $1.99 billion in 2015

Here is the percentage of sales for each company that are made to the United States government:

1.) Lockheed Martin: 71 percent

2.) Boeing: 64 percent of Boeing's sales in its Defense business

3.) Raytheon - 67 percent

4.) General Dynamics - 60 percent

5.) Northrop Grumman - 84 percent

Stock Performance:  Here's a look at how each company's stock has performed over the past five years, keeping in mind that, in general, Named Executive Officers are among the largest individual shareholders:

1.) Lockheed Martin:

2.) Boeing:

3.) Raytheon:

4.) General Dynamics:

5.) Northrop Grumman:

In all cases, over the past five years, the returns to shareholders by the top five defense companies have outstripped the growth in the S&P 500 by a relatively wide margin.  

Here is the compensation for each company's Named Executive Officers (NEOs):

1.) Lockheed Martin:

2.) Boeing:

3.) Raytheon:

4.) General Dynamics:

5.) Northrop Grumman:

In total, in 2016, the five CEOs at the nation's largest defense contractors made $85.47 million resulting in average compensation of $17.09 million.

The United States defense industry defines the term "Big Business" thanks, in large part, to the spending of hundreds of billions of tax dollars by the Department of Defense.  In all cases (except perhaps Boeing which has a non-defence aircraft building business), these five companies would be far smaller entities without the beneficence of U.S. taxpayers.