General Peter Pace: State of the Government-Industrial Monstrosity

President Dwight Eisenhower's Military-Industrial Complex went on a decade long steroid binge. It emerged as the Government-Industrial Monstrosity (GIM). In virus like fashion, the GIM infiltrated health care, education, energy, just about every government effort.

It did so under the guise of "modernization", which purports the private sector is more efficient and free markets are the best allocators of resources. Never mind that layers of private contractors, each with their 20-30% profit motive, can produce $400 hammers just as well as the old bureaucracy. Forget about legislated earmarks or protective measures Congress passes to aid its corporate sponsors.

But do pay attention to the influence peddlers, one of whom is General Peter Pace, former Joint Chiefs of Staff under President Bush. He landed several cushy part time jobs, one with SM & A, a global consulting firm. Their 2008 proxy statement had this to day of their arrangement with the General:

Mr. Pace is not obligated to work full time for the Company and may serve on the boards of, or as a consultant to, businesses that do not compete with the Company as long as he informs the Company of those outside activities and those outside activities do not materially interfere with the performance of his duties to the Company. The agreement provides for an annual base salary of $300,000. In addition, Mr. Pace is entitled to an incentive bonus equal to two percent (2%) of all revenue in excess of $12,000,000 earned by the Company from all Qualifying Projects during the Qualifying Periods applicable to such Qualifying Projects (as defined in the agreement). Mr. Pace also received a one-time cash Signing Bonus in the amount of $240,000 and was granted an option on the Effective Date of his agreement to purchase 100,000 shares of Common Stock of the Company, issued pursuant to the Company’s 2007 Equity Incentive Plan.

The target incentive for Mr. Pace under this plan is 50,000 shares of Common Stock of the Company, but the actual number of shares granted will be in accordance with the performance scale described above in this document.

Mr. Pace and his dependents are entitled to reimbursement for documented medical expenses not otherwise covered by the Company’s medical plan and disability insurance coverage and he receives other benefits as afforded other Executives and set forth elsewhere in this discussion.

Sweet! Pete not only made big money from his work, but he benefited from a buyout. His firm was purchased by Odyssey Investment Partners, a private equity underwriter (PEU) during the height of the financial implosion. Odyssey paid $119 million in cash for the General's firm. The deal closed in late December 2008.

From the largest aerospace and defense contractors, through the major software providers, to healthcare and financial/audit service providers, SM&A is the partner many companies turn to WHEN THEY MUST WIN.

General Pace's stock holdings grossed over $400,000. But the sale did something more invaluable for him, it put SM&A into private hands. Can you imagine the public's outrage when General Pace reported millions in incentive bonus for a part time job?

The Government-Industrial Monstrosity is here and Peter Pace is but a fractal.

(Don't be surprised if SM&A is advising health insurance companies in the health care reform fight. THEY MUST WIN. He could get a huge bonus for denying millions of Americans access to affordable health care.)