President Donald Trump signed an executive order Wednesday prohibiting defense contractors from issuing dividends to shareholders or conducting stock buybacks until they deliver high quality military equipment on time and on budget.
“Many large contractors, while underperforming on existing contracts, pursue newer, more lucrative contracts, stock buy-backs, and excessive dividends to shareholders at the cost of production capacity, innovation, and on-time delivery,” the executive order states. “Effective immediately, they are not permitted in any way, shape, or form to pay dividends or buy back stock, until such time as they are able to produce a superior product, on time and on budget.”
In a post on Truth Social, Trump criticized defense companies for paying massive dividends to shareholders, conducting stock buybacks, and awarding excessive executive salaries “at the expense and detriment of investing in plants and equipment.”
Trump also criticized defense companies for failing to produce and properly maintain the military equipment they deliver to the armed forces.
“From this moment forward, these executives must build new and modern production plants, both for delivering and maintaining this important equipment, and for building the latest models of future military equipment,” Trump said. “Until they do so, no executive should be allowed to make in excess of $5 million dollars, which, as high as it sounds, is a mere fraction of what they are making now.”
Trump also singled out contractor RTX in a separate social-media post, saying the company “has been the least responsive” to the Pentagon’s needs and the “most aggressive” in prioritizing shareholder spending over the needs of the U.S. military.
He added that the company must “step up and start investing in more upfront investments like Plants and Equipment, or they will no longer be doing business with” the Pentagon.
Following the announcement, defense stocks fell, with Northrop Grumman, Lockheed Martin, and General Dynamics dropping 4% or more, and RTX shares down over 2% before rebounding after hours.
