The Trump administration is preparing an executive order that would restrict stock buybacks, dividends, and executive compensation at defense contractors with projects running over budget and behind schedule, three sources familiar with the plan told Reuters on Monday.
The proposed order targets major Pentagon suppliers, including Lockheed Martin, Northrop Grumman, Boeing, RTX, and L3Harris Technologies. Reuters could not determine the specific mechanism the order would use to enforce these restrictions, and sources said the language remains subject to change.
A White House official declined to confirm the plan, stating that discussion of potential executive orders constitutes “purely speculation” until officially announced.
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The administration’s move follows mounting frustration over expensive delays in major weapons programs.
Northrop Grumman’s Sentinel intercontinental ballistic missile program has ballooned to $140.9 billion — 81% over its original $77.7 billion estimate from September 2020, according to Pentagon cost assessments published in July. The program will also run several years behind its initial schedule.
Lockheed Martin’s F-35 fighter jet, among the Pentagon’s most expensive programs, has faced persistent cost increases and schedule delays throughout its development.
Defense contractors have maintained substantial shareholder return programs despite project delays. Lockheed Martin announced in October that its board approved a dividend increase to $3.30 per share for the fourth quarter of 2024, marking the company’s 22nd consecutive annual dividend increase. The company also authorized $3 billion in additional stock repurchases, bringing total buyback authorization to approximately $10 billion.
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Defense Secretary Pete Hegseth warned contractors during a November 7 speech at the National War College that companies unwilling to prioritize speed and invest their own capital would “fade away.”
“These large defense primes need to change, to focus on speed and volume and invest their own capital to get there,” Hegseth said. “If we do that, the Department of War is, of course, big time supportive of profits. We are capitalists, after all. But if they do not, those big ones will fade away.”
The speech accompanied sweeping changes to Pentagon weapons procurement that President Donald Trump authorized through an executive order signed in April.
Sources told Reuters the proposed compensation restrictions are tied to a Treasury Department initiative, though specifics remain unclear. Bloomberg reported Trump could sign the order as early as this week.
The administration has emphasized that it seeks to make defense production more agile amid concerns about the slow pace of weapons development and rising global threats.
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