WASHINGTON
—
President
Donald
Trump
issued
an
executive
order
today
that
prohibits
defense
companies
from
making
share
repurchases
and
paying
dividends
to
shareholders,
as
well
as
places
restrictions
on
executive
compensation,
unless
companies
make
investments
to
modernize
weapons
production
facilities.
“All
United
State
Defense
Contractors,
and
the
Defense
Industry
as
a
whole,
BEWARE:
While
we
make
the
best
Military
Equipment
in
the
World
(No
other
Country
is
even
close!),
Defense
Contractors
are
currently
issuing
massive
Dividends
to
their
Shareholders
and
massive
Stock
Buybacks,
at
the
expense
and
detriment
of
investing
in
Plants
and
Equipment.
This
situation
will
no
longer
be
allowed
or
tolerated!”
Trump
said
today
in
a
post
on
his
Truth
Social
media
platform,
shortly
before
the
EO
was
published
on
the
White
House
website.
“Therefore,
I
will
not
permit
Dividends
or
Stock
Buybacks
for
Defense
Companies
until
such
time
as
these
problems
are
rectified
—
Likewise,
for
Salaries
and
Executive
Compensation.
MILITARY
EQUIPMENT
IS
NOT
BEING
MADE
FAST
ENOUGH!”
he
said.
The
executive
order
formally
says,
“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.”
“Every
firm
across
our
economy
has
a
right
to
profit
from
prudent
investment
and
hard
work,
but
the
American
defense
industrial
base
also
has
the
responsibility
to
ensure
that
America’s
warfighters
have
the
best
possible
equipment
and
weapons.
These
two
objectives
are
not
mutually
exclusive,”
the
EO
says.
The
executive
order
mandates
that
Secretary
of
Defense
Pete
Hegseth
take
30
days
to
review
contractor
performance
and
identify
any
who
are
falling
short
—
from
“underperforming”
on
relevant
contracts,
to
failing
to
invest
in
production
capacity,
to
“not
sufficiently
prioritizing
United
States
government
contracts.”
If
so
identified,
Hegseth
is
to
work
with
the
company
to
remediate
the
issues
and,
if
that
fails,
Hegseth
is
to
“initiate
immediate
actions
to
secure
remedies”
through
a
number
of
legal
and
regulatory
channels,
such
as
the
Defense
Production
Act.
It
also
suggests
the
government
may
“cease
ongoing
advocacy”
for
underperforming
companies
when
it
comes
to
potential
deals
with
foreign
customers.
The
order
also
bakes
in
the
requirement
for
future
contracting,
saying
that
within
60
days
Hegseth
will
“ensure
that
any
future
contract
with
any
new
or
existing
defense
contractor,
including
a
renewal,
contains
a
provision
prohibiting
both
any
stock
buyback
and
corporate
distributions”
during
a
period
of
“underperformance.”
Elsewhere,
the
EO
mandates
that
executive
compensation
be
tied
not
to
traditional
financial
metrics
for
the
company,
but
to
“on-time
delivery,
increased
production,
and
all
necessary
facilitation
of
investments
and
operating
improvements
required
to
rapidly
expand
our
United
States
stockpiles
and
capabilities.”
Executives,
the
EO
says,
could
have
their
salaries
capped
at
currently
levels
—
presumably
more
flexible
than
Trump’s
original
demand
on
social
media
that
CEOs
not
make
more
than
$5
million.
In
his
social
media
post,
Trump
lists
several
actions
he’d
like
to
see
from
defense
companies
—
namely
building
new
production
plants
and
speeding
up
maintenance
and
repair
—
but
does
not
list
specific
metrics
that
companies
must
meet
to
regain
the
ability
to
buy
back
stock,
increase
executive
compensation
or
pay
dividends.
Singling
Out
One
Firm
In
another
post
on
Truth
Social
prior
to
the
EO,
Trump
took
aim
at
one
supposedly
offending
defense
company:
Raytheon,
the
weapon’s
building
arm
of
RTX,
responsible
for
manufacturing
products
like
the
Patriot
air
and
missile
defense
system.
Raytheon,
Trump
wrote,
“has
been
the
least
responsive
to
the
needs
of
the
Department
of
War,
the
slowest
in
increasing
their
volume,
and
the
most
aggressive
spending
on
their
Shareholders
rather
than
the
needs
and
demands
of
the
United
States
Military.
Raytheon
seems
to
think
this
is
the
Biden
Administration,
and
this
is
‘business
as
usual,’
IT’S
NOT!
Either
Raytheon
steps
up,
and
starts
investing
in
more
upfront
Investment
like
Plants
and
Equipment,
or
they
will
no
longer
be
doing
business
with
Department
of
War.”
The
president
added
that
RTX
must
stop
conducting
stock
buybacks
if
it
wants
further
business
with
the
US
government.
Breaking
Defense
reached
out
to
RTX
as
well
as
the
five
other
top
publicly
traded
defense
companies
for
comment.
RTX,
Boeing,
L3Harris
and
General
Dynamics
declined
to
comment.
Lockheed
Martin
and
Northrop
Grumman
did
not
immediately
respond
to
the
request
for
comment.
RELATED:
Defense
companies
keep
up
momentum
on
share
repurchases
despite
Navy
leader’s
criticism
Roman
Schweizer,
an
analyst
with
TD
Cowen,
said
prior
to
the
EO’s
publication
that
Trump’s
statements
could
come
as
a
surprise
to
industry,
as
Tuesday’s
announcement
of
an
agreement
between
Lockheed
Martin
and
the
Pentagon
to
triple
PAC-3
production
was
seen
as
a
positive
sign
for
defense
contractors.
“Ultimately,
this
announcement
[from
Trump]
results
in
more
questions
than
answers,
and
we
would
expect
DoW
to
clarify
the
President’s
intent
at
some
point
and
establish
definitions
and
benchmarks
for
the
policy.
We
expect
Congress
to
have
questions
about
the
policy
as
well,”
he
wrote
in
a
note
to
investors.
In
December,
Schweizer
wrote
that
implementing
an
EO
targeting
defense
companies
could
result
in
“a
host
of
regulatory
and
legal
issues,”
including
on
whether
firms
like
Amazon
or
Microsoft
could
be
considered
defense
contractors
due
to
their
contracts
with
the
military
and
US
intelligence
agencies. In
today’s
note,
he
stated
that
his
take
remains
the
same.
Hegseth
expressed
support
for
the
pending
restrictions,
posting
a
screenshot
of
the
Truth
Social
post
on
X
and
adding
the
“100”
emoji.
In
another
social
post
guaranteed
to
raise
eyebrows
in
the
defense
industry,
Trump
said
he
wanted
the
defense
budget
for
fiscal
2027
to
be
raised
to
$1.5
trillion
—
more
than
50
percent
its
current
level.
“This
will
allow
us
to
build
the
“Dream
Military”
that
we
have
long
been
entitled
to
and,
more
importantly,
that
will
keep
us
SAFE
and
SECURE,
regardless
of
foe,”
the
president
wrote,
suggesting
purported
revenue
from
his
foreign
tariff
regime
would
offset
the
cost.
Updated
on
1/7/2026
at
5:32
p.m.
ET
to
include
information
from
a
later
Trump
post
on
Truth
Social.