Defense contractors are seeking urgent legal advice after U.S. President Donald Trump signed an executive order linking share buybacks, dividends and executive compensation to weapons delivery schedules. The order, titled “Prioritizing the Warfighter in Defense Contracting,” has raised concerns across the industry about enforceability but is already influencing corporate decisions, as companies seek to avoid potential retaliation from the administration. Executives and analysts say the threat of contract terminations and financial penalties, even if challenged in court, is enough to create a chilling effect.
The White House defended the move, with spokeswoman Anna Kelly saying the order signals an end to defense firms prioritizing investor returns over military readiness. Major contractors have responded cautiously: Lockheed Martin said it shares the administration’s focus on speed and accountability, while L3Harris told employees increased investment would be required. Other firms including RTX, General Dynamics and Northrop Grumman did not immediately comment, and Boeing declined to comment. Defense stocks initially fell before rebounding after Trump announced a proposed $1.5 trillion defense budget for fiscal 2027.
Analysts described the twin announcements as a mix of incentives and pressure, noting that major contractors paid about $8 billion in dividends and conducted roughly $10 billion in share buybacks over the past year. Questions remain over how the order can be enforced, since the U.S. government holds no equity or board representation in these firms. Still, industry lawyers warn that threatened contract actions could have real consequences. As one executive put it, regardless of legal challenges, defense companies face a losing battle on public perception when delays in weapons deliveries are weighed against executive pay and shareholder returns.
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