The Trump administration is preparing an executive order that would restrict dividends, share buybacks and executive compensation at defense contractors whose projects run significantly over budget or behind schedule, according to sources familiar with the proposal. The move reflects growing frustration within the White House and the Pentagon over costly delays and inefficiencies in major weapons programs, as President Donald Trump pushes for a more agile and accountable defense manufacturing system.
Industry groups are closely monitoring the proposal, which is reportedly linked to a Treasury Department initiative, though the final language and enforcement mechanism remain unclear. A White House official cautioned that discussions around potential executive orders are speculative until formally announced. Nevertheless, defense stocks reacted to early reports, with shares of Lockheed Martin and Northrop Grumman falling in after-hours trading.
The planned order comes amid broader Pentagon procurement reforms aimed at speeding up weapons acquisition and reducing bureaucratic hurdles. Several major programs, including Lockheed’s F-35 fighter jet and Northrop Grumman’s Sentinel missile system, have faced sharp cost overruns and delays. While defense firms routinely return capital to shareholders through dividends and buybacks, the administration’s proposal signals a tougher stance on financial rewards tied to underperforming government contracts.
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