Executive Order Overview
What It Does
The "Prioritizing the Warfighter in Defense Contracting" order targets defense contractors who have allegedly prioritized shareholder returns over production capacity and timely delivery to the U.S. military.
Key Prohibitions
- Stock Buybacks: Banned for contractors until they produce "superior products, on time and on budget"
- Dividend Distributions: Prohibited during periods of underperformance
- Executive Compensation: Cannot be tied to short-term financial metrics like EPS
Performance Criteria
The Secretary of War must identify contractors who:
- Fail to meet production benchmarks
- Insufficiently invest their own capital in production capacity
- Do not prioritize U.S. government contracts
- Maintain inadequate production speed
- Spend on buybacks/distributions while missing delivery targets
Enforcement Process
Identification Phase
Secretary of War identifies underperforming contractors who have engaged in stock buybacks or distributions while failing to meet production/delivery benchmarks.
Remediation Window
Identified contractors must submit board-approved remediation plans addressing production deficiencies and capital investment commitments.
Negotiation Period
Secretary negotiates with contractors to resolve issues and establish performance milestones.
Enforcement Actions
If remediation fails, Secretary may invoke Defense Production Act remedies and modify Federal Acquisition Regulations for future contracts.
Potentially Affected Contractors
The EO does not name specific companies, but major defense contractors with significant stock buyback programs include:
Lockheed Martin
F-35, missiles, space systems
RTX (Raytheon)
Missiles, radar, engines
Northrop Grumman
B-21, space, cyber
General Dynamics
Submarines, tanks, IT
Boeing Defense
Aircraft, satellites, weapons
L3Harris
Communications, sensors
Future Contract Requirements
The EO mandates that new defense contracts must include:
- Buyback Prohibition Clauses: No stock repurchases during periods of underperformance
- Distribution Restrictions: Dividend limitations tied to delivery milestones
- Executive Compensation Standards: Comp tied to on-time delivery and production increases, not EPS
- Performance Reporting: Enhanced transparency on production capacity vs. capital allocation