BY COMFORT OGBONNA
The Trump administration is preparing an executive order that would impose limits on dividends, share buybacks and executive compensation at major defense contractors whose government projects run over budget or fall significantly behind schedule, according to three people familiar with the proposal. The move reflects growing frustration within the White House and the Pentagon over what officials see as inefficiency, cost overruns and delays across some of the most expensive weapons programs in the U.S. military.
President Donald Trump and senior defense officials have repeatedly criticized the defense industry as costly, slow-moving and resistant to change, arguing that entrenched practices have made it difficult for the military to quickly produce and deploy modern equipment. The planned order is intended to pressure contractors to improve performance and accountability by tying financial rewards more closely to meeting cost and delivery targets.
Industry groups and major defense firms are closely monitoring the proposal, which is said to be linked to a broader Treasury Department initiative. Two of the sources said the plan has triggered concern across the sector because of its potential impact on corporate finances and shareholder returns. Details of how the order would force companies to comply remain unclear, and those briefed on the matter cautioned that the language is still being drafted and could change before any formal announcement.
A White House official stressed that no decision has been finalized, saying discussions about potential executive orders remain speculative until formally announced.
News of the proposal rattled investors, with shares of leading defense contractors falling in after-hours trading. Lockheed Martin shares dropped 1.6%, while Northrop Grumman declined 2% after initial reports of the plan circulated through political news outlets.
Share buybacks and dividends are a common feature of the defense industry, where large, long-term government contracts often provide steady cash flow. Lockheed Martin, for example, increased its dividend for the 23rd consecutive year in October, raising it to $3.45 per share. At the same time, the company authorized up to $2 billion in additional share repurchases, bringing the total value of approved buybacks to $9.1 billion.
Critics within the government argue that these shareholder payouts stand in stark contrast to the persistent problems facing several flagship defense programs. Lockheed’s F-35 fighter jet, one of the most expensive weapons systems ever developed, has faced repeated cost increases and delivery delays. Similar issues have affected other major programs, many of which have taken far longer to complete than originally promised and at significantly higher costs to taxpayers.
Northrop Grumman’s Sentinel intercontinental ballistic missile program, designed to replace the aging Minuteman III missiles, has also drawn scrutiny. The U.S. military said last year that the $140 billion program is years behind schedule and roughly 81% over budget, highlighting the scale of the challenges facing defense procurement.
The largest defense contractors, including Lockheed Martin, Northrop Grumman, General Dynamics and Boeing, did not immediately respond to requests for comment regarding the proposed executive order.
The potential restrictions come amid a broader effort by the Trump administration to overhaul how the Pentagon buys weapons and technology. In November, U.S. Secretary of Defense Pete Hegseth announced sweeping changes to the procurement system aimed at speeding up acquisitions and cutting through bureaucracy. Those reforms, which stem from an executive order signed by Trump in April, give the Pentagon greater authority over major weapons programs in an effort to eliminate layers of red tape.
Pentagon officials have described the current system as “unacceptably slow,” blaming fragmented accountability and misaligned incentives for delaying the deployment of new technologies at a time of rising global security threats. The administration argues that faster, more flexible procurement is essential to maintaining military readiness.
The defense industry itself has also pushed for changes, though often from a different perspective. In June, an industry group representing defense and aerospace companies said it had identified more than 50 regulatory requirements that discourage firms from working with the government. In a letter sent to Hegseth on June 3, the Aerospace Industries Association called for easing rules related to cybersecurity compliance, cost accounting standards, intellectual property protections and commercial acquisition requirements, arguing that excessive regulation adds cost and complexity to defense projects.
As the administration weighs new restrictions on contractor compensation and shareholder payouts, the proposed executive order underscores a growing tension between the government’s demand for accountability and efficiency and the industry’s concerns about profitability, regulation and long-term investment.
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