SASC moves to codify Trump’s EO targeting defense stock buybacks

The Senate Armed Services Committee has adopted a bipartisan amendment to the fiscal 2027 defense policy bill that would restrict stock buybacks for defense contractors failing to meet specific performance requirements. The measure requires firms to submit a qualified defense investment plan detailing production capacity increases or face limitations on shareholder distributions and dividends. This legislative move aims to ensure taxpayer dollars are prioritized for national security and industrial expansion rather than executive compensation or stock price manipulation.

The amendment, which received bipartisan support from Senators Elizabeth Warren, Josh Hawley, and Mike Lee, seeks to codify a previous executive order issued by President Trump. Under the proposed rules, contractors would be required to provide the Pentagon with a specific plan to enhance production capacity. Failure to meet these performance benchmarks would trigger restrictions on equity security purchases, dividend payments, and other capital distributions. Additionally, the bill includes a provision that would prohibit the Department of Defense from contracting with companies unless they agree to these terms or obtain a waiver from the Secretary of Defense.

Proponents of the measure argue that defense contractors should prioritize expanding production over padding their bottom lines. Senator Hawley stated that contractors should focus on capacity, while Senator Warren claimed that large military firms are diverting billions in taxpayer funds toward executives and shareholders instead of investing in national defense capabilities. While the Senate committee has approved the measure, the House Armed Services Committee did not include similar language in its version of the authorization bill after Representative Chris Deluzio withdrew a related amendment due to jurisdictional concerns.

The defense industry has responded with significant opposition, led by the Aerospace Industries Association (AIA) and the U.S. Chamber of Commerce. AIA President Eric Fanning warned that the amendment could jeopardize progress in rebuilding the defense industrial base by discouraging investment and making it more difficult for new companies to enter the market. Keith Webster of the Chamber’s Defense and Aerospace Council further criticized the move as a flawed and unwarranted intrusion into free market mechanisms, arguing that stock buybacks provide essential market liquidity and stability. The bill is now headed to the Senate floor for further consideration.