Trump Signs Executive Order 14372 Barring Underperforming Defense Contractors From Stock Buybacks and Dividends
On January 7, 2026, President Donald Trump signed Executive Order 14372, "Prioritizing the Warfighter in Defense Contracting," at the White House in Washington. The order provides that any defense contractor identified by the Secretary of War as underperforming may not pay dividends or buy back its own stock in any way until the problem is resolved.
The order says the United States produces the best military equipment in the world, but not enough of it and not quickly enough. Many large contractors, while underperforming on existing contracts, pursue newer and more lucrative contracts, stock buybacks and excessive dividends to shareholders at the cost of production capacity, innovation and on-time delivery. Effective immediately, the order says, such contractors are not permitted to pay dividends or buy back stock until they are able to produce a superior product, on time and on budget.
Under the order, within 30 days and on a continuing basis thereafter, the Secretary of War must identify contractors for critical weapons, supplies and equipment that are underperforming on their contracts, not investing their own capital in necessary production capacity, not sufficiently prioritizing United States Government contracts, or whose production speed is insufficient, and that engaged in a stock buyback or corporate distribution during that period. An identified contractor receives a notice describing the problem and may submit a board-approved remediation plan for the Secretary's review during the 15 days following notification. Contractors already identified and studied may not need an additional review.
If a remediation plan is insufficient or a dispute cannot be resolved within the 15-day negotiation period, the Secretary may initiate immediate actions to secure remedies to the maximum extent permitted by law, including enforcement tools under the Defense Production Act and federal acquisition rules. The Secretary must also consult the Secretaries of State and Commerce on whether to cease advocacy support for such contractors competing for international military sales.
The order further requires that within 60 days, all future defense contracts, including renewals, contain a provision prohibiting stock buybacks and corporate distributions during a period of underperformance, stipulate that executive incentive compensation be linked to on-time delivery, increased production and capacity investment rather than short-term financial metrics such as free cash flow or earnings per share, and allow executive base salaries to be capped at current levels during underperformance. The Chairman of the Securities and Exchange Commission is asked to consider amending the stock buyback safe-harbor rule so that identified contractors cannot use it. The costs of publishing the order are borne by the Department of War.
Source: The White House
Published by GSM · USA (original Chinese edition)
Photo: GSM 行政令统一模板（美国总统行政令）
