On January 7, 2026, the Trump Administration issued Executive Order 14372, Prioritizing the Warfighter in Defense Contracting. This executive order emphasizes the importance of the defense industrial base to maintaining the U.S. military’s strength and lethal warfighting capabilities, stating that “years of misplaced priorities” (i.e., incentives to maximize investor returns to the detriment of the warfighter) have led to delays in the production of military equipment. To this end, the executive order asserts that certain defense contractors have prioritized stock buybacks and shareholder dividends over production capacity, innovation, and on-time delivery.

To achieve the administration’s desired objectives, effective immediately, defense contractors may not pursue stock buybacks or pay dividends until “they are able to produce a superior product, on time and on budget.” The executive order acknowledges that contractors are entitled to earn a profit but reiterates that they are also responsible for ensuring warfighters have the best equipment and weapons —  two obligations that are not mutually exclusive.

With respect to application and enforcement, the Secretary of War must, within 30 days of the signing of the executive order, identify underperforming defense contractors. The Secretary of War will then notify and engage with each contractor to resolve the issues and, where permissible under law, allow the contractor to submit a remediation plan within 15 days of notification. The executive order includes enforcement procedures for situations where a contractor and the Secretary of War are unable to resolve the dispute.

The executive order instructs the Secretary of War to include a contract provision prohibiting stock buybacks and shareholder dividends when the contractor is underperforming. It also requires the Secretary of War to ensure future contracts state that executive compensation will be aligned with on-time delivery, increased production, and operational improvements, rather than short-term financial metrics. The executive order also requires the Secretary of War to ensure future contracts will enable capping of executive compensation when there is a finding of underperformance.

The January 7 executive order can be found here. The executive order fact sheet can be found here.