See what’s clicking on FoxBusiness.com.
President Donald Trump signed an executive order on Wednesday to prevent defense companies from paying dividends or buying back stock until they improve production and delivery performance.
“Effective immediately, they are not allowed in any way, shape, or form to pay dividends or buy stock, until such time as they are able to produce a high-quality product, on time and on budget,” reads the order.
Trump and the Pentagon have criticized the defense industry for what they describe as high costs and low productivity. The administration has vowed to make changes to improve the production of military equipment.
“I am committed to ensuring that the United States military has the most dangerous warfighting capabilities in the world,” the order reads. “Our nation can only be at peace if we maintain energy. The performance of America’s defense industrial base is critical to this position. After years of de-prioritizing priorities, traditional defense contractors have been encouraged to prioritize the interests of investors over the nation’s military.”
BOEING SECURES $8.6B CONTRACT TO BUILD FIGHT JETS FOR ISRAEL AIR FORCE
President Donald Trump signed an executive order barring defense companies from paying dividends or buying back stock until they improve performance. (Yuri Gripas/Abaca/Bloomberg via Getty Images/Getty Images)
“Although the United States produces the best military equipment in the world, we are not making enough of it quickly enough to meet the needs of our soldiers and our allies,” he added. “As a result, in these dangerous times, it is important that our defense contractors are held to the highest standards aimed at ensuring the development of the main national interests, including in relation to the timeliness and quality of defense equipment delivered.”
Trump made similar comments earlier Wednesday on Truth Social.
“I have been informed by the Department of Defense that the Defense contractor, Raytheon, is the most responsive to the needs of the Department of Defense,” he wrote.
Raytheon is the RTX defense contracting unit.
TRUMP ANNOUNCES PLAN TO BLOCK COLLEGE LEAVES FROM BUYING SINGLE FAMILY HOMES
President Donald Trump and the Pentagon have criticized the defense industry for what they describe as high costs and low productivity. (Getty Images / Getty Images)
Defense stocks fell after Trump’s position, reversing recent gains following the use of US military equipment to attack Venezuela and capture its President Nicolás Maduro and his wife in the Latin American country.
Shares of defense giant Lockheed Martin fell 4.8%, Northrop Grumman fell 5.5%, and General Dynamics fell 3.6% in afternoon trading in New York.
Shares of RTX fell 2% before the recovery and rose 2.5% in after-hours trading.
Trump’s order said that within 30 days, Pentagon chief Pete Hegseth will identify defense contractors who are underperforming in their contracts involving stock purchases. Hegseth then engaged those companies and gave them the opportunity to submit a remedial plan for Pentagon review within 15 days of the notification.
If Hegseth determines that the remedial plan is inadequate, steps may be taken to protect remedies, including enforcement actions.
Pentagon chief Pete Hegseth will identify defense contractors who are underperforming in their joint contracts and stock purchases. (Getty Images / Getty Images)
GET FOX BUSINESS ON THE GO BY CLICKING HERE
In two months, Hegseth will need to ensure that any futures security contracts contain provisions preventing any stock purchases if the company defaults on its contract.
“Additionally, the Secretary will ensure that these future contracts specify that executive incentive compensation for contractors will not be tied to short-term financial metrics, such as free cash flow or earnings per share driven by stock purchases, and instead will be tied to timely delivery,” the order said.
The order directed the US Securities and Exchange Commission to consider regulations to implement the proposed restrictions.
Reuters contributed to this report.
