An executive order signed Jan. 7, 2026, directs the Secretary of War to identify underperforming defense contractors that have bought back stock or made corporate distributions, and to place limits in future contracts. The order was published in the Federal Register on Jan. 13, 2026, as Executive Order 14372, titled “Prioritizing the Warfighter in Defense Contracting.”
The order states that it is United States policy to speed defense buying and rebuild the defense industrial base. It says major defense contractors will stop share repurchases and dividend payouts when those uses of money come at the cost of faster procurement and greater production capacity. In its purpose section, the order says that, effective immediately, the contractors it describes are not permitted to pay dividends or buy back stock until they can produce a superior product, on time and on budget.
Within 30 days of the order’s date, and on a continuing basis after that, the Secretary of War must identify firms supplying critical weapons, supplies, and equipment if they are missing targets on their contracts, are not putting their own money into needed production capacity, are not giving United States Government contracts enough priority, or are building too slowly in the Secretary’s judgment. The identification covers contractors that, during that period, engaged in a stock buy-back or a corporate distribution. The Secretary must give any identified contractor notice describing the problem and then work with the contractor to resolve it. Where the law allows, the contractor may submit a remediation plan approved by its board of directors for the Secretary’s review during the 15 days after notice. For contractors the Secretary has already identified and studied in that way as of the order’s date, another review of that kind may not be required, as the Secretary decides.
If the remediation plan is insufficient, or the dispute is not resolved in that 15-day period, the order says the Secretary may begin steps at once aimed at faster output, putting the United States military first, and restoring adequate performance, investment, priority, and output, as far as the law permits. Those steps may include a voluntary agreement by the contractor, enforcement under the Defense Production Act, and contract enforcement under the Federal Acquisition Regulations and the Defense Federal Acquisition Regulations Supplement. When deciding whether to start an enforcement action, the Secretary, as far as the law allows, must consider the contractor’s financial condition, the economic viability of relevant programs, and possible mutual benefits from government growth opportunities paired with the contractor’s capital investments.
Within 60 days of the order, the Secretary must take steps so that any future contract with a new or existing defense contractor, including a renewal, bars stock buy-backs and corporate distributions during a period of underperformance, contract non-compliance, insufficient prioritization, insufficient investment, or insufficient production speed, as the Secretary determines. Those contracts must also state that executive incentive pay will not be tied to short-term financial measures, such as free cash flow or earnings per share produced by stock buy-backs. The order says that pay will instead be linked to on-time delivery, increased production, and the investments and operating improvements needed to expand United States stockpiles and capabilities. The contracts must let the Secretary, after a finding of those problems, require that executive base pay stay frozen at present amounts, except for rises that match inflation, as the law permits, for a period long enough for the Secretary to review incentive pay.
When the Secretary identifies a contractor under the review section, the Secretary must consult the Secretary of State and the Secretary of Commerce on whether to stop ongoing advocacy or deny new advocacy when lagging contractors seek an overseas foreign military sale or a direct commercial sale. The order directs the Chairman of the Securities and Exchange Commission to consider whether to amend stock buy-back rules under Rule 10b-18 so the relevant safe harbor would not cover defense contractors of the type the Secretary identifies.
The order says it does not impair lawful authority of an executive department or the budget functions of the Director of the Office of Management and Budget. It must be carried out consistent with applicable law and subject to available appropriations. It does not create a right enforceable against the United States. Publication costs are to be borne by the Department of War. The order does not say it revokes or amends any earlier order.