Senator Elizabeth Warren, D-Mass., has publicly credited former President Donald Trump with influencing defense contractors to increase investment in weapons production rather than shareholder payouts. Warren and Sen. Mike Lee, R-Utah, are urging the Pentagon to make Trump's restrictions on stock buybacks for defense contractors a permanent policy.
In a letter to Secretary of War Pete Hegseth, the bipartisan duo advocated for their "Prioritizing the Warfighter in Defense Contracting Act." This legislation aims to codify key provisions from Trump's January executive order. These provisions tie executive incentives to on-time delivery and production improvements, shifting focus away from short-term financial metrics. The executive order also allows the Pentagon, where regulations permit, to cap the base salaries of executives at underperforming contractors.
Staffers for Senators Warren and Lee analyzed earnings calls and financial reports from the 20 largest publicly traded U.S. defense contractors. Their review indicated that these companies collectively reduced buybacks and dividends by $2 billion in the first quarter of 2026, compared to the same period in 2025. During the same period, capital spending, which includes investments in factories and equipment, rose by $1.2 billion.
While the analysis does not definitively prove that every dollar withheld from shareholders was reinvested, Warren and Lee contend that the trend suggests Trump's policy is encouraging defense firms to prioritize building weapons and expanding their capacity. This push comes amidst concerns over cost overruns and delays in major Pentagon weapons programs, even as defense contractors have reported strong profits and substantial returns to shareholders.
Among four major contractors—Lockheed Martin, RTX, Northrop Grumman, and General Dynamics—combined buybacks and dividends decreased from approximately $4.2 billion in the first quarter of 2025 to about $2.7 billion in the first quarter of 2026. This represents a $1.5 billion reduction in payouts to stakeholders.
Warren and Lee have pointed to companies like GE Aerospace, which increased its stock buybacks, as an example that an executive order alone may not be sufficient to prevent all companies from prioritizing shareholder distributions. The senators noted that key elements of their proposed legislation have been included in the Senate's version of the fiscal year 2027 National Defense Authorization Act.