WASHINGTON — On January 7, 2026, President Donald J. Trump signed a new executive order for defense contractors. The order requires these companies to put military manufacturing first and focus on inventing new technology instead of using profits for stock buybacks.
A stock buyback occurs when a company buys its own shares to increase their market value. According to a White House press release, the new policy aims to ensure the military is ready for combat and to stop firms from putting investor payouts ahead of the delivery of critical weapon systems.
Monitoring Contractor Performance
The order tells the Secretary of Defense—who will also use the newly restored title Secretary of War—to identify companies that focus more on making money for investors than on meeting production deadlines. To hold firms accountable, the government will monitor how these companies spend money and handle their contracts.
If defense companies do not submit effective plans to address production delays, the government may use the Defense Production Act. This law allows the president to require companies to put military orders first. Officials may also try to negotiate changes to existing contracts to fix performance problems.
Executive Pay and Shareholder Payouts
The policy also changes how much company leaders get paid in future defense contracts. The order gives the Secretary the power to limit executive base salaries at current levels, allowing only for cost-of-living raises. Additionally, the order links future bonuses for company leaders to meeting delivery deadlines instead of stock market performance.
If a company fails to meet goals or neglects its own factories, future contracts will prohibit that firm from paying shareholders or buying back stock.
Legal and International Consequences
The federal government may stop helping defense companies sell military equipment to other countries if those firms fall behind on production goals at home.
Furthermore, the head of the Securities and Exchange Commission (SEC) will consider removing certain legal protections for defense firms that fail to meet the requirements of their contracts. The SEC is the federal agency that oversees the stock market.
Additional Changes and Veteran Support
In a broader effort to strengthen national security, the U.S. Department of Defense has adopted “Department of War” as an official alternative name. According to the press release, bringing back the name shows a commitment to keeping the peace by having a strong military.
In addition to manufacturing changes, the administration restored GI Bill benefits for certain veterans. This applies to those who were removed from the military for refusing the COVID-19 vaccine under the previous president. These benefits help veterans pay for college or job training.
