# Defense Industry Groups Push Back Against Stock Buyback Restriction Amendment
A proposed amendment to the fiscal 2027 defense policy bill that would prohibit certain defense contractors from buying back their own stock is facing intense opposition from major industry groups, setting up a high-stakes battle ahead of a key House Rules Committee meeting.
In a June 26 letter addressed to the House Rules Committee, 20 industry associations led by the U.S. Chamber of Commerce called on lawmakers to reject the amendment offered by Rep. Chris Deluzio (D-Pa.). The proposal mirrors an earlier attempt by Deluzio to attach similar language to the House Armed Services Committee’s version of the National Defense Authorization Act, which he ultimately withdrew due to jurisdictional concerns.
The industry groups urged Congress to “reject any further attempts to prohibit public companies from making decisions that are in their best long-term interests.”
## The Industry Argument
In the letter, obtained by Federal News Network, the industry associations argued that the amendment would create an uneven playing field within the defense sector.
“The amendment would create two classes of defense contractors: publicly traded firms that would be prohibited from returning profits to Main Street investors, and privately-owned contractors that can allocate profits without similar restrictions,” the letter stated. “A strong defense industrial base requires both public and private companies that have the ability to raise private capital, which itself requires the ability to return profits to investors, in both public and private markets.”
The groups further contended that the amendment represents an unprecedented overreach by the federal government into corporate governance matters.
“More fundamentally, this amendment raises serious concerns about an unprecedented expansion of the federal government’s role in restricting lawful corporate governance and capital allocation decisions made by businesses,” the letter read. “Whether a company chooses to return capital to shareholders through dividends or share repurchases has long been recognized as a legitimate business judgment made by corporate boards acting pursuant to their fiduciary duties.”
## Details of the Proposed Amendment
Deluzio’s amendment would prohibit the Pentagon from entering into contracts with companies unless they agree not to repurchase their own stock for the duration of the contract. The proposal would specifically target companies that have received more than 50% of their annual revenue from Department of Defense contracts over the past three years and that receive more than $100 million annually from the DoD.
Under the proposed legislation, contractors would have the option to apply for a waiver, though the Secretary of Defense would retain the authority to revoke such a waiver at any time.
## The Broader Legislative Landscape
The lobbying effort to defeat the amendment comes as the House Rules Committee prepares to meet to determine whether the proposal — one of more than 1,350 amendments filed to the annual defense policy bill — will advance to the House floor for consideration.
The push to restrict stock buybacks among defense contractors has been gaining momentum on both sides of the Capitol. Earlier in June, the Senate Armed Services Committee adopted an even more sweeping amendment that would bar the Pentagon from contracting with companies unless they agree “to not purchase equity security, pay dividends, or make any other capital distribution with respect to equity securities unless the contractor has a waiver from the defense secretary.” Under the Senate version, contractors would be required to submit a “qualified defense investment plan” detailing how they intend to increase production capacity, or face restrictions on shareholder distributions if they wish to receive a waiver.
## Lawmakers’ Rationale
Supporters of the restrictions have pointed to President Donald Trump’s executive order on the matter, arguing that major defense contractors have for too long failed to deliver critical weapon systems on time and invest adequately in production capacity while simultaneously spending billions of dollars on stock buybacks and rewarding investors.
Sen. Elizabeth Warren (D-Mass.), who spearheaded the Senate effort alongside Sen. Josh Hawley (R-Mo.), was vocal in her support after the Senate Armed Services Committee adopted their amendment.
“Giant military contractors are cheating our government out of billions in taxpayer dollars and lining their executives’ and shareholders’ pockets instead of investing in our national defense,” Warren said. “It’s time to stop these contractors from putting Wall Street over our national security.”
## Industry Pushback
Industry groups have pushed back forcefully against these characterizations. In their letter, they argued that stock buybacks occur only after companies have already fulfilled their commitments to research and development and other investments.
“Prohibiting stock buybacks is based upon disproven theories that when companies elect to buy back their own stock, they are taking capital away from research & development, manufacturing, or other investments,” the letter reads. “A decision to repurchase shares is also a sign of financial strength — an indication that a company has already met its investment obligations and is generating surplus capital.”
The groups also warned that restricting stock buybacks would harm the retirement savings of millions of Americans and could discourage companies from going public in the first place.
“Prohibiting covered defense contractors from engaging in otherwise lawful dividends, share repurchases, and other capital distributions unless they obtain a waiver from the Defense Department establishes a troubling precedent in which Washington effectively dictates how businesses manage capital allocation decisions that have traditionally remained the responsibility of corporate leadership and shareholders,” the industry groups cautioned.
They also raised concerns about the potential for mission creep, warning that once such a framework is established, future administrations could expand it to pursue unrelated policy objectives.
“Once Congress creates a framework that prohibits otherwise lawful capital distributions by government contractors absent federal approval, future administrations could readily expand that model to pursue entirely different policy objectives unrelated to national security or defense procurement,” the letter stated. “Congress should be cautious about establishing a mechanism that invites future political interference in routine business decisions well beyond the scope of this amendment.”
## Pentagon Support
The effort to restrict stock buybacks has found support not only among lawmakers but also within the Department of Defense leadership, who have expressed frustration that major defense contractors are prioritizing investor returns over the needs of the nation’s warfighters.
Chief Pentagon Spokesman Sean Parnell voiced strong support following President Trump’s signing of the “Prioritizing the Warfighter in Defense Contracting” executive order.
“After numerous years of failing to meet contractual obligations, under President Trump’s order, defense contractors will no longer be allowed to leave our warfighters behind while giving themselves massive payouts from stock buybacks,” Parnell said. “This will give Department of War the ability to meet national security objectives and ensure efficiency and accountability. Our obligation is to our warfighters; not Wall Street.”
The outcome of the House Rules Committee meeting will determine whether the amendment moves forward to a full House vote, as the debate over how defense contractors allocate their profits continues to intensify.
—
*Original article source: Federal News Network*
