Corporate contractors are lobbying against a provision in the annual defense spending bill currently advancing in Congress, which would prevent the Pentagon from contracting with companies that buy back their own stock if they do not meet government performance standards. The U.S. Chamber of Commerce is leading this lobbying effort and has requested the Senate to remove Section 815 of the National Defense Authorization Act for fiscal 2027.
Section 815, proposed by Senator Elizabeth Warren (D-MA) with support from Senators Josh Hawley (R-MO) and Mike Lee (R-UT), would prohibit defense contractors from repurchasing shares or distributing cash dividends during the duration of a contract without the War Department's approval. The Chamber of Commerce argues that this provision could set a precedent for federal control over corporate financial decisions and could negatively impact American retirees and investors by restricting capital returns to shareholders.
A coalition of trade associations, including the Business Roundtable, has co-signed the letter opposing the amendment. Concerns have been raised that the buyback prohibition could extend to a wide range of companies that provide goods or services to the Department of War, including major technology and telecommunications firms.
Proponents of Section 815 argue that companies should prioritize performance over stock buybacks when dealing with federal contracts. Senator Warren stated that military contractors should invest in national defense rather than prioritizing shareholder returns. The Chamber of Commerce counters that capital returned to shareholders is reinvested into the economy.
The White House has previously issued directives aimed at limiting stock buybacks among underperforming military contractors. Section 815 would formalize these efforts, allowing the War Department to revoke contracts from companies that fail to comply with investment standards. Recent studies have indicated that defense contractors have faced significant delays and cost overruns in weapons programs, which supporters of the provision attribute to a focus on shareholder returns.
The House has attempted to include similar buyback restrictions in its version of the NDAA, but those efforts have faced challenges. The Chamber of Commerce has also expressed concerns that the proposed buyback restrictions exceed the intent of prior executive orders and would impose excessive regulations on corporate governance.