WASHINGTON, D.C. — The House Rules Committee is scheduled to discuss the National Defense Authorization Act for fiscal 2027 on Monday night. Among the items for discussion is a proposed amendment from Representatives Chris Deluzio and John Garamendi that would bar the Department of Defense from entering into contracts with companies that do not agree to refrain from purchasing their own stock. The prohibition could be waived at the discretion of the Pentagon.

Industry groups, led by the U.S. Chamber of Commerce, sent a letter to the House Rules Committee urging the rejection of the amendment. Signatories include the Aerospace Industries Association and the Business Roundtable. The letter stated that a ban on executing buybacks and paying dividends "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." It further noted that prohibiting covered defense contractors from engaging in lawful dividends and share repurchases without a Department of Defense waiver "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." Addressing the potential impact on future partnerships, the letter also stated that creating a framework requiring a government waiver for ordinary capital allocation decisions "sends the opposite signal and risks discouraging precisely the type of innovative and non-traditional market participants policymakers are actively trying to attract."

A similar prohibition was included in the Senate's version of the National Defense Authorization Act for fiscal 2027. That provision, which was added on a bipartisan basis in the Senate Armed Services Committee's approved bill, would bar contractors from paying dividends. Both the House amendment and the Senate provision aim to codify an executive order from President Donald Trump concerning such a prohibition. Senator Elizabeth Warren stated that the Senate provision is intended to "bring a small amount of discipline to these defense contractors who have been running wild for years." The Deluzio and Garamendi amendment is one of over 1,300 proposed amendments before the House Rules Committee. The House of Representatives is anticipated to vote on the National Defense Authorization Act later in the week.

Why It Matters

The proposed amendment by Representatives Deluzio and Garamendi, and a similar provision in the Senate's version of the defense bill, represent an effort to alter how defense contractors manage their financial capital. If enacted, these measures could impact the financial strategies of companies contracting with the Department of Defense, potentially requiring a waiver for practices such as stock buybacks and dividend payments.

The opposition from industry groups like the U.S. Chamber of Commerce reflects concerns about government influence over corporate governance. The debate around these provisions reflects differing views on the balance between federal oversight and corporate autonomy in the defense sector, as lawmakers consider the National Defense Authorization Act for fiscal year 2027.