President Donald Trump is turning up the heat on America's biggest defense contractors, and he's not being subtle about it. Speaking from Mar-a-Lago on Monday, Trump made it clear that he thinks there's something deeply wrong when defense CEOs pocket $50 million a year while the weapons systems they're supposed to deliver keep showing up late.

The core complaint? Defense contractors are spending billions on stock buybacks and executive compensation while critical military programs crawl along at a pace that would make a glacier look speedy. Trump sees this as a national security problem, not just a procurement annoyance.

"We'll be discussing the pay to executives, where they're making $45 and $50 million a year and not being able to build quickly," Trump said. "They're going to make that kind of money, they have to build quickly."

It's a straightforward proposition: if you want Wall Street-level pay, deliver Pentagon-level results.

What the White House Has in Mind

According to Punchbowl News, the administration is drafting an executive order that would fundamentally change how defense contractors operate. This isn't just tough talk. The proposed measures include some serious teeth.

Here's what's on the table:

• Limiting Buybacks and Dividends: If your project is significantly behind schedule or over budget, expect restrictions on returning capital to shareholders.
• Performance-Linked Pay: Executive bonuses would be tied directly to whether weapons systems actually get delivered on time.
• Forced Reinvestment: Companies would need to plow money into research and development and facility upgrades before they could tap federal subsidies.

The philosophy here is pretty clear: taxpayer money should translate into weapons on the front lines, not dividends on Wall Street. Secretary of Defense Pete Hegseth is backing this "Peace Through Strength" initiative, which aims to cut through the legendary bureaucracy of Pentagon procurement.

The Pushback

Not everyone thinks this is a great idea. Industry analysts are warning that heavy-handed government intervention could backfire by scaring off private investment. Jefferies analysts told the Wall Street Journal they see this as "an overreach," arguing that "the contractors don't need to be regulated given contract structure and clearer demand signals self-regulate investments."

Translation: the market will fix this on its own, so back off. Whether that's true or just wishful thinking from analysts covering defense stocks is an open question.

How the Market Responded

Defense stocks had a rough ride when news of the potential executive order first broke last week, but they've largely bounced back. RTX Corp. (RTX) and Lockheed Martin (LMT) both took hits initially, with investors processing what stricter oversight might mean for profitability. By Tuesday, though, RTX had climbed back to the $185 range.

Northrop Grumman (NOC) followed a similar pattern, dropping to around $560 before recovering to trade near $580 by Tuesday.

General Dynamics (GD) held up the best of the bunch, likely because investors are also digesting Trump's proposed 13.4% increase in the fiscal 2026 defense budget. More money flowing into defense overall tends to soften the blow of stricter rules on how that money gets spent.

The Bigger Picture

What's interesting here is that Trump is essentially arguing that defense contractors have gotten too comfortable. They operate in a world with guaranteed government demand, limited competition for major programs, and cost-plus contracts that often shield them from the full financial consequences of delays. In that environment, why wouldn't you maximize executive pay and shareholder returns?

The administration is betting that changing the incentive structure will change behavior. If executive bonuses depend on hitting delivery dates, executives will presumably find ways to hit those dates. If buybacks get restricted when programs run over budget, companies will presumably manage budgets more carefully.

Whether that logic actually works in practice is another matter entirely. Defense procurement is complicated for reasons that go beyond corporate greed. Technical challenges, changing requirements, supply chain issues, and yes, Pentagon bureaucracy all play roles in why major weapons systems often take longer and cost more than originally planned.

Still, when CEOs are making $50 million while fighter jets and submarines arrive years late, it's not hard to see why politicians might want to do something about it.