U.S. Chamber of Commerce, Business Groups Urge Senate to Scrap Pentagon Contractor Buyback Restrictions from Defense Bill

A broad coalition of U.S. business organizations is pressing Congress to remove a controversial provision from the Senate’s annual defense policy bill that would prohibit Pentagon contractors from conducting stock buybacks or paying dividends without approval from the Defense Department.

The proposal, known as Section 815, has emerged as one of the most contentious corporate governance measures in this year’s National Defense Authorization Act (NDAA), setting up a clash between lawmakers seeking tighter oversight of defense contractors and business groups warning that the federal government is overreaching into private-sector financial decisions.

The Senate is expected to begin considering the NDAA this week.

The U.S. Chamber of Commerce, joined by 40 other business organizations representing companies that supply goods and services to the Pentagon, sent a letter to Senate leaders on Tuesday urging them to strike the provision before the legislation reaches President Donald Trump’s desk.

The groups argued that Section 815 would represent an unprecedented expansion of federal authority over corporate finance by allowing the government to influence how companies allocate capital.

“By prohibiting dividends, share repurchases, and other capital distributions absent a government waiver, Section 815 would shift responsibility for ordinary capital allocation decisions from corporate leadership to Washington,” the letter said. “[W]e urge the Senate to strike Section 815 and oppose future efforts to use federal procurement policy to control otherwise lawful corporate governance and capital.”

Business groups contend the language is drafted so broadly that it could affect tens of thousands of companies doing business with the Department of Defense, extending well beyond major weapons manufacturers.

Unlike previous efforts aimed specifically at large defense contractors, the provision contains no explicit distinction between prime contractors producing military equipment and companies providing routine commercial services such as food, logistics, or maintenance.

Supporters argue the proposal is intended to ensure defense contractors reinvest profits into production capacity instead of rewarding shareholders while government contracts experience delays and cost overruns.

The measure was championed by Democratic Senator Elizabeth Warren and included in the Senate Armed Services Committee’s version of the NDAA with bipartisan support. Warren previously introduced similar legislation alongside Republican Senators Josh Hawley and Mike Lee, highlighting unusual cross-party agreement on increasing oversight of defense contractors.

Last month, Warren described the proposal as an effort to “Bring a small amount of discipline to these defense contractors who have been running wild for years.”

She reiterated that position in a statement, saying, “Time to stop these contractors from putting Wall Street over our national security.”

Warren accused large military suppliers of prioritizing investors over taxpayers.

“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,” she said

The proposal also aligns with an executive order signed by President Donald Trump in January directing the administration to discourage stock buybacks and dividend payments by defense contractors that fail to meet Defense Department performance expectations.

Trump said the objective was to encourage companies to reinvest earnings into expanding defense production capacity as geopolitical tensions increase.

Industry Says Proposal Goes Far Beyond Trump’s Order

Business groups say the Senate legislation is significantly more restrictive than Trump’s executive order.

While the executive order has generally been viewed as giving the administration flexibility to influence contractor behavior on a case-by-case basis, Section 815 would establish a statutory prohibition requiring contractors to obtain formal Defense Department waivers before engaging in ordinary capital distributions.

Under the bill, the Defense Department would generally be prohibited from awarding contracts unless a contractor agrees in writing not to:

Purchase its own publicly traded shares or those of its parent company.
Pay dividends.
Make other capital distributions to shareholders.

The restrictions would take effect on June 15, 2027.

Companies could receive exemptions only if the Defense Secretary approves a “qualifying defense investment plan,” allowing capital distributions to proceed.

Business organizations warn that such a framework introduces significant uncertainty into corporate financial planning and could discourage companies from participating in the defense industrial base.

Will Anderson, Vice President of Corporate Governance at the Business Roundtable, said: “Section 815 would give the federal government an unprecedented role in companies’ routine financial decisions.”

He added: “The proposal is far-reaching and would create new uncertainty for companies across a wide range of industries at exactly the moment Congress should be removing barriers to participation in the defense industrial base — not creating new ones.”

The proposal underpins how attitudes toward corporate governance have evolved in Washington.

Historically, many Republicans opposed government involvement in decisions such as dividends and share repurchases. However, growing concern over supply-chain resilience, military preparedness, and industrial policy has led to broader bipartisan support for greater oversight of defense contractors.

The Senate Armed Services Committee approved the NDAA by an 18-9 vote, and committee records indicate Section 815 was incorporated into the base bill without a separate vote, suggesting relatively little opposition during committee deliberations.

Still, some Republican lawmakers have expressed reservations.

Senator Mike Rounds, a Republican member of the Armed Services Committee, questioned whether Congress should be directing companies’ financial decisions.

“I don’t like it when politicians are telling business people how to build their businesses necessarily,” he said. “Anytime you get into the middle of trying to tell businesses how to do business, I think you’re going farther than you should.”

Rounds also warned that restricting buybacks and dividends could ultimately reduce investment in the defense sector rather than encourage it.

“A benefit that they see for creating an opportunity for more investment that we can use to continue to rebuild the industrial complex that we need,” he said.

Business groups made a similar argument in their letter, stating: “Restricting capital distributions therefore does not create additional investment; it simply prevents capital from being allocated to its highest-value use.”

Legislative Outlook Remains Uncertain

Although Section 815 has advanced through committee, its future remains uncertain. This is because removing the provision during Senate floor consideration would require adoption of an amendment, a difficult task given the bipartisan support behind the measure and the Senate’s 60-vote threshold for most amendments.

However, the proposal faces another hurdle later in the legislative process. The House version of the NDAA does not contain comparable restrictions on buybacks or dividends. Once both chambers pass their respective bills, lawmakers will negotiate a compromise in a House-Senate conference committee.

That process could ultimately determine whether Section 815 survives in its current form, is substantially modified, or is removed entirely before the final defense authorization bill is sent to President Trump for signature.

Rounds acknowledged that the conference negotiations may offer the best opportunity for changes.

“That means there’s a good possibility that it’s either modified or changed,” he said.