Trump Threatens CEO Pay If Weapons Makers Don’t Change
A Raytheon-built AIM-9X Sidewinder infrared-guided air-to-air missile is mounted on one of the 3rd Wing's F-15C Eagle jets at Elmendorf Air Force Base, Alaska, on Sept. 26, 2003. (AP Photo/Mark Farmer, File)
Defense industry CEOs earning eight-figure compensation packages could soon face sharp limits on their pay. President Trump on Wednesday issued a series of demands aimed at major defense contractors, including a proposal to cap executive compensation at $5 million until company performance improves.
In social media posts cited by the Wall Street Journal, Trump said the proposed cap would be “a mere fraction” of what executives currently earn, reviving an idea he raised last month as a potential executive order. He described current executive pay as “exorbitant and unjustifiable,” according to CNBC.
Trump’s posts laid out a broader critique of defense contractors’ performance, with particular focus on stock buybacks, production capacity, and Raytheon.
Stock buybacks: Trump called for penalties on companies that prioritize stock buybacks and shareholder payouts over investments in factories and equipment. He wrote that contractors are “issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment.” According to Politico, companies including Lockheed Martin, RTX, General Dynamics, and Northrop Grumman directed roughly $89 billion toward buybacks and dividends between 2021 and 2024.
Production concerns: Trump said defense firms are producing “Great Military Equipment” too slowly and failing to maintain it properly. He argued that contractors must build “NEW and MODERN Production Plants” to meet national defense needs.
Raytheon singled out: Trump said Raytheon has been “the least responsive to the needs” of the Defense Department, citing slow production increases and heavy spending on shareholder returns. He warned that the company must halt stock buybacks and invest more in manufacturing facilities if it wants to continue doing business with the government.
Shift in tone: The posts mark a departure from recent Defense Department efforts to court industry cooperation, including a speech by Defense Secretary Pete Hegseth to defense executives at Fort McNair in November, according to Politico.
Unclear enforcement: White House officials did not specify how the administration would enforce the proposed measures or whether the pay cap would apply only to base salary or total compensation, the Journal reported. Defense industry analyst Byron Callan of Capital Alpha Partners said those decisions traditionally fall to boards and shareholders. “No company in its right mind is going to be investing without some kind of assurance that it’s taking a reasonable risk for a reasonable return,” Callan said.
Market reaction: Some contractors appear to be responding. On Tuesday, Lockheed Martin announced an agreement with the Pentagon to more than triple annual production of Patriot missile interceptors to roughly 2,000 units, committing to expand its factory in exchange for seven years of orders. After Trump’s posts, shares of General Dynamics, Lockheed Martin, and Northrop Grumman fell about 3%. RTX, Raytheon’s parent company, closed down 2.5% and dropped another 2% in after-hours trading, according to CNBC.
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