Business declares war on DoD stock buyback ban moving in Senate

Business is declaring war on a provision tucked into a must-pass defense bill that would restrict Pentagon contractors from executing stock buybacks and paying dividends unless they have the Defense Department’s approval, and asking Congress to kill the provision before it reaches the president’s desk.

The U.S. Chamber of Commerce, along with 40 other business groups, sent a letter Tuesday to Senate leaders urging them to strip the measure from the bill — an annual defense policy package called the National Defense Authorization Act. The Senate is due to begin considering the measure this week.

The provision, known as Section 815, would amount to an unprecedented incursion from the government into tens of thousands of companies that do business with the Pentagon, the groups wrote. It would also apply broadly, making no explicit distinction between a prime defense contractor manufacturing missiles and a food vendor.

“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 reads. “[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.”

The push from the Chamber and the other groups, all representing Pentagon contractors, exemplifies the threat the provision poses to business. Section 815’s inclusion in the bill, which has already been approved by the Senate Armed Services Committee, also greatly increases its chance of becoming law and severely reduces the likelihood it will be stripped before a Senate vote.

The provision was pushed by Sen. Elizabeth Warren, D-Mass., and was included in the NDAA on a bipartisan basis, according to members of the committee who spoke to CNBC after their closed-door vote. Warren had led a similar bill with Sens. Josh Hawley, R-Mo., and Mike Lee, R-Utah.

Proponents say it is meant to crack down on underperforming contractors and codify President Donald Trump’s January executive order to bar buybacks and dividends for contractors who underperform DOD expectations. Warren, in an interview last month, described the policy as intended to “bring a small amount of discipline to these defense contractors who have been running wild for years.”

Warren, in a statement, said it is “time to stop these contractors from putting Wall Street over our national security.”

“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.

Trump, in issuing the executive order the month before he began a war against Iran, said he wanted to…