Washington’s Foreign Equity Bets Need Better Governance

What do a rare earth mine in Brazil and a graphite mine in Mozambique have in common? Both have received significant United States government funding. The rub? Neither was subject, when the financing was committed, to the corporate governance standards that American listed companies are: an independent board, an independent audit committee, and audited disclosure to shareholders.There are strong national and economic security justifications for the recent push to use equity strategically to build secure American supply chains. Congress created the Development Finance Corporation in 2018 and the CHIPS program office in 2022, and has adopted a sharply faster pace in the past eighteen months. Government investment has moved into critical minerals, semiconductors, and defense industrial capacity, establishing a substantial government ownership position in companies both foreign and domestic. The government currently invests in more than a dozen foreign projects, totaling billions in equity and debt investment. This includes investments in foreign listed or unlisted companies like the Balama graphite mine project led by Syrah Resources’ unlisted Mozambican subsidiary, Twigg Exploration, and the Brazilian rare earths producer Serra Verde, privately held when the Development Finance Corporation committed a $565 million loan with an equity option in February 2026.As an investor and board member in numerous companies in the critical minerals and defense sectors, I have seen firsthand two problems with the current approach. When public money flows to a foreign company not listed on a United States exchange, the American taxpayer receives fewer protections than the same dollars would buy in an investment in a stock traded on a United States exchange, and fewer still when it flows to a privately held company, foreign or domestic. Further, the foreign company also benefits from United States government investment and market access without the compliance burden its American competitors carry, creating a reciprocity and returns problem. This gap in our regulations has created a critical vulnerability in our current approach to industrial policy.Washington should compile a standard set of existing U.S. corporate governance terms and apply them as a baseline when negotiating equity investments in unlisted foreign companies. It should condition its support on compliance with a short list of fundamental governance principles: a majority independent board, meaning independent of management; an independent audit committee that selects and oversees the auditor; audited financial statements; and a consent right if the company falls out of compliance. This is not the full panoply of listed-company regulation, as compensation committees and executive pay rules add cost without protecting the taxpayer. Implementing these terms would allow federal agencies responsible for these investments, such as the Development Finance Corporation and the Office of Strategic Capital, to move efficiently, price risk accurately, and create highly defensible investment positions.Sign Up for Our NewsletterWhen There Isn’t a StandardAmerican corporate governance of publicly traded entities is the global gold standard, thanks to the sophistication of its regulatory architecture and stringent compliance norms. Investing in a U.S. stock exchange-listed company generally guarantees a majority independent board and an independent audit committee. These structures, codified in exchange listing rules and Exchange Act Rule 10A-3, safeguard shareholder interests and bolster financial reporting integrity and are cornerstones of modern corporate governance. Unlisted foreign companies can bypass this system entirely. Though independent audit committees are required for all listed companies, foreign companies listed on a U.S. stock exchange may follow home-country practices, in place of the majority independent board rules that bind domestic issuers.Recent trouble with one of the aforementioned foreign equity investments underscores how fraught these investments can be. The Balama graphite mine received a $150 million loan from the Development Finance Corporation in November 2024. Financial exposure was concentrated at the project level, which had the most operational risk and lowest governance visibility. After a $53 million tranche disbursement that month, nationwide post-election unrest and a force majeure declaration forced the agency into a January 2025 waiver of the resulting default events, with further disbursements suspended, to protect Syrah Resources from formal default. In March 2026 the agency proposed converting roughly $31 million of the loan into a stake of about twenty percent in Syrah itself. That proposal remains unsigned, but if it closes, Washington will have become a major shareholder only after the loan ran into distress.It’s impossible to prove a negative, but if Washington had required an independent subsidiary-level board as a condition of its investment, at the minimum governance would have been significantly strengthened. Such a board would not have prevented the national political crisis (and plus, this is the kind of risk the Development Finance Corporation exists to absorb). However, the loan terms could have been structured to give its independent audit and risk committee a mandate to review local labor disputes, community relations, and site security protocols before major capital infusions were authorized, and a forum in which the government could pre-agree local remediation steps, security adjustments, or escrow agreements triggered by early-warning indicators. Rather than relying on delayed updates from the parent-company, this structure could have provided more direct visibility into operational problems on the ground.To be sure, the Development Finance Corporation does not lend blind. It already requires audited financials, know-your-customer checks, and compliance with the International Finance Corporation’s performance standards. Those safeguards matter, but they do not necessarily give the government continuing board-level participation in the company it is backing. Proactive leverage strengthens the government’s position well before a default event occurs in a foreign company, even where a waiver, as at Balama, or a later restructuring still proves necessary.Meanwhile, another investment, Serra Verde is also beginning to have some challenges. Given the administration’s push to dramatically increase foreign investments to secure its critical mineral supply chains, and the Development Finance Corporation’s December 2025 reauthorization raising its equity ceiling to forty percent, this problem is likely to grow.Safeguarding Taxpayer CapitalFederal agencies should also ensure that foreign companies receiving federal equity assistance do not gain a competitive advantage over similarly situated American firms that comply with United States corporate governance requirements, such as MP Materials, Albemarle, and Energy Fuels, among many others.Requiring the Department of Commerce, the Department of Defense, the Department of Energy, and the Development Finance Corporation to condition their equity investments on foreign companies agreeing to standard governance terms is the fastest path forward and requires no legislation, as each already attaches conditions under its own authorities. Currently, federal agencies structure transactions differently, constantly negotiating protections transaction-by-transaction. But a single package of corporate governance terms, developed in consultation with the Securities and Exchange Commission and applied as a default, would empower each agency to act swiftly and deliberately. Foreign companies listed on a recognized, foreign exchange could meet it through equivalent home-market rules plus the audit and consent terms.Those terms should conform with existing United States governance standards. For example, terms should include a majority independent board of directors, using the American definition of independence. An independent audit committee should have the authority to hire and oversee the external auditor. Given the national security grounds for investment, annual governance certification should be provided to the investing agency by a senior officer of the company, with necessary carve-outs for classified information and confidential business information. Finally, a consent right, or “veto,” should be available to the agency if the company falls out of compliance.Implementing these standards should occur at the earliest stages of a transaction to establish that fiduciary structures are prerequisites for accessing taxpayer capital. Whether a deal originates through the CHIPS Program Office at the Department of Commerce or the Development Finance Corporation’s equity program, the process always begins with preliminary agreements. Agency deal officers should publish this standardized corporate governance term sheet before any company applies, attach it directly to the initial notice of funding opportunity, and mandate it as a core appendix within the preliminary, non-binding letter of intent.A default term sheet will also shorten the transaction timeline, as foreign management and their legal counsel are presented with a clear, binary choice before due diligence begins: Adopt these guardrails, or an accepted equivalent, or walk away. Under the current, individualized approach, agency attorneys and foreign counterparties spend months trading redlines over basic oversight mechanics. Standardization will not eliminate bespoke legal work on each deal, but it starts that work from a common baseline, enabling deal officers to redirect their energy toward evaluating management track record, substantive economic viability, technical readiness, and supply chain security. Standardizing a governance term sheet empowers federal agencies to move decisively, price operational risk accurately, and construct highly defensible investment positions.Addressing CriticismCritics will likely raise several objections.First, they may argue these recommendations will critically limit the government’s authority or speed with which it can invest. But there already exist adjacent regimes such as the Defense Counterintelligence and Security Agency’s Foreign Ownership, Control, or Influence mitigation rules for cleared contractors, the aforementioned Securities Exchange Act Rule 10A-3, and the wider set of statutes governing foreign control in other sectors. They are just not standardized.This approach is also not novel, as the United States government already imposes board-level governance conditions on foreign-owned companies participating in United States defense programs, and Congress has authorized the Development Finance Corporation to make conditioned minority equity investments in foreign companies.Second, they could argue that demanding stricter terms might push foreign firms toward Chinese or Gulf capital, undermining the secure supply-chain objective entirely. Yet this criticism assumes capital is perfectly fungible, which ignores the underlying economics of critical supply chains. Access to the American market and the reputational stamp of U.S. government backing signals to global buyers that the firm is de-risked, highly compliant, and stable, carrying a premium that offsets governance burdens. A published standard also removes the temptation to trade governance away, deal by deal, in the name of speed.The precedent for this leverage is already abundantly clear. Under the Committee on Foreign Investment in the United States process (which I am intimately familiar with as a previously appointed trustee for adversarial capital cases), foreign companies routinely and voluntarily accept stringent National Security Agreements which often mandate independent American directors, proxy boards, and rigorous compliance reporting simply to preserve their access to U.S. assets and customers. Plus, foreign firms building critical minerals or defense capacity ultimately need bankable, long-term offtake agreements with Western original equipment manufacturers and defense primes. Accepting opaque, state-backed capital from strategic adversaries often carries geopolitical strings that jeopardize a supplier’s ability to integrate into these premium Western markets.Third, critics might say that home-country laws may conflict with American board structures. For example, another country may require workers, unions, or government nominees to be represented on the board, or restrict the company from sharing data outside the home country. Where full compliance is legally impossible, Washington can negotiate alternative oversight mechanisms rather than abandoning standards altogether.Finally, cynics point to an enforcement problem: Washington might never exercise a veto against a critical supplier during a crisis. That may be true, but it fundamentally misunderstands the objective of this policy. Governance conditions are not designed to act as a guillotine. Instead, they offer transparency by preventing the United States from being blindsided by delayed, sanitized parent-company updates, replacing opacity with direct, audited visibility into the realities of complex, foreign operations. And on questions of foreign ownership and control, they let the government narrow a company’s decision space well short of a veto.This proposal provides a level playing field using existing authority to protect American taxpayer dollars and American companies without sacrificing national security objectives. By insisting on fundamental corporate governance for unlisted foreign partners, we can secure supply chains, safeguard the treasury, and maintain high standards that make American industry the envy of the world.Write for Cogs of WarStephen Rodriguez is an investor in more than 25 companies in the defense industrial, critical minerals, and global supply chain sectors. He is also a life member at the Council on Foreign Relations and a commission director at the Atlantic Council.Image: Midjourney