Golden Share

Understanding the Golden Share

A golden share is a special class of stock that gives its holder certain special rights, usually beyond those of ordinary shareholders. These rights are often reserved for entities like governments or founders.

Key Concepts

The primary purpose of a golden share is to allow a specific shareholder, most commonly a government entity, to exert influence or control over a company, even with a minority stake. This control is typically exercised through:

• Veto power over significant decisions (e.g., mergers, acquisitions, asset sales).
• Ability to appoint directors.
• Control over strategic direction.

Deep Dive into Rights

The exact rights conferred by a golden share vary widely but often include the power to block actions deemed detrimental to the national interest. This might involve preventing foreign takeovers of key infrastructure or ensuring continued domestic operation.

Applications and Examples

Golden shares have been most prevalent in the privatization of state-owned enterprises. Governments often retain them to safeguard national security, public services, or critical industries like defense, energy, or telecommunications. For example, the UK government has historically used golden shares in privatized utilities.

Challenges and Misconceptions

While intended to protect national interests, golden shares can be controversial. They can deter investment by creating uncertainty for other shareholders and may be seen as an impediment to free markets. Misconceptions often arise regarding the extent of control and the specific triggers for its use.

FAQs

What is the main purpose of a golden share? To protect national interests or strategic assets in privatized companies.

Who typically holds a golden share? Often the government or the original founder.

Can a golden share be easily overruled? Generally, no, as it grants specific veto or control powers.