Golden Share
Candlefocus EditorGolden shares are referred to as ‘golden’ because they give their shareholder veto power when it comes to changes to the company’s charter. Golden shares are issued by private companies or government agencies and usually hold at least 51 percent of the voting rights. This enables the holder of the share to exercise a crucial amount of influence in those companies and prevents any need to secure third-party votes in certain decisions.
In the UK, the use of golden shares originated in the 1980s, when the British government issued several shares in former state-owned companies such as British Petroleum, British Airways and British Telecom. In these cases, the British government held the golden shares in order to provide the government with a majority of the voting rights, and therefore, the power to veto any decisions made by the company’s board of directors.
In Brazil, golden shares have been used by the government since the early 2000s to maintain its control over state-owned entities, such as the Bank of Brazil, Caixa Econômica Federal and BNDES. In 2014, the government used this control to veto the appointment of a new president of the Bank of Brazil. This shows the power that a golden shareholder can have.
Although the use of golden shares has been mostly used in the UK and Brazil, they have been used to maintain the control of state-run entities in other countries as well. These include Argentina, Germany, China, Japan and France.
Overall, golden shares are used to ensure that certain entities remain under the control of the government by granting specific voting rights to the shareholder. By granting a single shareholder a disproportionate amount of power, golden shares are a great way for the government to maintain control over the company.