Definition
A golden share refers to a type of share in a company that holds special voting rights, typically more than 51% of the voting rights, giving its owner a decisive influence over major corporate decisions. This mechanism is often used by governments to retain strategic control over companies, particularly following privatization, to prevent the company from falling into foreign or otherwise undesired ownership.
Examples
- British Aerospace: In the privatization of British Aerospace, the UK government retained a golden share to ensure that the company would stay under domestic ownership.
- Telecom Italia: The Italian government held a golden share in Telecom Italia to maintain control over telecommunications infrastructure crucial for national security.
Frequently Asked Questions (FAQs)
What is the primary purpose of a golden share?
The primary purpose of a golden share is to allow a government or another stakeholder to retain control over a company, particularly in strategic sectors or after privatization, to safeguard national interests.
Can a golden share be transferred?
Typically, a golden share is non-transferable and is specifically designed to remain with the entity that initially held it — often a government or an important institutional investor.
How does a golden share differ from regular shares?
A golden share carries significantly more voting rights than regular shares, often enough to influence crucial company decisions (e.g., mergers, acquisitions). Regular shareholders usually have proportionate voting rights with no special privileges.
Are golden shares common outside of government use?
While primarily used by governments, the concept of a golden share can be utilized by private entities to retain control over critical decisions within a corporation.
Is the concept of a golden share legal in all countries?
No, the legality and use of golden shares vary by country and depend on national corporate governance laws and regulations.
Related Terms with Definitions
- Privatization: The process of transferring ownership of a business, enterprise, or public service from the government to the private sector.
- Voting Rights: The rights of shareholders to vote on certain corporate matters, often reflecting the size of their ownership stake.
- Shareholder: An individual or entity that owns shares in a company and thus holds a financial interest in its growth.
- Majority Control: Ownership or control of more than 50% of a company’s voting shares, which generally makes it possible to pass decisions without the need for approval from minority shareholders.
Online References
Suggested Books for Further Studies
- “Corporate Governance: Principles, Policies, and Practices” by Bob Tricker
- “Privatizing Governmental Functions” by Deborah Ballati
- “The Economics of Privatization” by John R. Nellis and Mary M. Shirley
Accounting Basics: “Golden Share” Fundamentals Quiz
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