All that Glitters Is Not Gold!

In the current environment of economic paranoia and with the disrepute of dogmatic liberalism, it was expected that there would be more understanding of the need for the holding of “golden shares” by nations with stock in companies. Since the end of the World War II, and especially after the “historic compromise” at Volkswagen in 1959 (when the federal and regional government took action to protect employees and small shareholders), this has been considered one of the “models of capitalism.” The State, as representative of the public, has one word to say. And since the privatization policy of Mrs. Thatcher (who cannot be accused of socialism) in 1980, this began to be approached in the form of Golden Shares (GS). They are mainly a political tool, but written into corporate statutes (akin to the “Rule of Law”/state’s rights) in order to keep the “public interest” in a private firm.

Almost all the countries of “Old Europe” kept GS, even the nations that have privatized since the fall of communism in 1991. An entity unsuspected of Bolshevism, the Adam Smith Institute, came to advise the introduction of GS in cases of “Third World” post-state companies, as an alternative to companies purely owned by the state, or pure and simple protectionism.

Since the turn of the new century, the European Court of Justice (ECJ) has had several rulings on the matter. In 2003, 2005 and 2007, several decisions reviewed or punished the existence or certain use (different things) of GS, in countries as diverse as Britain, Spain, Germany, Italy, Denmark, Holland and France. In general, the ECJ considered the retention of special powers by states within companies violated the principles of the free market, capital movements, competition, justice and business freedom.

But even the ECJ recognized the legitimacy of the need to maintain the “special interest” of public power — in certain areas — or to protect general goods that could not otherwise be assured.

The big question is if the “national interest” is sufficiently demonstrated in each case; if it is not confused with the whims of a minister or a bureaucrat; if it does not destroy the business, the market and the values that it is claiming to save; if it opposes monopolies or perpetuates them.

If it saves the company — for example, from a covert and phased IPO (Initial Public Offer – takeover bid) — or if it buries it.

That is the question.