Examination of the 'golden share' arrangement in the partnership between U.S. Steel and Nippon Steel
A Fresh Take:
Host: STEVE INSKEEP, HOPPING ON BOARD
Stateside, the U.S. is backing a Japanese firm's plan to grab a chunk of U.S. Steel - in exchange for a decisive say in the company's future. It's a tactic known as a golden share, giving the U.S. some extra voting power in the company's affairs. To shed some light on this, we're chatting with industrial policy expert, Todd Tucker.
TODD TUCKER STEPS IN:
TUCKER: So, you're right, Steve. A golden share's a tool governments worldwide use to guarantee a dominant grip on pivotal industries - think of players like Volkswagen in Germany or Heathrow Airport in the U.K. These entities have a golden share, allowing the government to meddle in any major moves, from selling the company to redefining its purpose.
INSKEEP: OK, I get it, this ain't a scheme dreamed up by the Trump administration, but an established practice worldwide.
TUCKER: Exactly. The contemporary usage came into play during the Thatcher period in the U.K., when the government adopted a policy of offloading many state-owned companies. As a compromise, they left the government with a golden share.
INSKEEP: Looking at the golden share as veto power, not something empowering the government to tell the company what to do.
TUCKER: Close, but a bit more. The company must consult the government on strategic decisions like plant closures, investment decisions, and, in essence, seek their blessing before they move forward.
INSKEEP: I've got my eyes on the $14 billion investment. Supposed to be spread across a few years, making me wonder if it'll stick.
TUCKER: Understandable. Investments promise a lot today, but follow-through is another question. That's why the Biden administration was hesitant - being burnt before by U.S. Steel and Nippon not keeping their promises. But this innovative solution suggests the U.S. will wield a say in the company's decisions if it detects any deviations from the agreed course.
INSKEEP: If Nippon doesn't abide by its promises, what can the U.S. do to teach them a lesson?
TUCKER: Simple. If Nippon can't attract private investment for its ambitious $14 billion plan, the U.S. can step in and run the company more like a public entity - or even further tighten its hold.
INSKEEP: There's a chilling implication: governmental mission creep. A future president might think, "I've got influence here. Why not tilt the company in favor of my pet projects?" Like crypto investments, hypothetically speaking.
TUCKER: Absolutely. The risk is there, ever since Nippon willingly accepted government scrutiny. On the bright side, the arrangement might benefit the steel industry, pushing towards green steel and reducing carbon footprints. On the flip side, it could also enable political appointees to influence company decisions inappropriately, opening the door for corruption.
IN CLOSING:
TUCKER: Glad to help, Steve.
INSKEEP: Todd Tucker, thanks for your insights. He's the director of industrial policy and trade at the Roosevelt Institute.
It's an interesting case study - the U.S. Steel and Nippon Steel deal. The golden share, a tool borrowed from nations that prioritize control over industries like steel, ports, energy, and utilities, now adopted in American corporate governance to ensure alignment with national strategic priorities.
Although the article does not explicitly mention it, it's worth noting that the use of golden shares can raise concerns about corruption, restricting competition, and politicizing business decisions. In some countries, such as Italy, the misuse of golden shares has been associated with contractor bribes, preferential treatment, and political favoritism.
- This discussion illustrates that governments, like the U.S., often intervene in key industries, such as steel, through tools like golden shares, thus exerting control over companies' strategic decisions and future direction.
- The implementation of a golden share in the U.S. Steel and Nippon Steel deal could potentially lead to mission creep, with political appointees showing preferences for agenda items, posing a risk of corruption and politicizing business decisions.
