Golden Share

A type of share which gives the shareholders (basically government) a veto power over changes to the company charter. They are a means of protecting key national interests, and are limited to certain specified in the company’s articles of association, and confer no right to interfere on other issues.
A share with special voting rights that give it peculiar power vis-à-vis other share. The term applies particularly to share retained by a government after privatization. If a government wishes to sell off a company in a sensitive industry (say defence) and yet retain control, it can hold on to a golden share. This might give it the right to veto any takeover bid.

Characteristics of Golden Share
Not of Gold- the shares are not made of gold! They are the power, which the government reserves with him to be used in deciding vital issues.

No power of discretional control- Golden shares does not give government any power to control privatized enterprises as they see fit. Their function is not to allow politicians to retain control over a newly privatized business, but to prevent a specified number of dangers being realized.

Yields government special rights- The real beauty of the golden share idea is that while it affords the government special rights, the government can choose not to exercise them. For example, the British government stood aside and allowed Ford to take over Jaguar and British Petroleum to acquire Britoil. Similarly, Singapore relinquished its special golden-share rights in ST Industrial Corporation, ST capital and ST Computer Systems & Services when the government determined that special protection was no longer necessary for these companies.

Functions to appease opponents of privatization- The golden share is in essence a solution that addresses primarily political, rather that legal or economic, concerns. It functions to appease opponents of privatization.

Irony of the golden share- The irony of the golden share is that although it appears regressive in an era of economic liberalization, it has been used by reformers to provide political cover. With it, privatization may be made palatable enough to be pushed through the political process.

Surrender of golden shares- Mindful of the dangers, the UK government tried to ensure that golden shares had a limited lifetime. It actually used the veto power of golden shares only twice. And in practice, UK government have often chosen to surrender golden shares once privatized enterprises have become firmly established.