TOKYO REPORT: Golden Shares in Spotlight for Economic Security, Investment

Tokyo, Sept. 22 (Jiji Press)–Golden shares, a special class of stock that gives the holder veto power over major corporate decisions, are drawing increased attention in Japan amid debates over economic security and investment. In the protracted negotiations over Nippon Steel Corp.’s acquisition of United Steel Corp., the major Japanese steelmaker agreed to Washington’s request to oversee the execution of the company’s pledged investments. “We made a straightforward response by proposing a golden share” in U.S. Steel to the U.S. government, Chairman Eiji Hashimoto said. The decision proved pivotal for securing U.S. President Donald Trump’s approval of the acquisition. As economic protectionism gains ground, attention is focused on whether golden shares will become a key tool for companies seeking growth through mergers and acquisitions and for attracting external investment. A golden share confers rights different from those of common shares. Sometimes described as a “class share with veto rights,” it gives the holder the power to block some key decisions, such as the appointment or removal of directors or resolutions at general meetings of shareholders. Britain popularized the golden share in the 1980s during the privatization of state-owned enterprises, including telecommunications and gas companies, under then Prime Minister Margaret Thatcher. The mechanism was intended to protect strategically important industries from foreign takeovers, on national security grounds. A recent example was the 2024 acquisition of International Distribution Services, the owner of Royal Mail, by the EP Group of the Czech Republic. In that case, the British government took a golden share in the parent company to ensure, for example, that the company’s headquarters cannot be moved outside Britain without government approval. To date, among Japan’s listed companies, only Inpex Corp., a major resource developer, is known to employ a golden share. To safeguard stable energy supplies, Inpex issued a golden share to the industry minister. According to the company, this special share gives the minister veto power against speculative acquisitions and against management control by foreign capital. In the wake of the Nippon Steel case, attention has turned to Rapidus Corp., which aims to mass-produce cutting-edge semiconductors. When the revised law on the facilitation of information processing was enacted in April this year to enable government investment in semiconductor companies, a supplementary resolution addressed the issue of government shareholdings. It said that “holding a golden share should be among the options to be considered.” A proposal emerged for the Information-Technology Promotion Agency, an independent administrative agency under the industry ministry’s jurisdiction, to hold a golden share in Rapidus. The measure would enable the government to block foreign takeovers even if the chipmaker goes public. A former industry ministry official underscored the need for such safeguards, saying, “If the company ends up being fully acquired by a Chinese concern, any number of ritual disembowelments wouldn’t be enough” to take responsibility. At the same time, using a golden share can also undermine the equal treatment of shareholders and limit managerial flexibility. Yoshio Kawatani of Dai-ichi Life Research Institute Inc. noted, “From the perspective of other shareholders, it raises concerns about transparency and fairness, because a single share could overturn a management decision at the last minute.” Reflecting such concerns, the European Court of Justice in the early 2000s found illegal the Spanish government’s use of golden shares in some companies, including major oil business Repsol. Policymakers are “shifting from a hands-off approach to the private sector and the market to one in which governments play a more active role through industrial policy,” Nippon Steel Chairman Hashimoto noted. The trend is accelerating worldwide, exemplified by the policies of the second Trump administration. With the post-Cold War era of expanding free trade seen at a turning point, the initiatives of Nippon Steel and Rapidus may serve as test cases for whether golden shares can balance economic security with a drive to boost investment. END [Copyright The Jiji Press, Ltd.]