The death of the golden share

‘A triumph for the European Commission’ (as USA Today chose to describe it) is not something usually to be celebrated here. But yesterday’s finding by the European Court of Justice against Germany’s ‘VW law’ – protecting Volkswagen against takeover via a blocking minority vote held by the state – really does look like a blow for greater dynamism, industrial synergy, and efficient use of capital throughout Europe.

In Britain, the golden share was used to allow the government a continuing hand in the destiny of privatized businesses  – but this ruling seems to mean that the device has finally had its day. Similar mechanisms protecting German and Portuguese energy companies, Telecom Italia and a variety of businesses in Hungary and Poland are now in competition commissioner Charlie McCreevy’s sights. Rulings have already been made against the Dutch government blocking powers in relation to postal and telecoms services. The French will now have to watch their step with EADS, the aerospace group, and Thales in the defence sector. Some 23 British entities, including Royal Mail, British Energy, which runs our nuclear power stations, and the Rosyth and Devonport naval dockyards, still have golden share arrangements, but can now expect to forfeit them if challenged.

But – we should ask – is this a wholly good thing? Is the principle of one-share-one-vote really so much more important than the principle of national interest? And what does national interest mean anyway, when it coincides with business? In a British context, it was well understood during the era of privatizations in the 1980s and ‘90s as a need for a degree of residual control over vital infrastructure such as reservoirs, power stations and airports and over vital supplies such as defence equipment: very few people argued against golden shares when the businesses concerned were floated or sold off.