The Problem With Trump’s ‘Golden Share’ in U.S. Steel

As a Japanese firm moves closer to acquiring United States Steel, the disclosure of the details of the terms of sale is vindicating the concerns that the Trump administration is, in effect, nationalizing the American industrial icon. “We have a golden share, which I control,” is how President Trump explains this apparent intrusion into the workings of the capitalist free market by Uncle Sam. So much for the traditional Republican ideal of limited government.Nippon Steel had planned on purchasing outright the American steelmaker in a deal that was approved by the shareholders of the firm created by J.P. Morgan. Yet in the twilight of the Biden administration the acquisition ran afoul of national security concerns, giving Uncle Sam a de facto veto over the deal. Under Mr. Trump, the deal was allowed to go through only if the federal government were granted extensive control of the firm’s operations.The means by which this control can be achieved is what’s called a “golden share,” a special class of preferred stock that grants Uncle Sam power to overrule decisions by the management and other shareholders on several critical points. The president, the Times reports, will have authority over whether the company, say, moves jobs or production outside of the country, or closes certain of its plants, or where it derives the raw materials it uses to make steel. It’s hard to imagine the other shareholders — or the Tokyo-based management at Nippon Steel — being altogether delighted by the prospect of having the president peering over their shoulders when they make decisions about how to run their business. Nippon had initially proposed that America’s golden share would expire “after three or four years, the duration of the Trump administration,” per the Times.Yet Mr. Trump’s commerce secretary, Howard Lutnick, “insisted that the golden share should last in perpetuity,” the Times reports. Mr. Lutnick insists that Uncle Sam’s “golden share” has “powerful terms that directly benefit and protect America, Pennsylvania, the great steelworkers of U.S. Steel, and U.S. manufacturers.” Yet the federal stake, which Mr. Trump says gives him “total control,” could raise eyebrows among other prospective foreign investors.That’s because the federal intervention could prove to be but the first in a new trend that sees a growing role for Uncle Sam in the management of ostensibly privately-owned firms. The arrangement “could drive away foreign investors in U.S. companies,” Reuters reports, citing concerns by “national security lawyers.” Attorney Stephen Heifetz warns the deal will “cause people to spend more time thinking about the obstacles to investing in the U.S. market.”The “golden share” in United States Steel echoes Mr. Trump’s earlier musings about mandating a federal stake in TikTok should the social media giant find an American owner. These government ownership stakes also follow the statist playbook of the Chinese communists. Ownership stakes in Chinese firms allow Beijing to maintain influence over private firms there, without any need for “a public battle” with the companies, the Wall Street Journal reports. In China the “golden shares” serve as a “quieter form of control” over private companies, the Journal adds, and the firms have but “little choice” but to agree to requests from Beijing. It’s hard to see the merit of importing such a business model. Such federal intrusion could lead companies here to lose sight of their central mission under free-market capitalism, which is to serve the interests of their real owners, the shareholders — not the government.

The Problem With Trump’s ‘Golden Share’ in U.S. Steel

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