Golden shares and privatisation of strategic sectors: a comparative study between Indonesia and the UK

Abstract

Protecting national interests (strategic sectors) has been a plausible argument behind the adoption of golden shares by many of the countries undertaking privatisation, including Indonesia. This legal device is primarily designed for social and political purposes and not commercial purposes. In its operation, therefore, the golden share deviates from the general principles of company law such as ‘one share one vote’ by creating special rights including veto rights. The golden share is the state’s control-based regulation, not an equity-based control. Due to this unique characteristic, the Indonesian Government should maintain the existence and application of the golden share mechanism in privatised strategic sectors, such as telecommunications companies. However, as the existing golden shares arrangements suffer from a lack of clarity about specific functions, i.e., protecting national interests, the government should specify its criteria and put these into specific legislation.