Treasury to dump "golden shares"

By Timothy Sifert

The Treasury Ministry has to dump most of the "golden shares" it holds in 77 formerly state-owned companies by May 1 of next year to comply with European Union laws restricting the use of these types of instruments.

Golden shares are usually small equity holdings in a privatized company that give the Treasury veto power in that company's operations and strategic decisions even though the firm has ceased to be a state-owned entity. Though the share rights are rarely exercised, this forced abandonment of the practice of golden shares represents a further - and welcomed - severing of state control over the private sector. And it's all the more important - at least in appearance - as the country's government has been seemingly loathe to privatize anything of late.

The Treasury recently evaluated its golden share holdings, which run the gamut from the sugar refining industry to pharmaceutical and tobacco businesses, to see if their existence fits the EU directives Poland agreed to as part of its accession treaty.

Upon review, the ministry concluded that "most cases" are indeed in violation of the EU treaty, according to Anita Ryng, director at the European integration department of the Treasury Ministry.

The Treasury is devising ways to either dish out the minority shares to majority shareholders or renegotiate the contract terms, Ryng pointed out. However, she noted that the task of sorting the shares out is mitigated by the fact that the bulk of the holdings is in the sugar industry, and most of those companies are consolidating to create Polski Cukier, which will then void the government's shares.

"It will not be such a big problem," she said. "In the sugar factories (the shares) will just disappear through consolidation."

But the task is still large, she said, especially as the May 1 deadline to reorganize these Treasury holdings adds a sense of urgency to the process. Ryng added she had no doubts that the Treasury would be compliant by the time of accession.

Some private companies in which the government holds golden shares include the privatized factories now owned by tobacco concerns British American Tobacco and Philip Morris.

Ryng does not believe the banning of golden shares will significantly affect to the Treasury's operations, as the change is only one part of a major house-cleaning effort as the country approaches the EU's doorstep.

"These were old regulations within the companies," she said. "Very seldom do we use these rights."

Ryng declined to reveal the last time the ministry exercised its golden share veto power.

Poland is not alone in employing golden shares in its privatization schemes, as a number of current EU members, such as the U.K. and Spain, have recently been criticized by the union for their use of golden shares. In May the European Court of Justice issued a judgment in favor of the European Commission, and against Spain and the U.K., on the basis that golden shares are illegal under EU regulations.