Corporate Deal Making Made Easy: Just Give Donald Trump Personal Power To Approve All Strategic Decisions

Deals

from the steelman-this-corruption dept

Here’s a fun corporate governance puzzle for you. Suppose you’re a foreign company trying to buy an American steel producer. The previous administration blocked your deal. The current president promised during his campaign to block it too, saying he’d stop it “instantaneously. Absolutely.” How do you get the deal approved?

If you guessed “write the president’s name directly into your corporate charter and give him personal veto power over your business decisions,” congratulations! You understand modern American capitalism.

That is, more or less, what happened with Nippon Steel’s acquisition of US Steel. The company has filed amended corporate documents with the SEC that contain what might be the most extraordinary governance provision in corporate history: a section that literally names “Donald J. Trump” and grants him veto power over everything from plant closures to pricing strategies to executive compensation.

Initial reporting described this as a “golden share” arrangement with the US government, but that turns out to be wrong in an important way.

Historically, when governments privatized state-owned companies, they sometimes kept what’s called a “golden share”—a special ownership stake that gives the government veto power over certain decisions even though they no longer run the company day-to-day or even have a direct economic stake in the company. The idea was “we’re selling this to private investors, but we still care about some strategic decisions.”

More recently, golden shares have become associated with China’s approach to tech companies. Beijing lets companies operate with private investment but maintains golden share arrangements that give the government control over key decisions. Indeed, supporters of a TikTok ban often point to the supposed “golden share” that the Chinese government holds in the company (something TikTok kinda denies, by suggesting it only applies to the Douyin subsidiary, and not ByteDance proper or international TikTok).

To simplify: golden shares are a way for countries to pretend they have privatized industries that are actually nationalized. You know: the kind of thing MAGA Republicans used to call socialism or communism.

Trump supporters hated such things just a few weeks ago. Senator Lindsey Graham recently promised legislation to “remove any existing company that has a golden share structure from any American exchange.” Apparently, that principled stance expires when the golden share goes to Trump personally.

That’s a tweet from Lindsey Graham, just months ago, claiming:

I will soon introduce legislation with my Senate colleagues that prevents any company that has a “Chinese golden share” from being listed on any American exchange and further, remove any existing company that has a golden share structure from any American exchange.

Which makes it pretty wild that the US has now created its own version, except weirder: instead of “the government” having control, Donald Trump personally has control.

The SEC filing contains what may be the most extraordinary corporate governance provision ever written:

ARTICLE VI

1.            The Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, without (in addition to any other vote required by law or this Certificate of Incorporation) (i) at any time when Donald J. Trump is serving as President of the United States of America, the written consent of Donald J. Trump or President Trump’s Designee, or (ii) at any other time, the written consent of the CMAs (as parties to the NSA) (and any such act or transaction entered into without such consent or vote shall be null and void ab initio, ultra vires and of no force or effect):

(a)            alter, amend, repeal or waive any provision of this Certificate of Incorporation, except as contemplated by Article XII of the NSA;

(b)            change the Corporation’s name from “United States Steel Corporation”, change the Corporation’s headquarters from Pittsburgh, Pennsylvania, or change the Corporation’s domicile to a jurisdiction other than a state, commonwealth, district or territory of the United States;

(c)            reduce, waive or delay any Capital Investment (as defined in Schedule 2 to this Certificate of Incorporation), subject to receipt of necessary approvals and permits on an expedited basis;

(d)            (A) prior to June 18, 2027, close, idle or sell the Corporation’s Granite City Works or (B) prior to June 18, 2035, close, idle or sell any other Production Location, except, in each case of (A) and (B), any Temporary Idling or in response to, or as a result of, a Force Majeure Event;

(e)            fail to follow the recommendation of the CMAs (as parties to the NSA) with respect to Trade Actions;

(f)             effect any material acquisition of a business that is domiciled in the United States that competes with the Corporation or its suppliers;

(g)            implement pricing of the Corporation’s average spot sales price during any rolling six (6)-month period below eighty-five percent (85%) of the corresponding six (6)-month average for that applicable steel product as publicly published by the U.S. Midwest Domestic Hot-Rolled Coil Steel Index (i.e., Hot-rolled, Cold-rolled, and Coated steel); provided, that, for the avoidance of doubt, the average spot sales price will be calculated monthly and will be based on the average spot price for the applicable steel product for each individual customer transaction in the United States;

(h)            accept direct financial assistance from the Japanese government, excluding (a) financing obtained from Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance (NEXI) or other equivalent Japanese government related financial institutions on commercially reasonable terms and (b) financial assistance for research and development in Japan;

(i)             prior to June 18, 2030, reduce the base salary of employees of the Corporation; and

(j)             make material changes to the Corporation’s existing raw materials and steel sourcing strategy in the United States, unless such changes are intended to benefit the Corporation, its operations or customers, which changes, among others, include: to the extent steel making raw materials or inputs are or become inadequate in quantity or quality; and initial imports to the Corporation to accelerate the transfer of technology or commissioning or qualification of facilities committed to being built in the United States (e.g., grain oriented electrical steel).

The practical effect is that Donald Trump now has personal veto power over US Steel’s pricing, plant closures, executive compensation, acquisitions, and corporate governance changes. The company literally cannot make major strategic decisions without Trump’s written consent.

There’s something genuinely novel here. American corporations do not typically write individual politicians into their governance documents. Some might even argue it looks quite corrupt.

Many people have claimed that this is nationalizing US steel and embracing socialism (some claiming this is good, many others more correctly being horrified by it).

That latter link, by trade expert Scott Lincicome, points out how absolutely ridiculous this is:

As we’ve already discussed (twice), there is no reason for the U.S. government to be involved in what is inarguably a small transaction involving two publicly traded companies that are both eager to seal the deal on mutually acceptable terms. The “national security” arguments for blocking or amending those terms are bogus: As I explained in December, “the U.S. military needs a tiny amount of domestic steel output and gets none of it from U.S. Steel,” and security experts across the political spectrum—including officials in both the Trump 1.0 and Biden administrations—saw no serious concerns. The government’s involvement was and remains about politics, and the whole drama serves as a serious black mark on U.S. international economic policy (and Biden’s time in office).

But calling this “nationalization” doesn’t quite capture what’s happening. Nationalization suggests the government taking control of strategically important industries for policy reasons. This is more like… “Trumpalization”? The personal capture of corporate governance by an individual politician.

The structure makes this clear. When Trump is president, he controls US Steel directly. When he’s not, control transfers to Treasury and Commerce—the “CFIUS Monitoring Agencies” referenced in the documents.

This dual structure—Trump when in office, federal agencies otherwise—makes it impossible to defend this as standard CFIUS oversight. Normal foreign investment reviews don’t write specific politicians into corporate charters. They create institutional safeguards, not personal fiefdoms. If this were really about national security oversight, the control would run through established government agencies with expertise and continuity, no matter who was President.

This seems unprecedented, and not in a good way. A private corporation has voluntarily surrendered key governance decisions to Donald Trump personally, apparently as payment for his approval of their deal. It’s the kind of arrangement you’d expect to see in a kleptocracy, not a constitutional democracy.

And somehow we’re supposed to pretend this is normal corporate governance.

Filed Under: cfius, corporate governance, corruption, donald trump, foreign ownership, golden shares
Companies: nippon steel, us steel