Corporate Governance in Arcelor Mittal Merger

CORPORATE
GOVERNANCE

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Contents
Introduction............................................................................................................... 1
Post-merger board structure........................................................................................... 1
Advantages and Disadvantages of this structure...................................................................2
Institutional investors significant contribution in the firm’s governance with such higher powers to
one family................................................................................................................. 3
Positive and negative impact on the effectiveness of pre-merger Mittal steels..............................4
Conclusion................................................................................................................ 5
References................................................................................................................ 6

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Introduction
Corporate governance has a significant role in the management of operations and avoiding
any kind of legal obligations. In this environment, it is critical that firm chooses the best
possible strategies for managing the corporate structure within the firm. Merger helps the
firm in improving their resource which again has impact on the corporate governance of the
firm due to which they can improve their ethical standards. Arcelor and Mittal Steels have
been in one of the biggest mergers which required corporate governance to be defined more
precisely (Zarin and Yang, 2011). This will allow the companies to gain competitive
advantage over the rivals and allow that companies do not lose their market share. On the
basis of Financial Times, this report is going to showcase post-merger board structure along
with the advantages and disadvantages of this board structure. It also assesses the fact that
whether institutional investors will be able to put any significant contribution to the
governance of the firm when the 43.5% of voting equity is with Mittal family. This report
will also discuss the positive and negative impact on the effectiveness of the pre-merger
board structure when compared with post-merger board structure.
Post-merger board structure
In 2004, the merger between the Arcelor and Mittal steel made them one of the biggest steel
producers in the world. This was done by Mr Mittal by putting together his public and private
steel interest. It was because of this merger that that Mr Mittal was unable to run his private
steel interest without taking permissions from the audit committee. Bringing change in the
board structure he added more numbers of independent directors in the list. 43.4% of the
shares of the company were with Mittal and his family. He is the chief executive of Mittal
and also the chairman of the board of directors (Financial Times, 2006). After the merger he
became non-executive president of this merged firm. In this new board structure there were
18 new members which consists of six members from Arcelor, six from Mittal steels, three
are the big shareholders of the company and three are the employee representatives. Joseph
Kinsch has the responsibility of the non-executive chairman but now he is the Chairman. Mr.
Mittal holds roughly 10 times than anyone else in the firm. His son Aditya Mittal is the chief
financial officer in this board while the chief executive role was given to the person named
Guy Dolle.