Corporate Governance Question Answer 2022

Running Head: CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
Name Of the Student
Name Of the University
Author’s Note

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ANSWER 1:
The case study discusses the acquisition and merging of two corporations under the title head
Arcelor and the Mittal in the year of 2006 according to Zarin and Yang 2011. Arcelor Mittal is
the title heir of the Mittal Steel corporation, a business company which was incorporated in the
year 1976 by its owner, Mr. Lakshmi Mittal. The ArcelorMittal was constituted and formed in
the year 2006 due to merging of the two companies called the Arcelor, as a separate legal entity
and the Mittal as another legal business separate entity. It was a hostile merging by the Mittals
due to various factors but it turned out as the world’s largest steel industry. Mittal previously
constituted a unitary form of the Board of Directors. Such constitution of Board of Directors
means that the entire governance and management of the company affairs is under the control of
a single body (O’Boyle and Shilbury 2016). There no separate governing body formed for the
purpose of governance department to the Board of Directors. Hence, such unitary form of Board
constitutes of four various kinds called; a board of directors, such board constitutes majority of
non-executive directors. On the other hand, Arcelor constituted two tier Board located in
Luxembourg. Such two-tier Board of Directors is the structure in which the two subsidiaries are
formed as decision making board and the supervisory board where the two subsidiaries are
constituted on either side of the Board, functioning as independent entities (Block and Gerstner
2016).
After the merging of Arcelor and Mittal as a separate unitary entity, a new company was
formulated names as the ArcelorMittal with a revised set of Board of Directors with appointment
of 18 members and all the eighteen members being a part of non-executive team. In such kind of
board of directors, majority of the directors are independent. In the newly formulated entity, the

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Mittal corporation retained its supremacy with the voting rights in the company by holding of the
majority of shares amounting to 43.5% shares equivalent to the similar percentage of voting
rights in the affairs of the company. The company is incorporated as the Public Limited Liability
Corporation which is managed by its board of directors as the decision making authority. The
Board of Directors are incorporated and allowed to work as per the provisions under the articles
of association of the company (McLaughlin 2018). The revised directors of the Board formulated
six members from the Arcelor and six from the Mittal and three representatives from the existing
Arcelor shareholders and three representatives of the employees. Therefore, it has already been
stated that most of the members formulating the board are the non-executive members of the
company.
It can be discussed inferring the above analysis, that the newly constituted board of
directors is an example of the unitary form of board of directors, constituting majority of non-
executive directors. This kind of Board of Directors is not commonly found in the corporations
which are listed and the members are mostly excelled in the organizations which are non-
profitable, including those dealing with sports, health sectors, trust and so on. The structure of
the board deals with the recognition of Mittals monarch in the process of decision making in the
governance and management of the company.
The unitary board of directors is known for emphasizing a single body for the governance
or the decision making process of the company. Therefore, such arrangements has its advantages
as compared to two-tier body of governance. Firstly, the model has a single governing unit, it
owns certain advantages related to the independency of the system of governance without any
opinion being conflicted by any other body within the similar capacity. Thus, the decision could
be taken easily and in the essence of fast flowing decision. In addition, the decision of the body

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would be single headed, which would be free from all kinds of ambiguity. Secondly, the sharing
of data would be one way flowing and in its emphasis lies in one way. Thus, approval is not
required from one body to the other (Saeed and Saeed 2018). Better communication ways and
technologies result in better working atmosphere and effective learning productivity of the
people. Thirdly, the benefit of the unitary form extends its essence to the directors as a single
authority for the making of decisions in the entire procedure of decision making. The non-
executive directors also gives their suggestions to the directors who are executives. Fourthly, as a
unitary model of decision making process, the members interact with the directors who are
executive which improves their relationship with the directors and hence the implementation of
their ideas and plans.
However, such unitary form of decision making process by the directors suffers from
certain disadvantages as explained by Malkawi 2018. The CEO of the organization holds a very
important position in the Board panel for the directors. If any dispute exists between the CEO
and the board members, the interest of the company would be affected in an adverse situation.
Furthermore, the interference of the non-executive directors in the decision making
process lead to an increased risk of liability imposed upon the company. And finally, the
personal relationship can affect the managerial relationship of the company including the
managerial matters, appointment and monitoring of the company. Biasness and unfair personal
views and relationships are a significant concern in such a unitary form of decision making
model.