Corporate Governance

This article discusses the post-merger board structure and the impact of corporate governance in ArcelorMittal. It explores the positive and negative impacts of pre-merger effectiveness and the effectiveness of the post-merger board. The article also highlights the cultural and political differences faced during the merger.

Running head: Corporate Governance
Corporate Governance
Name of the Student-
Name of the University-
Word Count- 2000
Author’s note-

1Corporate Governance
Table of contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Post-Merger board structure........................................................................................................2
Impact in governance...................................................................................................................4
Positive impacts of pre-merger effectiveness..............................................................................6
Negative impacts of pre-merger effectiveness............................................................................7
Effectiveness with post-merger board.........................................................................................7
Conclusion.......................................................................................................................................8
Reference.........................................................................................................................................9

2Corporate Governance
Introduction
ArcelorMittal is the renowned steel company who is considered as the world’s second
largest steel producer in the world. The company is headquartered in Luxembourg and it was
formed in the year 2006. The company was taken over by Indian based steel company known as
Mittal Steel. The annual steel production in the last year was amounted to 92.5 million metric
tons. The company is ranked 123rd during the global access in 2017 out of the 500 companies of
Fortune Global which also consists of the world’s biggest corporates. The report emphasis on the
post-merger board structure and it also discusses on pros and cons of the merger and acquisition
about the company. During the second part it is focused on the number of voting equity, which
they retain and how the institutional investor could be able make significant contribution of
governance in the company. However, during the last it is focused on the negative and positive
impacts which is being elated by the effectiveness in accordance to the pre-merger and post-
merger issues.
Discussion
Post-Merger board structure
Solution to question 1
Arcelor Mittal has been created by determination of the takeover of the Western
European steel maker named as Arcelor, it mainly consists of Spain, France, Luxembourg.
However, Mittal Steel which is a renowned Indian origin steel industry made a bid of hostile
takeover and it was generally successful in the year 2006, when they took over and replaced
merger between Arcelor and Severstal which did not had any sufficient shareholder approval.
Headquarter is associated in Luxembourg City. With merging of these two giants the production

3Corporate Governance
of the company simply rise above and approximately, they together started to produce around
10% of World’s steel and concluding an average it is considered as the largest steel company in
the World. With handling, the total revenue started to rise and the next year it marked a record
high of $105 billion (Corporate.arcelormittal.com. 2019). This is absolutely a great start of the
company and they started to create their own sort of benchmark by itself.
Pros
Mittal Steel officially made the bid of euro 40.37 per share to Arcelor which is
approximately Dollar 33 billion approximately. However, Mittal being able to catch hold of the
total value being able to incur much more profit. During the year of 2008, the company was
combined to generate and recruit 3,20,000 employees throughout 60 countries in the world. After
the merger, the market capitalization of the company raised to $30 billion which even increased
to $32.5 billion during the end of the year. The company started to take over more number of
companies during the initial period and they planned to innovate more number of products which
helped them to attract more number of clients very easily. The masterminds of the two
companies together combined to process the betterment and planned to create a long-term
structure for the company. However, the company is related to announce different several types
of plant closings, which is included in, differ subsidiaries that is helpful in assigning lower cost
values which creates betterment of employment scaling in the industry.
Cons
According to (Zhang et al. 2019), the operating income of the company fell uncertainly
lower in comparing to the other year. It really fallen to $4.9 million. The sales of the company
fallen during the period of 2010-11 by 10 percent due to surge in the prices of steel in world

4Corporate Governance
market. After the merging of the company, it was certain that they would be having certain type
of problems which will affect the long term plan of the company. The company started to meet
the reduced demand of steel in the world market by lowering the costing. This lowering affected
the feature of maintaining the quality because low budget products are not that reliable in
resourcing the effectiveness. Eventually the organization started to sell off their subsidiaries to
others in the market (Pusuluri. 2018). They even decided to curtail the European production,
which was a major setback of the company. Due to market volatility, the manufacturing
subsidiaries of the company were being sold to their rivals called Nucor, which affected their
productivity massively.
During the period of 2012, Arcelor Mittal faced another setback that generated debt of 22
billion due to slow down in China’s economy (Gentry and Stroup. 2019).
Solution to question 2
Impact in governance
The hostile takeover followed by Mittal Steels of Arcelor followed to the particular
changes in governances also with holding for the market of corporate control in the market. The
mechanism, which was conducted by the company in order to gain success in hostile takeover,
are very significant in European countries (Deck and Sheremeta. 2019). The governance, which
is applied by them in Europe, is practiced by listing in the stock exchanges it is being dispersed
among the small or petty shareholders who are consoled in US stock markets also. After
following this issue, Mittal industries conducted a meeting in order to discuss about the conflict
of interest that is being raised between two parties very frequently. Mittal family enacted to hold
around 43.5 % share in order to control the concentrated ownership which includes two type of

5Corporate Governance
consequences for the corporate governance (Henn, Cavalli-Sforza and Feldman. 2019). The
family decided to give the dominant shareholders some incentive in order to mold their interest
in rendering to the management and also to the shareholders. This is the reason, which generally
reduced the degree about conflict of interest between the management and the shareholders.
Family-controlled firms a type of which is practiced in maintaining the governance throughout
the wide use of it (Coghlan. 2019). However, Arcelor did not practiced with any sort of force
application to the target company which gently helped the system to manage resources much
effective. During the bid war which eventually took place, Mittal increased the percentage of
share from 25% to 34.5% however members of the family got somehow shirked because they
forecasted that the position of share price would have went much lower to 43.5% and this is what
Mittal wanted to go for. Certainly after the merger took place, Mittal took care of the governance
and the cultural aspect of the company. It really pushed the employees to go beyond their
performances which certainly surged the motivation level of employees throughout the world,
Lakshmi Mittal in focusing on the governance regarding taking decisions on the attribution of
governance concessions to the employees (Collins and Halverson, 2018).
However, Arcelor did not accepted the hostile takeover as they started approaching the
president of Luxembourg and they contributed to contact with the French prime minister as well
with president of them (Webb. 2019). Although during the later stage, president of Luxembourg
enacted with emphasizing that corporate governance which is established by the Mittal steel
industry attributed positive impact of it. Hence, in referencing with the scenario as followed by
them Mittal industries succeed to encourage the best out of it. They gave the justification for the
provisions of enacting new legislations which even gave the government to use their possible
rights for focusing on the takeover being associate within the two parties (De Vaus et al. 2018).

6Corporate Governance
However, at last the invest bankers were considered as the most important alignment who were
active as the supportive client during the hostile takeover. The investment bankers provided the
help of mediating between two of them by giving advice, political lobbying and by helping them
with financing different sort of projects which are associated with the company. As they
arranged the loan, it suddenly made quite easier for both of the parties which enabled the
demonstration of governance effectively (Donaldson. 2018).
Solution to answer 3
Positive impacts of pre-merger effectiveness
Before the merger that took place between the two companies, it could be said that Mittal
was a powerhouse before the merger but only focused to the alignment in Asian countries itself
(Bischof, Laux and Leuz. 2019). The managers gave a thought analysis that it is very much
required to in focus their business expansion throughout the world. Hence, in focusing to the
outcome of the betterment in associating of the company, Laxmi Mittal decided to overcome the
demand throughout the world. The company went for associating higher amount of value in
comparison of what they have now (Deck and Sheremeta. 2019). After generating the financial
forecast of the company, they decided to bid for hostile takeover which will accumulate
betterment of the company. This is the most positive impact which is enacted by the
measurement of the Mittal industries in association of getting stronger industry throughout the
system in considering the whole world. It is also acknowledged by them in order to consider the
growth by enabling the association with effecting synergy technique. It is the technique of
implementing merger of two companies which accumulate with same kind of business (Mooley
et al. 2019).

7Corporate Governance
Negative impacts of pre-merger effectiveness
Negative impacts which are associated is the cultural differences and it is basically
enacted with finding out the association in order to fix up the issue in accordance to the company
(Lei. 2018). The cultural differences between the European countries and the Asian countries are
negatively associated and there is no match between them. Secondly, another type of negativity
is enacted with political differences between two countries and it is being considered as one of
the major problematic situation which was being faced by Mittal Steel (Mooley et al. 2019).
Effectiveness with post-merger board
In focusing with the relation with the post-merger association it is being considered that
the from the second half of the financial year, the company is bearing fruit. The earnings before
interest and tax of the company rose to 0.6% to $15.27 billion which is referred as quiet higher
than what is expected in the market. During the other years, consecutively the CFO of the
company Aditya Mittal claimed that they are gradually becoming as one of the giants in steel
production business. The EBTIDA which the company generally increases and it helps to
strengthen the combined version of the company (Mbaye and Dinardi. 2019).
This referred synergy helped to higher the amount of the highest level which eventually
helped to strengthen the technological as well as financial strength of the organization.

8Corporate Governance
Conclusion
It can be concluded from the above topic that proper implementation of corporate
governance can cause a futuristic approach to the basis of company. It is rendered that if the
business is compatible to expand their resources then it is being issued that proper significance of
the organization is required to enhance their approach to become the next big thing in the world.
Synergy is the better approach which is taken by different organization in order to fix up their
meets of demand throughout the world. The significance, which is talked on the perspective, is
determined with being appropriate takeover of the target company in order to generate the
strength of the organization. In order to acquire the same sort of company it is being appropriate
in the sense of building a much-dominated strength for acquiring the resources related to the
business purpose. For collaboration purpose, it is being taken care of the associated purpose of
cultural governance to focus on respecting the culture of multi-nations. However, in order to
secure the stand in accordance of the parent company, Mittal Steel held 43% of share within
themselves to maintain the dominance. During the recent times, ArcelorMittal stands second in
order to produce and manufacture steel throughout the world. They accommodate 10% steel of
the whole world by themselves.

9Corporate Governance
Reference
Bischof, J., Laux, C. and Leuz, C., 2019. Accounting for financial stability: Lessons from the
financial crisis and future challenges
Coghlan, D., 2019. Doing action research in your own organization. SAGE Publications
Limited.
Collins, A. and Halverson, R., 2018. Rethinking education in the age of technology: The digital
revolution and schooling in America. Teachers College Press.
Corporate.arcelormittal.com. 2019. Home – ArcelorMittal . online Available at:
https://corporate.arcelormittal.com/ Accessed 31 Aug. 2019.
De Vaus, J., Hornsey, M.J., Kuppens, P. and Bastian, B., 2018. Exploring the East-West divide
in prevalence of affective disorder: A case for cultural differences in coping with negative
emotion. Personality and Social Psychology Review, 22(3), pp.285-304.
Deck, C. and Sheremeta, R.M., 2019. The tug-of-war in the laboratory. European Journal of
Political Economy.
Donaldson, D., 2018. Railroads of the Raj: Estimating the impact of transportation
infrastructure. American Economic Review, 108(4-5), pp.899-934.
Gentry, M. and Stroup, C., 2019. Entry and competition in takeover auctions. Journal of
Financial Economics, 132(2), pp.298-324.
Henn, B.M., Cavalli-Sforza, L.L. and Feldman, M.W., 2019. The great human
expansion. Resonance, 24(6), pp.711-718.

10Corporate Governance
Lei, Y., Li, N., Guo, L., Li, N., Yan, T. and Lin, J., 2018. Machinery health prognostics: A
systematic review from data acquisition to RUL prediction. Mechanical Systems and Signal
Processing, 104, pp.799-834.
Mbaye, J. and Dinardi, C., 2019. Ins and outs of the cultural polis: Informality, culture and
governance in the global South. Urban Studies, 56(3), pp.578-593.
Mooley, K.P., Nakar, E., Hotokezaka, K., Hallinan, G., Corsi, A., Frail, D.A., Horesh, A.,
Murphy, T., Lenc, E., Kaplan, D.L. and De, K., 2018. A mildly relativistic wide-angle outflow in
the neutron-star merger event GW170817. Nature, 554(7691), p.207
Pusuluri, A., Krishnan, V., Wu, D., Shields IV, C.W., Wang, L.W. and Mitragotri, S., 2019. Role
of synergy and immunostimulation in design of chemotherapy combinations: An analysis of
doxorubicin and camptothecin. Bioengineering & Translational Medicine.
Webb, M., Short, N., Bloom, N. and Lerner, J., 2018. Some Facts of High-Tech Patenting (No.
w24793). National Bureau of Economic Research.
Zhang, Q., Xu, J., Wang, Y., Hasanbeigi, A., Zhang, W., Lu, H. and Arens, M., 2018.
Comprehensive assessment of energy conservation and CO2 emissions mitigation in China’s
iron and steel industry based on dynamic material flows. Applied Energy, 209, pp.251-265.