Corporate Governance & Ethics

This document discusses the board structure and advantages/disadvantages of corporate governance in ArcelorMittal Company. It also explores the impacts of the merger on the pre- and post-merger effectiveness of the Mittal Steel board.

Running head: CORPORATE GOVERNANCE & ETHICS
Corporate Governance & Ethics
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Table of Contents
Answer to Question 1:....................................................................................................2
Answer to Question 2:....................................................................................................5
Answer to Question 3:....................................................................................................7
References:.....................................................................................................................9

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Answer to Question 1:
Board structure of ArcelorMittal Company:
In the year of 2006, two steel makers named Arcelor and Mittal merged together and
formed the biggest steel manufacturing company in the whole world. It was called
ArcelorMittal, with a total of 333,000 employees and forecasted an earnings of approximately
$15.6 billion. Before the merger, Arecelor was one of the biggest steel manufacturing
Company, with a turnover amount of €30.2 billion. This Company was formed through the
merger of three individual former companies named Aceralia, Arbed, and Usinor in the year
2002. In the year 2006, this Company merged with Mittal group and formed ArcelorMittal.
Before such merging, Mittal was mainly a family-oriented company with some traditional
viewpoints (Corporate.arcelormittal.com 2019).
In this merged Company, the Mittal group is holding up to 43.5 percent voting equity
power. This innovative boards of ArcelorMittal were more or less 18% strong, holding with
the chairperson named as Joseph Kinch (who appointed as a chairman of Arcelor before such
merger) and Lakshmi Mittal as a president (Corporate.arcelormittal.com, 2019). In this
merger company at present holding total of nine independent and non-independent directors
including directors for employee representative and nominee and one women director, named
Vanisha Mittal Bhatia, for reflecting the interests relating to significant shareholders. The
Roland Junck held the chair of the Company's CEO post along with the CFO person, who
was the son of Lakshmi Mittal, Aditya Mittal.
In case to perform the governance of the Company efficiently, the board of directors
and executive officers are appointed to implement individual strategy along with such
persons who are nominated in the management committee. ArcelorMittal's management
committee provides a foster an entrepreneurial spirit within the Company's environment

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(Black et al. 2018). It helps to create an organization inventive and adaptable and also
accountable for such purpose the structure of the committee is to maintain both flat and lean
structures. Brian Aranha was posted in this Company as the executive vice president and
generally used to perform the head of the strategy implementing.
Before merging, both of this Company was performed individually great in their
industry; however, after the merger, they provide an innovative revolution in the steel
industry. Through the help of their board of directors, executive employees, and also with the
help of the management committee, the Company achieved an overall success in its steel
industry.
The General Advantages and Dis-advantages of board of Directors:
Generally the board of directors are consider as the head of the companies in
case of making any decisions and other regulations (Dimopoulos and Wagner 2018). In case
of a company the impacts of such board of directors either positive or negative.
Advantages:
 Boost up the public profile:Through the implementing of an active board of
directors' structure, the Company can able to improve its public profile quickly. The
directors, with the application of an effective strategy for the public, can be able to
achieve the goodwill that will influence the overall success of the Company.
 Use of skills and Expertise: Using the proper board of directors generally helps to
perform correctly in case of conducting any business decisions. In a board of director
generally, consist many experts who are capable of taking useful business decisions
through the using of their skill and experiences. In the case of ArcelorMittal, the
Company holding many expertise persons who are competent in performing
efficiently, relating to managerial decisions (Ittner and Keusch 2015).

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 Corporate Governance: For every Company, the structure of Corporate Governance
is considered as one of the vital element for the overall Company's success. It is
generally the system of rules, principles, and also the process through which
companies are directed and controlled. Such governance is also providing some
guidelines in case of fulfilling overall organizational goals. In the case of
ArcelorMittal, corporate governance performed a vital role through the implication of
different strategies and making decisions.
 Independence and accountability: In case of the board of authority of a company,
are free from all types of dependencies. They are generally open to taking their own
decisions, which is found beneficial for the company. Here ArcelorMittal, the
company is having different directors, who are using their knowledge in this case, to
maintain the overall success of the company. Through the accountability of individual
expertise of each director, the company generally derive their overall success
(Honggowati et al. 2015).
 Strategic Direction: the Company generally using their strategies in the case to
achieve organizational success. The board of directors usually decides such policies.
In the case of ArcelorMittal, the board of directors decided their strategic visions in
case of implementing companies overall strategy.
Disadvantages:
 ArcelorMittal is a merger company, which is the combined form of Arcelor and Mittal
Company, where 43.5% voting power is under the authority of the Mittal group. So
one of the main problems which are reflecting in such case the biasness shows in
making any decisions.
 Sometime due to lack of proper communication such company faced difficulties in
deciding their strategies and regulations.

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Answer to Question 2:
Generally, two companies are used to merge in case of creating a new form of
Company, which is called the merger company. A merger is one kind of corporate strategy
that used to combine two different companies and formed a new active company. Such
merging is used to increase the financial as well as performing strengths of those two entities.
In case of merger generally involves combining process of two individual companies into a
single and more substantial company. In this merger process combination of the two
companies involves a usual transfer of ownership, through the stock swap or cash payment
between two companies. In general, both the merging companies surrendered their stocks and
issued some fresh capital as the implantation of a new company. Out of different types of
merger procedures, a kind of merger procedure is known as horizontal merger, here in case
ArcelorMittal, which is followed (Kaymak and Bektas 2017).
In case of a merger, generally, the Company holding more than 50% voting power
consider as the parent company. However, in the case of ArcelorMittal Company, the Mittal
group holding 43.5% voting equity, which means such Company will not consider as the
parent company to this merger company ArcelorMittal. In the case of governance of the
Company, each and every important person contributes their equal opinion towards the
development of the overall achievements of the Company. There are no options of partiality
expressed regarding the decision making authority in such Company. Mittal group are
holding more than 40% voting equity in this Company, which is more than the other investors
voting power (Corporate.arcelormittal.com 2019). Though they are holding more voting
power comparing to other investors, in case of governance of the Company, each and every
investor contribute equal proportion that helps to make any positive decisions.
ArcelorMittal, this company is engaged to providing the best-practice standards in
case of governance relating to corporate structures. Such governance provides proper

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decisions in case of dealings with individual stakeholders and with the respect to maintain
proper transparency in reporting and disclosure of accounting quality. Generally, the rights of
individual shareholders’ and individual investors’ relating to making any decisions are key
pillars for the company’s corporate and governance framework. The company is engaged in
considering the opinions provided by single stakeholders into account through the using of
corporate responsibility framework and through engaging with all the stakeholders regularly.
The company used to do continuous monitoring the legal requirements and best practices in
the united states, in European Union and also in Luxembourg, in case of making necessary
improvements of company’s corporate governance standards and in procedures.
ArcelorMittal is the public limited company, which is formed in Luxembourg. It is
mainly controlled by the board of directors, according to the requirements that set out in the
company’s article of association. The board of directors usually set the company’s different
strategies, and the implementation of such a strategy is used to delegate a group of executive
officers. In the case of making business strategy, the company normally used to take every
single stakeholder opinions, which is found beneficial for companies overall objectives along
with some social responsibilities.
Generally, in the case of institutional investors, their contributions get an equal
opportunity to contribute some valuable opinions towards the overall objectives and
governance of the company. Generally, the institutional investors are engaging in exercise the
control in the financial market not only as investors but also do as a shareholder. The
institutional investors’ activism believes that it used to improve corporate governance
because such monitoring provides benefits to all shareholders. In some instances, people also
argue that some of the institutional monitoring is giving incentives for the managers in terms
of a firm’s long-term prospects. Sometimes it is also considered that the institutional
investors should not have a proper role in corporate governance due to some portfolio

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managers who are had a lack in the expertise to advise corporate management. In some case,
the institutional investors have shown preference relating to liquidity comparing to control
because, to exercise control over corporate governance, they need a bit of sacrifice of cash.
Using the following prospects an institutional investors contribute their same opinions
towards the company’s overall success.
Answer to Question 3:
The impacts on pre-merger effectiveness of Mittal Steel board:
According to the article issued by financial times, before the merger with Arcelor, the
Mittal steel board’s most of the independent director was the Indian billionaire. Mr Mittal is
destined as a king of his industry unless a little improvement in his control is falling
significantly below the level of 50 per cent. Another thing is the company followed the two-
tier voting structure in which Mr Mittal and his family jointly owns at present 67.2 per cent of
the A-shares. In such share carrying only one vote and all the remaining majority is under B
shares, in which have almost ten votes. Mr Mittal was generally controlling 98.3 per cent of
the total voting power. Due to changes in the voting structure ratio of voting and nonvoting
share will change to 2:1 from 10:1. The differences in such ratio imply the powers are
conferred to outside shareholders. In Mittal steel’s articles of association will remain
academic until the majority of voting powers are under the authority of Mr Mittal
(Corporate.arcelormittal.com 2019).
According to the article in the Mittal group, the directors having limitless latitude in
regarding their discretion. According to the report, the powers are provided on the outside
stakeholders. Such are relating to the dismissal or appointment of individual director, which
are totally useless if Mr Mittal chose to use his voting power against them. In this article, the
financial times raised an issue that the Mittal steel is a Dutch holding company with no owns

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the business and all the assets are in under operating subsidiaries. While in the Mittal website,
nothing was disclosed about their corporate governance, subsidiaries and the enforcement of
governance rules.
According to the article, the pre-merger company is conducted by the Mittal group and
where the performer was Mr Mittal. In every decision was done through his opinion, which
implies positive as well as negative impacts on other stakeholders of this company.
The impacts on post-merger effectiveness:
After the merger along with Arcelor, the established company was named as
ArcelorMittal. In this company, the Mittal family retained only 43.5% voting power on
equity, which implies the equal contribution of each stakeholder in regarding company’s
decisions. Like before the total controlling and decisions making power will not remain under
the control of Mr Mittal, at present situation, it will be distributed among the other
stakeholders, including institutional investors. This following merger finds beneficial for
individual shareholders and also for the other investors who are contributing to this company
to run its operating activities.

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