Post-Merger Board Structure and Corporate Governance in Arcelor Mittal

CORPORATE
GOVERNANCE & ETHICS

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Contents
Introduction............................................................................................................... 1
Post-merger board structure........................................................................................... 1
Can an institutional investors make a significant contribution to company’s governance................3
Positive and negative impacts on the effectiveness of pre-merger Mittal Steel board.....................4
Conclusion................................................................................................................ 5
References................................................................................................................ 6

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Introduction
There are many companies that have gone into mergers and acquisitions so as to enhance
their resource base and their strengths. Due to these mergers companies have to improve their
organisational structure so as to make business effective. Post mergers leads to significant
changes in the operations of the firm and hence they need to have more control over the
business units for which they need for competing in the modern day business environment
(Bieda, 2012). Mr Mittal owner of Mittal steels have to make changes in the board structure
post-merger according to the requirements of the firm. However the control of the decision
making power and major control over the company’s strategies remained with Mr Mittal
only. There are many ethical issues that arise in any firm due to the change in the corporate
governance environment in the industry. This report is going to discuss the post-merger board
structure along with the pros- and cons of this board structure. It also highlight the fact that
whether with Mittal family retaining 43.5% of the voting equity, an institutional investor will
be able to make significant contribution to the governance of the firm or not. On the basis of
the Financial Times article, this report discusses the positive and negative impact on the
effectiveness of the pre-merger and post-merger board structure.
Post-merger board structure
Mr Mittal put together his private and public steel interests in the merger that created Mittal
Steel in 2004. Due to this merger Mr Mittal cannot run private steel interest in competition
with Mittal Steel without the consent or permission of the audit committee. The first change
that was done in the board structure was that he was committed to add more numbers of
board members including a majority of independent directors. In this new structure Mr Mittal
owns a 43.4% of the shares of the new firm. In the board of directors he is the Chairman and
Chief executive of Mittal. Post-merger he became non-executive president of the new firm
(The Economic Times, 2006). In this board structure there were 18 members as a director and
the role of the non-executive Chairman had gone to Joseph Kinsch, Arcelor’s current
Chairman. His son Aditya Mittal is the chief financial officer at Mittal. Mr. Mittal owns
roughly 10 times in the company as anyone else. Chief Executive’s role was given to Guy
Dolle. In the board there are 18 people on the new board where six of them were from