Corporate Governance for Managers

This article discusses post-merger board structure at Arcelor Mittal, institutional investors, and positive and negative impacts on pre-merger Metal Steel board. It provides expert insights on corporate governance for managers.

CORPORATE GOVERNANCE FOR MANAGERS

Table of Contents
Answer 1..........................................................................................................................................3
Answer 2..........................................................................................................................................4
Answer 3..........................................................................................................................................6
Reference.........................................................................................................................................8

Answer 1
Post Merger Board structure at Arcelor Mittal: There are three diverse classes of directors in
the company named as A, B and C. But now only two classes of directors are left as the term of
office of Malay Mukherjee, (CEO of Mittal Steel) expired last year. In accordance with the
provisions and polices followed by the company , all the rights are enjoyed by class A, directors
who has following: the chairman, chief executives as well as owner’s son Aditya Mittal and
daughter Vanisha Mittal Bhatia. Further, Jeannot Krecke, Michel Wurth is also part of board
structure as non-independent directors. Further, the independent directors who are part of Board
Structure are Bruno Lafont, Tye Burt, Suzanne Nimocks, Karel de Gucht and Karyn Ovelmen.
These nine directors are responsible for the strategic direction as well as oversight for the
business. Further, the team appoints as well as assists the senior management of the company
(Aaron, 2016).
Pros and cons
Pros of post merger related to board structure is alignment of common vision and objectives as
the whole team has one motive and objectives. In present case, as directors are enjoying
independent position, they can also connect with other business or association. Mittal Steel
Company is open to the Claim of cronyism in the boardroom (Beekes, at. el, 2016). Rules,
processes and requirements are clearly offered by the board of the company, therefore,
everything was apparently described and managed by the associates. For making the conclusion
of conflicts, regulatory requirements are carefully fulfilled by the authority (Aranea, González
Begega, and Köhler, 2018.). Another advantage which can be attained through new merged
board structure is accumulation of new ideas and excellence through which new heights can be
attained. Even appropriate guidance can be attained related to existing barriers which are faced
by the company. The merged team will comply the provisions and policies followed by both the
companies. Thus, through developed synergy, the board team of Arcelor Mittal will be able to
achieve higher revenue goals and improve customer experience along with brand management.
Cons of the post merged board structure includes independence of the non-executives as a
subject to worry as limited powers are available with the same (Dondofema, Matope, and
Akdogan, 2017). It is not an easy task for people with different ideas and prospects to work as

one team. The fact cannot be denied that Mittal enterprise is known for the monarch power of
Mr. Mittal. Moreover, a majority of shares as well as voting power are under control of family
members. Thus, to make enforceable decision which is in accordance with interest of company
but not in interest of members will be a tough task. Synergy do result into higher profits as well
as enhanced growth but in some cases even small differences can lead to uncertainty and a sense
that employees might not be valued in new environment(Dondofema, Matope, and Akdogan,
2017). Another significant challenge which is to be faced by post-merger board structure is
implementation of right strategy delineated early as well as in appropriate manner. It is necessary
to attain visibility into the integration leadership decision which comprise that Board should
assess cultural issue and attempt to navigate the related challenges. In accordance with study of
Erickson, Ton, and Wang (2019), it is not necessary that the whole team should move further
with same perspectives as now the boards of directors are having directors of both the
companies. Further, possibilities exist that they are not ready to accept the perspectives of
director of other company with an ease. Developed integrated polices will be a tough task for
board of directors, as now they are required to assess the necessities of employees and
management of both the companies.
Answer 2
Institutional investors are the financial institution that receives the funds from the third party for
making investments but by their personal name however they receive from others and associate
with the company by their own name (Heather, and Nand, 2006). As per the OECD principles of
corporate governance, it holds the fundamental statements because of which investors can
consider their personal interests, and apart from this adequate rights and knowledge was
available to them. Moreover, the demand of large institutional investors in last few years has
increased in order to appropriately utilize the talented and skilled expert shareholders those will
make the up to date use of rights and regulation (Erickson, Ton, and Wang, 2019). It will also
support for the good corporate governance in industries in which they used to spent.
The effectiveness of the corporate governance practices is highly based on the compliance of fair
policies and practices, in fact no over emphasis should be given to it. However as per the
modern terminology, the word ‘CONTROL’ is not valued as much it means to be. Moreover

the primarily used word ‘regulation’ is replaced by the word ‘management’ (Equinox Minerals
Limited. 2011).
In the present study, it can be accessed that Arcelor's shareholders, together with the instructional
investors were not happy as the method of dealing with Severstal was seems as hassled. Due to
same they continued to talk regarding annoying administration and go to court for providing
rights to their board members (Li, Redding, and Xie, 2018). Moreover as the Mittal family
retains 43.5% of voting equity, in this situation institutional investor can make significant
contribution with adequate support of independent directors. Severstal deal was approved by the
Luxembourg supervisory body even though it is connected with strange peculiarity (Liang,
Renneboog, and Vansteenkiste, 2017). Though, the essential turn, comes at the phase where
Arcelor's board and management comes to know that share buyback is associated with the deals
together with Severstal and same might be chosen in order to attain higher profits. The terms in
the agreement is done is 40% higher than the initial offer made by the Mittal in January. At that
time the bid that was made was 27% higher than Arcelor's stock price. Collectively the deal was
approved by Arcelor board members with Mittal. The long meeting was conducted at the
company's palatial headquarters in Luxembourg on Sunday and all the associated members were
present in the meeting (Lundin Mining Corporation. 2011).
Even though the polices followed in Arcelor Mittal do not always favor public interest but
discussions are carried out with the institutional investor’s straightly in order to conclude in
appropriate manner (Plender, 2006.). Moreover as a part of an alliance of shareholders, it
involves with the corporations in various important segments. The focuses of discussions which
do have significant importance that helps in controlling the challenges associated with the
company regarding rising rights and regulation and climate change in the polluted world are
discussed with institutional investors. Such involvement supports the companies to improve the
strategies that are connected with carbon risk resilience because the circumstances that are seen
in the world are of low carbon economy (Leepsa, and Mishra, 2016). Thus, institutional
investors do have significant opportunity relating to support or act against the decision which is
not in their interest. It can be concluded that it depends on institutional investor to make
appropriate contribution to the governance of the company.

In order to allow the institutional investors to assess the challenges and threats that are connect
with the change of climate and also provide the better learned decisions behalf of their clients ,
there should be enhanced disclosure strategy and setup planning it is a very essential tool as part
of policy to be complied by the company.
In the report of IRRC, increased engagement facts are explained which were fuelled by a great
consciousness of institutional investors concerning threats at the companies following portfolio
at current incomes downturns and a rising restlessness regarding the activities of board’s
supervision authority. Secondly institutional investors should be made part of decision relating to
important management alterations which will eventually lead to enhanced disclosure and
encouraged the interest of shareholder for similar knowledge. It will offer them clear visibility
within financial of corporation, as well as possible conflicts of interest connecting with officers
and directors, and compensation practices (Mathews, 2017). Though this procedure institutional
investor will be able to tackle previous possible problems and deal with obtainable once before
they reach to the conclusion (Müller, at.el 2016).
Answer 3
Positive Effects on pre-merger Metal Steel board and comparison of same with post merger
board structure
Mergers and acquisitions are applied by a company in order to grow, institute and expand to new
markets. It can be done through two ways i.e. Friendly and Hostile. The board structure of
Arcelor Mittal enterprise complies two tier voting structure and no change in same can be
accessed after post merger. The pre-merger percentile of Mr Metal and his family was 67.2 per
cent of the A shares, which bear one vote, and all the B shares, which enclose 10 votes. Though,
after merger to alleviate issues relating to voting structure same was changed from 10:1 to 2:1
(Schaeffler Group. 2011.). Thus, it can be assessed that the situation is not different in case of
post merger because still significant power is in hands of Mittal family. Thus, the powers which
were available with director are available in same position even after post merger. The same
leads to attainment of advantage relating to enjoying rights as well as to run company in the
manner they want.

In pre-merger board structure there were three diverse classes of directors named as A, B and C.
The class of Director B did not exist in the company for so long as the term of term of office of
Malay Mukherjee, Mittal Steel’s chief operating officer has been expired previous year. On the
other hand, class of A directors who have all the powers and rights including Mr Mittal, who
move together with the role of chairman and chief executive and his daughter Vanisha Mittal
Bhatia and son Aditya Mittal. In C, Class directors there were six non –executives, and
contained limited powers and rights in compare with a, class Directors. Their connections with
the company were not as good as they were elected just for the term of one year on the other
hand family director ( A class Directors ) are elected by the companies authority to four years.
Moreover they effectively provide pleasure at Mr Mittal’s. On the other hand, in class C director
six are described as independent, and are connected with some outside business links with Mr
Mittal (Plender, 2006.).
Negative impact on pre-merger Metal Steel board and comparison of same with post
merger board structure
Post Merger Board structure does comprise the director of Arcelor Company and they can make
their point to be accepted as the rules of board comprise details definitions relating to reporting
requirement and processes. However, the situation is not same in case of legal as well as
regulatory requirements. The reason behind same is that chairman has a wide discretion power in
order to decide whether the significant issue is potential conflict and whether same is required to
be published in annual report (Wang, Zheng, and Liu). Thus, these provision do rise question on
the independence of non- executive directors in situation which Mr. Mittal is capable of
operating private business in competition of Arcelor Mittal .
However, various powers are present for the outside investors which relates with the discharge of
the directors, appointments. Those powers are not worthy in case where Mr. Metal prefers to
practice its voting power next to them only (Shatokha, 2016). Thus, it will be a tough task for
new director to attain acceptance relating to any decision for which directors of pre-merger board
structure does not provide acceptance. Overall it can be concluded that the risk relating to
governance structure is questionable at it depends on the strategies complied by the new board
structure.

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