Corporate Governance: ArcelorMittal Merger

Running head: CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
Name of the Student
Name of the University
Author Note
1.

CORPORATE GOVERNANCE1
1.
The present case study focusses on the acquisition as well as merging of two
companies Arcelor and Mittal that took place in 2006 (Kumar 2019). ArcelorMittal is the
subsidiary of the Mittal Steel Corporation which Mr Laxmi Mittal established in 1976. The
incorporation of ArcelorMittal was done in 2006 when both the Arcelor merged with Mittal.
Here both the companies before merging have separate legal entities. The takeover done by
the Mittals although was regarded as a hostile one but it resulted into the largest steel industry
of the world (Kumar 2019). The Mittal Company prior to amalgamation followed a unitary
model of board of directors. This type of board structure denotes that the total company
governance was managed by a unitary body without any separation of powers (Ali 2016).
There is only a single body and no different supervisory body or management. The unitary
type of board of directors is generally of four kinds; a board with only executive directors, a
board with executive directors that forms the majority, a board with non-executive directors
which form the majority and a board of nonexecutive directors only. Arcelor on the other
hand followed the two tier board structure which had a separation of powers between the
management and the supervisory board which are independent of one another (Yasser,
Mamun and Rodrigs 2017).
After Arcelor and Mittal merged together, the new company ArcelorMittal consisted
of the new board of directors having 18 members who are all non- executive directors and
mostly are independent directors (Kumar 2019). The newly formed company had its majority
of the voting rights of about 43.5% were retained by the Mittal family members. The new
company as a public limited liability and the new board was controlled by the articles of
association of the company. The new board consisted of 6 directors coming from Arcelor, 6
directors coming from Mittal, the representatives of employees and 3 representatives from the

CORPORATE GOVERNANCE2
current shareholders of Arcelor. As said above, as all the directors were non executive, the
only executive director present in the board was Laxmi Mittal.
As discussed above about the board structure, it can be argued that the new board
structure denotes a unitary model of board of directors with mainly nonexecutive directors
(Kumar 2019). Further it showed that the Mittal family had major control and supremacy in
the company governance.
The unitary model of board structure possesses some advantages over the two tier
model (Yasser, Mamun and Rodrigs 2017). The former one has only one body that governs
the functioning of the company. Due to this, there is less chance of conflict in taking
opinions. Thus faster and unanimous decision can be taken.
Again, in the unitary model, the communication can be made easily. This is because
both the management and the supervisory boards work as a single unit. Thus there lies
question of taking approval. Easy communication flow helps to seek better management and
also unity.
Another advantage possessed by the unitary structure is that while taking decisions,
all the directors can take active part in it. The nonexecutive directors can also share their
opinions with the executive directors.
Since the unitary board acts as a single entity, the company members have the option
to interact and deal with the executive directors that indirectly helps in the betterment of the
relationship and good understanding.
On the other hand, the unitary model possesses some disadvantages too which will be
discussed below. Due to the non- separation of powers, in case of any conflict or
misunderstanding of the CEO with the other board members, the company interest will be at
stake. Further, participation of the non- executive directors has a chance of increasing the risk
of liabilities. Lastly, personal relation among the members can negatively affect the