Corporate Governance: A Case Study on Mittal Family Merger

Running head: CORPORATE GOVERNANCE
SOUTHERN CROSS UNIVERSITY
WORD COUNT - 2000
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Student Name: Muddasani Rahul
Student ID No.: 23201284
Unit Name: Corporate Governance
Unit Code: Acc03043
Tutor’s name: Shagun khemka
Assignment No.: 2
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CORPORATE GOVERNANCE1
Table of Contents
Introduction....................................................................................................................2
Discussion......................................................................................................................2
Answer to Question 1.....................................................................................................2
Post-merger board structure...........................................................................................2
Pros and cons of the board structure..............................................................................3
Answer to Question 2.....................................................................................................3
Contribution of the institutional investor to the governance of the company................3
Answer to Question 3.....................................................................................................5
Positive and negative impacts of the pre-merger Mittal steel board and its
effectiveness with the post-merger board......................................................................5
Conclusion......................................................................................................................8

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Introduction
The objective of this report is to bring about the discussion of corporate
governance which is relating to a case study about a merging activity of a certain
family known as Mittal family. The report primarily focusses on the positive and
negative effects of merging of the board structure of the Mittal family as well as
evaluate the post-merger board structure. The report further discusses on the
contribution of corporate governance on the voting equity of the Mittal family which
was retained to be 43.5%.The end section of the discussion states about the
effectiveness of pre-merger board structure on Mittal family and also highlights
whether the change had been successful.
Discussion
Answer to Question 1
Post-merger board structure
Due to the merger formed between Arcelor and Mittal, the company flourished
a lot and it gradually came to be popularly known as the world’s largest and greatest
steel company. The sales of the company was huge and it had the forecasted earning
of $15.6 billion. The traditions of two companies were different before the merging
activity. Arcelor had a governance structure which was European in nature (Sroka,
Cygler and Gajdzik 2014). The board included supervisors, employee representatives
and a management board. In Mittal family the tradition had been completely different.
Mittal company, being a family company had the tradition of distributing the power
unequally. In Mittal company, the founder was given the maximum power.
Due to formation of the merger, the structure of the board changed. The new
board that was formed had the Chairman named Joseph Kinsch. Previously, Joseph
Kinsch was the Chairman of Arcelor. The other representatives of the board were

CORPORATE GOVERNANCE3
President Lakshmi Mittal, other independent directors and a group of directors who
would represent the employees and another separate group of directors for focussing
on the needs and demands of the shareholders (Arcelor Mittal CEO - Interview’
2010).
Pros and cons of the board structure
The board structure committee proved to be advantageous for the company as
it paved way for the separation of powers between the higher authorities. The two
important stakeholders of the company, shareholders and employees, are also taken
care of and specific representatives were allotted to take care of their needs and
demands. There were representatives from both the merging companies, that is,
Arcelor as well as Mittal so that there is no biasness in the architecture (Arcelor Mittal
Announces Management Board and Board of Directors’ 2006). It was reported that
the merger had other added advantages. These benefits included diversification of
steel products across the globe, enhancement of the supply chain in order to meet the
requirements. Due to good relationships with the customers across the globe, the
merged company fetched many long-term contracts which ensured the survival of the
company in the long term.
Generally, during merger one company got the entire benefit while the other
was suppressed. But in the case of Arcelor and Mittal, the interests and
responsibilities of both the companies were taken into account in order to meet
sustainable growth and achievement. None of the board members were seemed to be
incompetent and the entire board functioned properly in order to facilitate the
forecasted earning. Due to the merger, the market share of both the companies got
increased to an enormous level.