Corporate Law Assignment: Board Structure of ArcelorMittal

Running head: CORPORATE LAW ASSIGNMENT
CORPORATE LAW ASSIGNMENT
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1CORPORATE LAW ASSIGNMENT
Answer 1:
The present assignment deals with the amalgamation of Arcelor and Mittal in 2006.
ArcelorMittal is the descendant of Mittal Steel, a business enterprise which was formed in the
year of 1976 by Mr. Lakshmi Narayan Mittal. In the year of 2006, the merging of Arcelor and
Mittal resulted into the formation of today’s ArcelorMittal (DePamphilis 2010). It was the result
of a hostile takeover by the Mittals that formed the largest steel plant of the world (Zarin and
Yang 2011). Mittals previously followed a unitary board structure. When the entire governance
of the company is executed by a single body, such type of board is known a Unitary board. The
management board and the supervisory work together as a single unit. A single board looks after
the entire governance. There are usually four types of Unitary board; board with executive
directors, a board with majority of executive directors, a board comprising of majority of non
executive directors and a board comprising only of non executive directors. The Arcelor, on the
other side was formed in Luxembourg. Its board followed two tier board system. In a two tier
board system, there are two secondary boards known by the names of management board and
supervisory board. These two secondary boards are independent of one another while working.
When the two companies merged together, the resultant board of ArcelorMittal had a new
board of 18 members. All such members are non executive, of whom most of the members are
independent. In the newly created board structure, Mittal family retained 43.5 percentages of the
voting rights. It bears the characteristics of a Public Limited Liability controlled by the board of
directors. The board follows the provisions provided in the Article Association of the Company
(Bourne 2016). There are six directors from Arcelor, six from Mittal, three present
representatives of Arcelor share holders and three representatives of employees in the new board

2CORPORATE LAW ASSIGNMENT
in the new board. Lakshmi Mittal is the only executive director of the board. The maximum of
the board of directors is non executive. The one who is not the member of the executive team is
known as non executive director.
As discussed above, it appears that the newly formed is a unitary type of board with a
majority of non- executive directors. This category of board is least found in listed public
companies. This type is mainly found in the field of non profitable organizations like charitable
institutions, trusts, health sectors and sports centers. The present board structure shows the
domination power of Mittals in the governing and control of the company.
The unitary category of board operates through a single board only. Hence, it
enjoys certain benefits over two tier model (Block and Gerstner 2016). First and foremost
advantage is the presence of a single governing body and not two distinct ones. The single body
can operate more easily and efficiently without any ambiguity in opinions. All the decisions can
be taken together. The second benefit is easy flow of communications. As both the boards work
as a single body, no permission from one board to another is needed. Easy communication can
result into better working and governance (Maassen 1999). The third one is that all the directors
can participate while taking any important decisions. The non executive directors can put their
suggestions to the executives. The fourth one is that all the members can interact with one
another that will help in a healthy relation and better working of the corporation.
However, there lies some drawbacks of the unitary board too when compared with two
tier board (Jungmann 2006). Firstly the CEO holds a dominating and crucial post in the board.
When there is any contradiction of opinions between the CEO and others, the company will be
affected. In addition to that, the participation of the non executive directors can result into