Corporate Governance: Unitary Board vs Two-Tier Board Framework

Running Head: LAW
CORPORATE GOVERNANCE
Name of the Student
Name of the University
Author’s Note

LAW2
ANSWER 1:
The study is based on the theme of the amalgamation of two separate entities namely the
Arcelor and the Mittal in the year of 2006 and the same has been described in Zarin and Young
2011. Mr. Lakshmi N Mittal incorporated the business entity Mittal Steel in the year 1976 and it
emerged out as Arcelor Mittal as its heir after the amalgamation. Two separate firms
amalgamated to form a single business unit called the ArcelorMittal and the act of amalgamation
took place in the year 2006. Such amalgamation was a confrontational one yet it emerged to be
world’s biggest steel plant.
Mittal was previously represented by the unitary constitute of Board of Directors. This
form of Board is explained by O’Boyle and Shilbury 2016 as the form of Directorship where the
company is managed by the single body of governance. There is no separate body or agent or
any separation of duties among the Directors and their governance. Thus, the unitary board of
directors is constituted with two elements namely the existence of a board of directors and such
board is constituting preponderance of non-executive representatives as the directors. On the
other hand, Arcelor as a corporation from Luxembourg as a separate entity was represented by
the two-tier sample of governance. This means that the board is constituted of two separate
bodies namely the subsidiary board and the supervisory board. In such an arrangement, each
subsidiary board is represented by two directors on each side forming the dual biard framework
for governance. These two board constituted under the dual board framework are independent of
each other acting as a solo unit and the same has been elaborated in Block and Gerstner 2016.
The amalgamation of Arcelor and Mittal has given rise to a new firm by way of their
fusion called the ArcelorMittal constituted as a Public Limited Corporation governed and

LAW3
administered by its Board of Directors for all the decision and judgment making. It is a
constitution of modern sample of the board of directors including 18 members with all of them
being non-executive members. The preponderance of directors constituting such a sample of
board is independent and working in solo. In the freshly constituted company called the
ArcelorMittal, the Mittal family reserved the 43.5% of the total voting rights. According to
McLaughlin 2018, the Board of directors are functional in concordance with the articles of
association of the company. The new team of directors include six leaders from Arcelor, six from
Mittal and three representatives from the existing shareholders from the Arcelor company and
the last three directors from the representatives of employees. However, it can be inferred that
the predominance of Directors in the Board are non-executive forming the constitution of unitary
form of Board of directors.
The Unitary Board of Directors is constituted of a solo governing body in the
management of the company. Therefore, this sample has its own set of merits and demerits when
compared with the two-tier body having dual framework of Board. Owing to the solo nature of
the Directors, it own predominance of independent structure of the governance and
administration without much contrasting opinion. Thus, the flow of decision is unhindered and
easily taken. The flow of decision is singular and hence, ambiguity shall be avoided at all
occasions of decision making plan. The second merit of the unitary form of board of directors is
about the free transmission of the information resulting in easier way of decision making. Thus,
no approval is required to be taken from one board to the other resulting smooth flow of decision
taking and its implementation in the corporate governance and its administration (Saeed and
Saeed 2018). The transmission of information and its efficacy with the decision making leads to
better communication resulting in clarity in the working environment of the corporation and its