case study board architecture at arcelor mittal the merger of steel makers arcelor a 3548515
Case Study: Board architecture at Arcelor Mittal
The merger of steel makers Arcelor and Mittal in 2006 produced the world’s largest steel company, with 330,000
employees and forecast earnings of $15.6 billion. Arcelor had fought a long defensive battle against the hostile takeover,
valued at around $35 billion. Arcelor was incorporated in Luxembourg and had adopted European governance
architecture, with a supervisory board, including employee representatives, and a management board.
Mittal was a family company with a tradition of growth through acquisition, in which the founding family still played the
dominant role. Arcelor had criticised Mittal for its inadequate controls, because it had many Mittal family members and
few independent directors on its board.
In the merged Arcelor Mittal company, the Mittal family retained 43.5% of the voting equity. The new board was 18
strong, with chairman Joseph Kinsch, who was previously chairman of Arcelor, president Lakshmi Mittal, nine
independent directors, plus employee representative directors and nominee directors to reflect the interests of
significant shareholders.
The General Management Board was chaired by the CEO Roland Junck, with the son of Lakshmi Mittal, Aditya Mittal as
CFO.
Questions
1. Assess the post-merger board structure and discuss the pros and cons before reading the Financial Times article.
(10 marks)
2. Since the Mittal family retain 43.5% of the voting equity can an institutional investor make a significant
contribution to the governance of the company? (10 marks)
3. Please read the Financial Times article under ‘Assessment Tasks and Submission’. Discuss the positive and
negative impacts on the effectiveness of the (pre-merger) Mittal Steel board after reading the article and
compare its effectiveness with the post-merger board. (10 marks)
Case Study ACC03043 – Corporate Governance Assessment 2 – Case Study – Board architecture at Arcelor Mittal DUE DATE: Monday, Week 10, 11:00 PM WEIGHTING: 40% WORD LIMIT: 2000 words (excl. references) Please write your word count on the front page! All students are required to submit this assessment via the ACC03043 SCU Blackboard learning site. Hard copy and email submissions will not be accepted and late submission penalties will apply to assignments that are not submitted on time via the specified Blackboard site. The following questions are all based on the Financials Times article ‘Governance may impede Mittal’s pursuit of Arcelor’ and the case study information below. Case Study: Board architecture at Arcelor Mittal The merger of steel makers Arcelor and Mittal in 2006 produced the world’s largest steel company, with 330,000 employees and forecast earnings of $15.6 billion. Arcelor had fought a long defensive battle against the hostile takeover, valued at around $35 billion. Arcelor was incorporated in Luxembourg and had adopted European governance architecture, with a supervisory board, including employee representatives, and a management board. Mittal was a family company with a tradition of growth through acquisition, in which the founding family still played the dominant role. Arcelor had criticised Mittal for its inadequate controls, because it had many Mittal family members and few independent directors on its board. In the merged Arcelor Mittal company, the Mittal family retained 43.5% of the voting equity. The new board was 18 strong, with chairman Joseph Kinsch, who was previously chairman of Arcelor, president Lakshmi Mittal, nine independent directors, plus employee representative directors and nominee directors to reflect the interests of significant shareholders. The General Management Board was chaired by the CEO Roland Junck, with the son of Lakshmi Mittal, Aditya Mittal as CFO.Questions 1. Assess…
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