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 criticized 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) Marks will also be awarded for the academic rigour of the paper (10 marks).
• Please answer the three questions individually (i.e. one by one), observing Harvard referencing style and a clear and logical structure, along with the ability to express yourself clearly and succinctly.
• Your arguments have to be based on concepts and tools discussed in the topics of this unit and must be supported through direct reference to (academic) literature (recent peer-reviewed journals preferred). The report will be assessed based on your ability to develop arguments supported by relevant and valid sources (please also refer to marking criteria). You are expected to use at least 5 academic sources (excluding the textbook) to support your viewpoints. All sources must be properly referenced.
• In addition to the academic references, and in case you want or need additional information about the case, feel free to engage with non-academic literature, i.e. in order to gain a broader and more detailed understanding of the case study environment, you can mention and use information and facts from valid newspapers, magazines and/or official reports. Again, all sources must be properly referenced. • Assignments strictly have to be within the word limit (- / + 10 %) • Where cases of plagiarism are found, students will be sanctioned in accordance with university policy (see Blackboard for more information). Get >Accounting homework help