Tricker: Corporate Governance 3e

Additional case studies

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.

For more information see www.arcelormittal.com click on 'corporate responsibility'

and 'investors and shareholders'

Discussion questions
Board architecture at Arcelor Mittal

1. What is your opinion of this board structure?

2. With 18 members, is the board likely to prove a viable vehicle for strategic
discussion or active management supervision?

3. 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?

© Bob Tricker, 2015. All rights reserved.