Question

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. 2

Answer 1

Arcelor and Mittal Steel Company on August 4 announced the chief executive officer, chief financial officer, members of the management board and members of the board of directors for Arcelor Mittal.

Roland Junck has been appointed CEO. Roland Junck is currently senior executive vice president of Arcelor’s Group Management Board, a position he has held since Arcelor’s creation in 2002 following the merger of Aceralia, Arbed and Usinor. Since 2006, he has held responsibility for Long Carbon Steel Europe, Long Carbon Steel South America, Wire Drawing and Coordination China. Prior to the creation of Arcelor, Junck was a member of the Arbed Group management board, a company he joined in 1980.

Aditya Mittal has been appointed CFO, with additional responsibility for the Flat American business.

The other four members of the management board will be:

• Michel Wurth, senior executive vice president, Flat Products Europe
• Malay Mukherjee, senior executive vice president, Stainless, Mining, Asia & Africa
• Gonzalo Urquijo, senior executive vice president, Long Products and Distribution
• Davinder Chugh, senior executive vice president, Shared Services

The appointments were approved by the board of directors of both Arcelor and Mittal Steel. They take place with immediate effect allowing for the immediate start of the integration process. The new management board will meet for the first time on August 8.

The 18 members of the new board of directors for Arcelor Mittal are as follows, subject to shareholder approval:

Arcelor representatives

Joseph Kinsch, chairman of the board

José Ramón Álvarez Rendueles (independent)

Edmond Pachura (independent)

HRH the Prince Guillaume of Luxembourg (independent)

Sergio Silva de Freitas (independent)

Jean-Pierre Hansen (independent)

Mittal Steel representatives

Lakshmi N. Mittal, president of the board

Vanisha Mittal

Wilbur Ross

Lewis Kaden (independent)

François Pinault (independent)

Narayanan Vaghul (independent)

The high level of competence and the experience of the members of this management board will allow Arcelor Mittal to swiftly set up a highly efficient organization which will be best positioned to realize its remarkable value creation potential.

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