... Shareholders urged to put CEO and board of directors in check
ArcelorMittal’s numerous safety problems in Liberia may seem isolated but, in reality, the company is suffering from a safety deficit that is endemic at the group level.
Now the world’s second-largest steelmaker faces an investor revolt following reports that, despite the highest number of fatalities the steel giant has had in recent years, its chairman, Lakshmi Mittal, and his son, Aditya, have been awarded millions of U.S. dollars in salary increments and bonuses by the company’s board of directors.
Times.co.uk, which originally reported the story, quotes investor advisor firm Glass Lewis, which recommended that shareholders in ArcelorMittal vote against the pay report and a resolution that discharges the board from certain legal liabilities at the steel giant’s next annual meeting scheduled for early May 2022.
An investor revolt occurs when the owners of a corporation (shareholders) work to throw out management or oppose their decisions.
In Liberia alone, there were at least five ArcelorMittal locomotive accidents reported in the last 15 months, resulting in two deaths and several injuries. In May 2021, two locomotives collided and severely injured the two operators as well as passengers.
In January 2022, two maintenance crew were killed, while several others were injured, some of whom had to be flown out of the country for treatment. The two deaths at ArcelorMittal Liberia exposed operational discrepancies, with local employees and affected communities blaming the management for failing to put safety mechanisms — including good communication — in place.
Globally, the Glass Lewis recommendation highlights the alarming rate of fatalities at the world’s second-largest steelmaker in recent years. The last financial year resulted in 29 work-related deaths across the company’s steel plants and mines globally. In 2020 there were 17 deaths, there were 21 in 2019 and 10 in 2018. Fatalities in the most recent year included six after an explosion at the Abayskaya coal mine in Kazakhstan and two after a train crash in Liberia.
In March 2022, Canadian authorities charged ArcelorMittal with criminal negligence after a worker was injured at its Mont-Wright mine in June 2019. The company allegedly failed to take the necessary measures to protect this person from a danger that had been known for 5 years.
In Liberia, ArcelorMittal is still reeling from the return of its third revised mineral development agreement by the Liberian Legislature to the Executive branch of government, citing concerns that “the agreement as structured does not give the kind of leverage that the government should have.”
The Senate specifically declined to ratify the agreement because it was not convinced that ArcelorMittal “has complied with the expressed language of the agreement or with the intent of the parties,” referring to the 2005 MDA, with specific reference to rehabilitation of infrastructure -- housing, health and education facilities and other infrastructures such as electric power, water and sanitation in the concession area. And this has caused tremendous inconvenience and perhaps suffering of the people of both Grand Bassa and Nimba Counties.”
Likewise, the House of Representatives did not just decline but returned the US$800 million agreement, touted to be the most significant foreign direct investment to be signed by the administration of President George Weah; the House returned the MDA to his office for renegotiation. In an accompanying letter to the President, the House expressed misgivings about the agreement, particularly its impact of an existing treaty between Liberia and Guinea on the ownership, operatorship, and users’ rights of the Yekepa to Buchana railroad as enshrined in Article 3 of the treaty with Guinea.
Meanwhile, Glass Lewis said that despite an “increasing number of fatalities over the last year,” ArcelorMittal had awarded a 9 per cent increase in basic salary to Mittal and his son, plus respective short-term bonus payouts of 171 percent and 125 percent of their basic salary, worth $2.9 million and $2.2 million, lifting their pay to $6.1 million and $5.8 million.
The pair own a 33.7 per cent stake in the business, which is the world’s second-largest steelmaker, employing 158,000 people and with a market value of €28 billion.
“Since 2008, we’ve been on a ‘Journey to Zero,’ with the aim of achieving zero fatalities and severe lost time injuries (LTIs),” ArcelorMittal says of its health and safety approach.
“But we are not there yet. Accidents, including tragic fatalities, still occur. So, our clear challenge is to build on the progress that has been made over the past decade by further intensifying efforts to build a safety-focused culture across the organisation, with rigorous standards and procedures in place backed up by strong training programs with employees encouraged not to look out just for themselves, but also each other.
“We aim to create a culture of shared vigilance in which risks are understood and monitored, best practices are shared, and appropriate action is taken at every level. Employees are trained in relevant fatality prevention standards, ranging from working at height to isolation. Every visitor to a site is expected to follow our 10 Golden Rules of Safety,” the company says.
And while ArcelorMittal claims that more than 3,500 situations were proactively detected and addressed across the group in 2019 — a 29 percent increase over 2018 — the 29 deaths in 2021 indicate a whopping 190 percent increase in fatalities since 2018.
But this is where the company appears to nail itself, and might be the basis of Glass Lewis’ recommendation to shareholders. The same health and safety statement continues: “Our leadership is held accountable for our safety performance through the Company’s remuneration policy. The policy links 10 percent of leadership bonuses — from managers through to the CEO — to safety KPIs in the business where he or she works, where relevant. And safety is the first topic in the appraisal process for every employee, irrespective of where they work.”
“In light of the concerns raised in our analysis,” Glass Lewis said it did not believe the pay increases “to be supportable.”
However, it appears that the ArcelorMittal board or directors has been on a mission to have shareholders comply with its decisions to payout fringe benefits to Mittal and son, while shielding the board from certain responsibilities.
To these, Glass Lewis warned that “shareholder approval to ratify the acts of the board of directors” and “discharge from liability [are] binding for all shareholders and can hinder legal claims filed by the company against board members.”