Goldman adds Mittal to board, may gain conflicts

By Joseph A. Giannone

NEW YORK (Reuters) - Goldman Sachs Group (GS.N) on Sunday proudly announced it added ArcelorMittal (ISPA.AS) Chairman Lakshmi Mittal to its board, but don't be surprised if some of the firm's investment bankers have mixed feelings.

As the chairman and chief executive of ArcelorMittal, Mittal is one of the world's richest men and an influential businessman in his native India. Mittal and his family strung together a series of acquisitions to create the world's largest steelmaker, responsible for 10 percent of global steel output.

Yet with rivals and critics always on the lookout for conflicts of interest, Goldman's bankers now must go to greater lengths when doing business with ArcelorMittal.

Adding Mittal "creates some hurdles," a Goldman spokesman said.

Certainly this is the kind of client that investment banks are loathe to lose. According to Thomson Reuters data, Mittal has been involved in 179 transactions totaling $79 billion over the past decade.

Goldman has advised Mittal on five deals since 2006 totaling $47 billion in volume. Goldman and Citigroup are tied for second place behind Credit Suisse, which since 1998 is the steelmaker's top advisor.

Times have changed since banks eagerly added industrial chiefs to their boards and sent managing directors to serve on the boards of clients. Today insider dealing rules and heightened worries about conflicts mean banks need to tread more carefully.

Goldman in particular has come under fire since it is the world's largest securities firm, and therefore likely to be involved in more deals. The bank also aggressively pursues work as a lender, adviser and investor, sometimes all in the same transaction.

Based on history, Goldman bankers will have to jump far higher to win deals. When former co-president John Thornton sat on Ford Motor Co's (F.N) board, it created headaches for the firm's bankers.

Some merger industry analysts argue the presence of former BP Plc (BP.L) chief John Browne on its board was a major reason why Goldman did less work for the British energy giant. Browne left the Goldman board last year.

Goldman has policies that require directors to recuse themselves from discussing business related to their companies, their sectors, or the possibility of Goldman serving their company as an adviser.

That said, Jack Coffee, who heads up the corporate governance center at Columbia University, doesn't see much of a conflict from Goldman adding a billionaire to its board.

The bigger problem, he said, is when bankers serve as directors at other companies. In these cases, they may be accused of trying to influencing their client and win more deal assignments.

"I don't think Goldman adds a client to its board because it wants more business. I suspect they have many bigger clients than Mittal," Coffee said.

(Reporting by Joseph A. Giannone)