Companies shape up to adopt global norms

November 13, 2023 | 19:00
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Aligning with international practices, corporate governance is becoming pivotal for sustainable business growth and investor trust – but in Vietnam, there is a need for wider industry awareness and adoption.

On November 22, the sixth annual Corporate Management Forum will be organised by the Vietnam’s Institute of Directors (VIOD), under the theme “Igniting Green Finance and Green Management”. The forum will serve as a platform for sharing missions, responsibilities, effective management strategies, and principles to address challenges in the journey of transformation and future growth.

The forum has been organised with technical support from the International Finance Corporation, sponsorship from the Swiss State Secretariat for Economic Affairs, and collaboration with the State Securities Commission.

Within the forum, the annual Board of the Year ceremony will honour outstanding boards of directors (BODs) that have excelled, surpassing over 500 other boards of listed companies in the Vietnamese market.

Companies shape up to adopt global norms

In September, the VIOD had representatives attending the annual meeting of the Global Network of Director Institutes. According to Ha Thu Thanh, VIOD’s BOD chairwoman, the global network focused on the modification of G20/OECD corporate governance principles and risk management culture.

“The most notable aspect in the modified principles is the addition of a chapter on sustainable development and enhanced resilience. It provides recommendations to help companies manage risks better, seizing opportunities for sustainable development amid climate change and other challenges threatening sustainability,” Thanh said.

Thanh added that these modifications also reflect market dynamics and the increasing complexity of risks that businesses face in the context of digitalisation. Accordingly, these principles will continue to be the leading national standards for corporate governance.

According to VIOD’s assessment and scoring of Vietnam’s BODs, many public companies have been transitioning to adopt advanced international corporate governance models. In this regard, the role of independent board members and environmental, social, and governance (ESG) standards are increasingly emphasised.

Despite encouraging movements, VIOD noted that there is still a limited number of companies in Vietnam that truly understand deeply and construct a systematic corporate governance framework or take steps to improve corporate governance practices.

This situation can be somewhat observed through the ASEAN Corporate Governance Scorecard assessment, where Vietnam currently ranks sixth.

Thanh emphasised that corporate governance is the foundation for the sustainable development of a business and can be considered an “international currency” for attracting capital and responsible investors. Especially in markets where investors are increasingly demanding responsibility, corporate governance should focus not only on financial indicators but also the overall framework of integrated ESG governance.

“Effective corporate governance can only be achieved when the BOD changes its mindset, successfully differentiating between the strategic narrative and execution, monitoring and reporting. With a correct understanding of corporate governance, BODs and relevant parties need clear and distinct delegation of rights and responsibilities. In doing so, they establish two necessary conditions for sustainable development: transparency and accountability,” Thanh explained.

According to VIOD observations, many current members of BODs in Vietnamese companies have not undergone sufficient training programmes, and lack the adequate preparation and awareness of critical issues. However, efforts are being made to professionalise corporate governance activities, as the institute is collaborating with relevant agencies and stakeholders.

Vietnam’s path to enhanced corporate governance Vietnam’s path to enhanced corporate governance

As the Vietnam Institute of Directors prepares for its Corporate Management Forum and its Board of the Year awards, VIR’s Dang Khoi spoke to CEO Phan Le Thanh Long about the current state and future prospects of corporate governance in Vietnam.

By Linh Le

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