The need to develop corporate governance education

David Gerald, CEO of Singapore’s Securities Investors Association (SIAS) – the leading investor education agent in Singapore, shares SIAS’ experience to Vietnam, on the sideline of a Hanoi Stock Exchange and Kim Eng Securities seminar on corporate governance in Hanoi.

How important is corporate governance to emerging nations like Vietnam?

In an emerging market like Vietnam, where the personal wealth of citizens is increasing, retail investors’ participation is expected to increase in your country’s stock market.

Meanwhile, it is a global trend that investors look beyond the company’s financial statements such as the companies’ product quality and customers’ satisfaction, the number of projects the companies have in the pipeline that indicate where the companies are heading and how companies attract, retain and develop the best talent.  

They want shareholder value and better performances from the companies in which they invest. Good corporate governance gives comfort to investors and research shows they are prepared to increase their investments in well governed companies.

Vietnamese enterprises’ corporate governance is typically weak. So what should we do?

Like all new initiatives, there must first be education. Corporate leaders are the agents of the owners of the business they are running. Therefore, they must be made to understand why it is important to embrace good corporate governance practices and how it will impact favourably on their businesses and consequently on the shareholder value.

Vietnam must strive to develop a pool of corporate governance experts who will coach the local listed companies on the ‘does and don’ts’ and to achieve high standards on corporate governance.

But even companies with good values are being underestimated given the current market dip. How does corporate governance help?

Market sentiments have no relevance to a company’s corporate governance policies and practices.  Companies with good corporate governance generally are able to maintain their valuation.

It is good corporate governance practice for companies to have good continuous disclosure whether the story is good or bad. This will assuage the investors. They will build the loyalty of shareholders in the long term.

What should the government do to support home enterprises in improving corporate governance? Is there any specific corporate governance model for Vietnam?

Besides setting minimum standards and the necessary legal framework, the government also needs to codify best practices in corporate governance for Vietnamese companies to emulate.

As an emerging economy, Vietnam can benefit enormously from the experiences of other financial centres like Australia, Singapore and Malaysia.

The basic requirement for any country to succeed in corporate governance is the introduction of the basic corporate legal framework. Being in ASEAN, Vietnam should embrace regional best practices.

Can you share about SIAS activities in promoting corporate governance in Singapore?

SIAS champions minority shareholders’ rights by holding discussions with boards and senior management of companies, resolving disputes between shareholders and listed companies, investors and brokers or fund managers, promote corporate governance and largely investor education at all levels of our society.

SIAS educates investors to be well-informed and be able to make decisions on their own. We teach them how to analyse the company, the market and how to interpret annual reports. To decide whether to invest in a company, investors should first study annual reports to find out the leaders of the company, its core business and its growth potential. Investing without knowledge is a gamble.