|The VLCA 2018 judging utilised new classifications in order to highlight more performances from smaller businesses |
The Vietnam Listed Company Awards 2018 are co-organised by the Ho Chi Minh City Stock Exchange (HSX), the Hanoi Stock Exchange (HNX), and Vietnam Investment Review under the sole sponsorship of Dragon Capital Group.
The awards are an extension of the Vietnam Annual Reports Awards, which has accompanied the growth of the Vietnamese stock market and listed companies throughout the past 10 years.
The VLCA Award Ceremony last Friday welcomed the attendance of senior leaders from the State Securities Commission of Vietnam, the two stock exchanges, the Vietnam Securities Depository and representatives from 200 listed companies, securities brokerages, investment funds and other financial institutions in the market.
The Vietnam Listed Company Awards (VLCA) 2018, which traces its roots back to the 10-year-old Annual Reporting Awards, concluded its four-month journey with an awards event last Friday. During the ceremony, the Organising Committee and the Selection Panel reflected on the year’s most significant changes, including a different set of voting and eligibility criteria.
Unlike previous years, the VLCA 2018 classified participants into three groups based on their market capitalisation. By doing this, small- to medium-sized companies have been given the opportunity to compete and shine at the event, besides the large-cap companies which usually dominated the winners’ list.
According to the Selection Panel, as expected, large-cap businesses showed superior performance with higher scores across the varying criteria. The quality of annual reports by mid-cap companies is also consistent. The small-cap group, however, has much room for improvement in comparison.
The quality gap among smaller companies themselves was also remarkable, said the judges. On one hand, some scored 92 over 104 points, which shows that small-cap companies are becoming more serious about annual reporting and information transparency.
However, half of small-cap companies have incomplete annual reports that lack crucial information, and these companies are in dire need of supervision and encouragement from policymakers and other market participants to improve their reporting standards.
“As the VCLA this year classified participants based on their market capitalisation, there has been stiff competition among large-cap businesses, most of which have a proven track record of outstanding reports,” noted the judges. Due to the smaller number of available awards for the large-cap category, some previous winners were unfortunately not granted an award this year.
In terms of eligibility criteria, to improve the quality of participants, the VLCA this year only selected companies in the VNX-Allshare Index, which meant that all 440 participants had to meet strict requirements on market capitalisation, free-float and liquidity level of stocks. Previously, the competition invited all businesses listed on the Hanoi Stock Exchange (HNX) and the Ho Chi Minh Stock Exchange (HSX).
This change has been well-received by the market but, subsequently, a number of companies were not eligible to compete this year because their stocks suffered from low liquidity and they were not part of the VNX-Allshare Index. The Selection Panel acknowledged, “This is an unfortunate situation, because some of these companies have strong annual reports in terms of both content and presentation, and they also met information disclosure requirements by the authorities.”
Corporate governance continue to triumph
The VLCA 2018 had separate award categories for corporate governance and sustainability reporting, highlighting the importance of these two activities in Vietnam’s increasingly-open stock market.
“Investors around the world are placing a heavier emphasis on responsible investing, which presents opportunities and challenges for listed companies in Vietnam. To raise new capital from international investors, Vietnamese companies must provide complete financial reports and other non-financial information, such as sustainability reporting or corporate governance,” said Le Hai Tra, acting chairman of the HSX, and head of the Organising Committee and the Selection Panel. According to Tra, this is the greatest goal for the VLCA and Vietnam’s entire stock market.
To boost the credibility of VLCA’s corporate governance awards, the Organising Committee developed in-depth criteria based on the Corporate Governance Scorecard by OECD and Vietnamese laws. Independent judges, who have experience implementing corporate governance standards in the ASEAN, were also invited.
Similar to 2017, all reports in the final round were audited by the four largest auditing companies - Deloitte, EY, KPMG and PwC. This was seen as a positive move that contributes to the impartiality and professionalism of the VLCA.
Based on the results from the event, the Organising Committee will release a detailed report on the current state of corporate governance at Vietnamese-listed companies. The report will link corporate governance to a company’s business success and help them understand the importance of corporate governance, as well as changes that need to be made on the company level.
At the same time, this report will also become a reliable document for Vietnamese policymakers, providing an overview of corporate governance in Vietnam in general, and a closer look at the three company groups based on market capitalisation.
From there, lawmakers can build new legal frameworks that address the most critical issues, and improve the level of transparency and corporate governance standards for the entire market.
Judges were happy with the overall standards of corporate governance this year, but remarked that in general, the implementation process at individual companies is still lacking. Specifically, although a lot of companies scored high in some criteria, the standard on the market level, spanning all aspects of corporate governance, remains low.
“In this year’s VLCA, 133 reports, or more than one-fourth of the participants, scored worse than average. This means there is a lot of work to be done in the coming years,” said the Selection Panel.
Highlights on sustainability reporting and report designs
The Organising Committee noted that there were 10 separate reports on sustainability reporting this year, which means businesses are increasingly aware of their environmental and social responsibilities.
Reports in the final round were built on the Global Reporting Initiative standards and the United Nations’ Sustainability Development Goals, together with Vietnam’s Circular No.155/2015/TT-BTC, with a high level of reliability and complexity. Even companies that incorporate their sustainability section into the overall report have done well in terms of content and presentation, said the judges.
“These reports are presented in a compelling and easy-to-understand way, and previous high-achievers have maintained their outstanding track record. We’re particularly impressed with Bao Viet Holdings – the company that has provided a creative and comprehensive report on sustainability, which is not often expected of a financial firm,” said the judges.
Besides these significant changes, the VLCA 2018 also placed higher importance on presentation than previous years, and introduced more detailed criteria on layout, storytelling, and designs.
The Selection Panel explained that winners often scored very high in terms of presentation, thus the VLCA this year wanted to prioritise those that told a compelling story about their business via a skilful combination of words, figures, illustrations and charts.
Scores for the business and financial reporting section increased this year, as companies begin to understand how to tell their stories, including achievements, challenges and detailed explanations of future goals.
“The VLCA is one effort among various initiatives that participants in Vietnam’s stock market are carrying out, in order to foster stronger listed companies in the country within the next decade. This will help improve Vietnam’s standing in international capital markets,” said Le Trong Minh, editor-in-chief of VIR and co-head of the Organising Committee.