VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ECONOMIC LAW GRADUATION THESIS LEGAL REGULATIONS ON INTERNAL CORPORATE GOVERNANCE STRUCTURE IN PUBLIC COMPANIES – A COMPARATIVE STUDY OF INTERNATIONAL REGULATIONS AND RECOMMENDATIONS FOR VIETNAM Supervisor: LL. Truong Trong Hieu Student’s name: Pham Thi Ngoc Diem Student ID: K195022027 Ho Chi Minh City, April 2023 VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ECONOMIC LAW GRADUATION THESIS LEGAL REGULATIONS ON INTERNAL CORPORATE GOVERNANCE STRUCTURE IN PUBLIC COMPANIES – A COMPARATIVE STUDY OF INTERNATIONAL REGULATIONS AND RECOMMENDATIONS FOR VIETNAM Supervisor: LL. Truong Trong Hieu Student’s name: Pham Thi Ngoc Diem Student ID: K195022027 Ho Chi Minh City, April 2023 i DECLARATION OF AUTHORSHIP I hereby declare that this thesis was carried out by myself under the guidance and supervision of LL. Truong Trong Hieu; and that the work contained and the results in it are true by author and have not violated research ethics.
The data in this thesis are for analysis, comments, and evaluations from various resources by my own work and have been duly acknowledged in the reference part. In addition, other comments, reviews and data used by other authors, and organizations have been acknowledged, and explicitly cited. I will take full responsibility for any fraud detected in my thesis. University of Economics and Law – Ho Chi Minh City Vietnam National University is unrelated to any copyright infringement caused on my work (if any).
Ho Chi Minh City, 10 April 2023 Author (signature and full name) Pham Thi Ngoc Diem ii LIST OF ABBREVIATIONS No. Abbreviation Meaning 1 BOD Board of Directors 2 BOM Board of Management 3 GM General Meeting of Shareholders 4 IFC International Finance Corporation Organisation for Economic Co-operation and 5 OECD Development 6 WB World Bank 7 HOSE Ho Chi Minh City Stock Exchange 8 HNX Hanoi Stock Exchange 9 US United States 10 UK United Kingdom iii TABLE OF CONTENTS INTRODUCTION. Status of the topic research. Aims, objects, and scopes of the research.
Scientific significance and application value of the topic. Structure of the thesis. SEVERAL BASIC CONCEPTS OF CORPORATE GOVERNANCE LAW FOR PUBLIC COMPANIES AND INTERNAL CORPORATE GOVERNANCE STRUCTURES IN PUBLIC COMPANIES. Definition of “public company”.
The concept of “corporate governance”. The concept of “corporate governance law” and “corporate governance model”. The role of corporate governance law. LEGAL REGULATIONS ON INTERNAL CORPORATE GOVERNANCE STRUCTURE IN PUBLIC COMPANIES OF THE UNITED KINGDOM, GERMANY, AND JAPAN.
Legal regulations on internal corporate governance structure in public company of the United Kingdom. Legal regulations on internal corporate governance structure in public company of Germany. Legal regulations on internal corporate governance structure in public company of Japan. ASSESSMENT OF THE SITUATION OF VIETNAMESE LAW ON INTERNAL GOVERNANCE STRUCTURE IN PUBLIC COMPANIES AND RECOMMENDATIONS.
Overview of Vietnamese legal regulations on internal corporate governance structure in public companies. Assessing the situation of Vietnamese Law. Enhance the position, responsibility, role and real power of the Inspection Committee. Abolish the requirement on the number of independent members in the Board of Management in the internal corporate governance model with the Inspection Committee.
Improve the substantive performance of the Auditing Committee and independent members of the Board of Management in the Auditing Committee. Rationale In the context of Vietnam's active and extensive integration into the global economy, the promulgation of legal documents and efforts to improve the legal system to support the country's economy are always among the top priorities. In particular, the reform of the law on public company governance has contributed to opening up the flow of social capital into business activities. Typically, the number of public joint stock companies established and the fact of raising capital on stock exchanges has been constantly increasing over the years.
Specifically, from two companies issuing shares to the public for the first time in 2000 to 2021, after twenty- five (25) years of operation, the Vietnamese stock market has more than one thousand and nine hundred (1900) public companies, of which the Ho Chi Minh City Stock Exchange (HOSE) has 404 listed companies, Hanoi Stock Exchange (HNX) has 343 listed companies, UPcom Stock Exchange has 895 companies registered for trading.1 Public companies have been gradually asserting their role in the economy as both a major source of goods supply for the stock market and a medium and long-term capital mobilization channel for the economy, promoting the development of the domestic economy. In addition to contributing to increasing the supply for the stock market, law on public company governance also gradually improves the efficiency of controlling management activities of public companies, building a legal corridor to help the market stay healthy. A series of companies that have been delisted as public companies and unregistered for transactions, especially being classified by market regulators as special monitoring over the years, have proved this. However, in 1 Nguyễn Anh Việt (2021), “Góp phần cơ cấu hệ thống tài chính theo hướng bền vững hơn”, People’s Army Newspaper, <https://www.vn/kinh-te/cac-van-de/gop-phan-co-cau-he-thong-tai-chinh-theo-huong-ben- vung-hon- 678869#:~:text=Sau%2025%20n%C4%83m%20ho%E1%BA%A1t%20%C4%91%E1%BB%99ng,ty%20% C4%91%C4%83ng%20k%C3%BD%20giao%20d%E1%BB%8Bch>, accessed on 3 March 2023.
2 addition to the above achievements, the Corporate Governance Assessment Report of Vietnam's listed companies in 2020 showed that on average, enterprises only achieved 59% points for the compliance section.2 This partly reflects the possibility that the legal provisions on public corporate governance have not been applied in accordance with the actual conditions of public companies. In addition to financial reasons related to the cost of capital, issuance costs, fear of diluting shares leading to loss of control, etc., the lack of adaptation of the law on public corporate governance can also be considered as one of the key causes of concern for enterprises in going public and listing on HNX, HOSE.3 Therefore, it is necessary to complete and improve the adaptation of legal provisions on corporate governance to public companies. Completing the law on public corporate governance is one of the important ways to build investors' confidence, protect the sustainable development of the stock market, and make the economy healthy. Currently, the public corporate governance system in Vietnam is still mainly based on the internal governance structure with a concentrated equity structure.
Therefore, I choose the topic: “Legal regulations on internal corporate governance structure in public companies – A comparative study of international regulations and recommendations for Vietnam” for the completion of my graduation thesis. Through this thesis, the author would like to learn in detail theoretical issues of public corporate governance law, regulations on internal corporate governance structure in public companies of Vietnam and some other countries in the world. At the same time, the author assesses the current situation, finds out the inadequacies of Vietnamese law in this regard and from there, proposes 2 Phan Đức Hiếu (2023), Doanh nghiệp vẫn ngại thực hành quản trị tốt, Vietnam Economics Times, <https://vneconomy.vn/doanh-nghiep-van-ngai-thuc-hanh-quan-tri-tot.htm>, accessed on 3 March 2023. 3 Đặng Đức Thành (2019), Huy động nguồn vốn bền vững cho nền kinh tế và từng doanh nghiệp, Government News, <https://baochinhphu.vn/huy-dong-nguon-von-ben-vung-cho-nen-kinh-te-va-tung-doanh-nghiep- 102265031.htm>, accessed on 10 March 2023.
3 suitable complete solutions based on learning from experiences from the countries sthat are compared. Status of the topic research Until now, the issue of corporate governance has been mentioned in numerous scientific works and research conducted by domestic and international scholars. Among them are the following typical and notable studies: (1) Lê Minh Toàn (2010), “Quản trị công ty đại chúng, niêm yết dành cho doanh nghiệp và nhà đầu tư”, National Political Publishing House This is the most comprehensive approach to corporate governance in Vietnam on the basis of current legal provisions as well as the actual implementation of regulations on corporate governance; the causes affecting the compliance with the principles of corporate governance in Vietnam. Since then, the authors propose some recommendations to improve this situation and solutions to improve the efficiency of listed companies.
To clarify the status of compliance with corporate governance principles in Vietnam, the authors has also analyzed several specific cases on corporate governance of listed companies on the stock market in our country (FPT Technology Investment Development Joint Stock Company, Viet Nam Petroleum Transport Joint Stock Company, Tuongan Vegetable Oil Joint Stock Company, Bach Tuyet Cotton Joint Stock Company, Vinaconex Joint Stock Company). However, up to now, these recommendations are quite outdated compared to the current law on corporate governance. (2) Hoàng Văn Hải (2016), “Đánh giá chất lượng quản trị công ty ở Việt Nam”, Vietnam National University Hanoi Press This study presents the content of corporate governance, the theories of public companies and the quality assessment of corporate governance according to Governance QualityScore standard set of the United States based on enterprise survey. Since then, the author offers solutions to improve this standard set.
However, this standard set was built on the basis of the United State context, so it is difficult to ensure compatibility with Vietnam. 4 (3) Lê Vũ Nam, Châu Quốc An, Lê Diễm Châu, Lưu Minh Sang (2018), “Pháp luật về quản trị công ty niêm yết trên thị trường chứng khoán Việt Nam”, Vietnam National University Ho Chi Minh City Press The contents of this book include regulations on the stock market, listed companies and corporate governance; some problems in the process of implementing the regulations. This book has also approached the recommendations based on the OECD Principles of Corporate governance in 2004 and some overlaps, difficulties in the application of enterprises and securities laws. Kent Baker, Ronald Aderson (2010), “Corporate governance: A synthesis of theory research and practice”, John Wiley & Sons, Inc This work describes the history of corporate governance as well as generalizes the corporate governance systems of countries around the world; studies the relationship between public corporate governance and business performance of the company, problems arising when separating ownership and management rights; emphasizes the role of agency theory and other approaches to corporate governance.
It can be said that this work has basically studied most aspects of corporate governance systematically. (5) Bob Tricker (2015), “Corporate Governance: principles, policies and practices”, Oxford University Press This work presents and analyzes cases where the principles of public corporate governance have been practiced. From there, the author evaluates the theoretical models of corporate governance of different countries, makes assessments and forecasts about the future of corporate governance. The author has a relatively complete analysis of the practice of corporate governance in countries in economic globalization context and the theory of corporate governance.
(6) Mihaela Ungureanu (2012), “Models And Practices Of Corporate Governance Worldwide,” CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, Vol. 5 This is a study of the main corporate governance models used around the world, namely the United States, German, and Japanese models. By analyzing the strengths and weaknesses of each model, the author wants to determine which model is the best and whether it can be adapted to different economic systems for large-scale application. The study has noted different approaches to building corporate governance systems in these countries, depending on the specific socio-economic context of each country.
In general, the above researches have analyzed relatively fully the theoretical basis of corporate governance, the law on corporate governance, the corporate governance models in the world and the factors affecting the governance of public companies. However, most of the domestic research works on the topic “corporate governance for public companies” focus on studying legal documents that have expired. Vietnam still lacks researches on which objects are current regulations. Therefore, my thesis on “Legal regulations on internal corporate governance structure in public companies – A comparative study of international regulations and recommendations for Vietnam” could be considered as a reference source on the current corporate governance legislation and as a basis for consideration of proposals in case regulations on corporate governance need to be amended and supplemented.
Aims, objects, and scopes of the research 3.