vietnam national university, HANOI school of business Do Lan Huong Corporate governance in Vietnam and in state owned enterprises after equitization Major: Business Administration Code: 60 34 05 Master of business administration thesis Supervisor: Dr Can Van Luc Hanoi – 2010 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGEMENT I would like to deeply thank my parents who have encouraged me in my education and their constant support through the course of studies. I also would like to thank my husband and my 2 little sons for their encouragement to me to continue my education. Many thanks also go to my colleagues who helped me a lot in collecting data to finish the thesis. Especially, I would like to send my sincere thanks to my helpful supervisor Dr.
Can Van Luc, for his advice and support during the time I write the thesis. i LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT CORPORATE GOVERNANCE IN VIETNAM AND IN STATE OWNED ENTERPRISES AFTER EQUITIZATION Do Lan Huong Hanoi School of Business Supervisor: Dr. Can Van Luc September 2010, 85 pages Corporate governance has been a prominent issue in developed market economies for some considerable time. However, in an emerging and transition economy like Vietnam, it is still unfamiliar and underdeveloped.
Legal framework for corporate governance in Vietnam is only in the early stage of development. Awareness of market participants on corporate governance is still limited. In the meantime, the business environment and the capital market are changing very fast and becoming more and more complicated, especially after the world financial crisis in 2007-09. The recent break up of Vinashin and the alarming inefficiency in management and operation of state owned enterprises have also attracted attention to corporate governance and made it become one of the current hottest issues.
In this context, this thesis provides a literature review of corporate governance and an up-to-date evaluation of corporate governance practices in Vietnam. Besides, as the success of Vietnam‟s SOE reform through equitization is significant for the country‟s future economic growth and the improvement in corporate governance is one of the major factors for improving efficiency in equitized state-owned enterprises (SOEs), an examination of the changes in corporate governance of SOEs after equitization is also conducted. To conclude, the thesis provides recommendations to building a sound and strong corporate governance system in Vietnam. ii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TÓM TẮT QUẢN TRỊ DOANH NGHIỆP Ở VIỆT NAM VÀ TẠI CÁC DOANH NGHIỆP NHÀ NƯỚC SAU CỔ PHẦN HÓA Đỗ Lan Hương Khoa Quản trị kinh doanh Giáo viên hướng dẫn: TS.
Cấn Văn Lực Tháng 09 năm 2010, 71 trang Ở các nước phát triển, quản trị doanh nghiệp đã ra đời từ lâu và rất được quan tâm. Tuy nhiên, ở các nền kinh tế mới nổi và đang trong giai đoạn chuyển đổi như Việt Nam, quản trị doanh nghiệp vẫn còn là một khái niệm mới mẻ và chưa được phát triển. Khung pháp lý cho quản trị doanh nghiệp đã được xây dựng nhưng vẫn còn ở giai đoạn ban đầu. Nhận thức về quản trị doanh nghiệp của các bên tham gia thị trường còn nhiều hạn chế.
Trong khi đó, môi trường kinh doanh cũng như thị trường vốn đang thay đổi hết sức nhanh chóng và ngày càng trở nên phức tạp đặc biệt sau cuộc khủng hoảng tài chính toàn cầu năm 2007-09. Bên cạnh đó, vụ việc Vinashin mới đây cũng như sự thiếu hiệu quả đáng báo động trong quản lý ở các doanh nghiệp Nhà Nước cũng làm dấy lên sự chú ý của mọi người tới quản trị doanh nghiệp và khiến nó trở thành một trong những vấn đề nóng bỏng nhất hiện nay. Trên tinh thần đó, luận văn đề cập đến hệ thống cơ sở lý luận về quản trị doanh nghiệp và bức tranh cập nhật nhất về thực trạng quản trị doanh nghiệp ở Việt Nam. Bên cạnh đó, do sự thành công trong công cuộc đổi mới doanh nghiệp nhà nước (DNNN) thông qua quá trình cổ phần hóa có ý nghĩa rất quan trọng tới sự phát triển kinh tế trong tương lai của Việt Nam, nên luận văn cũng sẽ trao đổi về quản trị DNNN sau cổ phần hóa.
Trong phần cuối, luận văn đưa ra một số kiến nghị nhằm góp phần xây dựng và nâng cao hiệu quả công tác quản trị doanh nghiệp tại Việt Nam. iii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS ACKNOWLEDGEMENT. iii TABLE OF CONTENTS. iv LIST OF ABBREVIATIONS.
vi LIST OF TABLES. vii CHAPTER 1: INTRODUCTION .2 Rationale of the Thesis .3 Purpose of the Thesis .4 Key Research Area .6 Contribution of the Thesis. 11 CHAPTER 2: LITERATURE REVIEW .1 Definitions of Corporate Governance .2 What is Corporate Governance? .2 Objectives of Corporate Governance .2 Codes of Corporate Governance .2 Models of Corporate Governance .3 Corporate Governance System .4 Corporate Governance Mechanisms .5 Corporate Governance in Transition Economies. 31 CHAPTER 3: CORPORATE GOVERNANCE IN VIETNAM .2 Legal framework and law enforcement.1 Development of a legal framework for corporate governance in Vietnam .2 Current corporate governance framework in Vietnam.3 Rights of Shareholders .1 Basic shareholder rights .2 Right to participate in or to be informed of decisions on key corporate changes .3 Rights to participate and vote in general shareholders‟ meeting .4 Markets for corporate control.4 Equitable Treatment of Shareholders .1 Equal treatment to all shareholders .2 Minority shareholder protection .3 Insider trading and abusive self-dealing .4 Related party transactions .5 The Role of Stakeholders in Corporate Governance.6 Disclosure and Transparency.
49 iv LUAN VAN CHAT LUONG download : add luanvanchat@agmail.2 Quality of accounting standards .5 Channels for disseminating information .7 Board of Directors .8 Board of Supervisors .9 Remaining corporate governance issues in Vietnam. 64 CHAPTER 4: CHANGES IN CORPORATE GOVERNANCE OF STATE OWNED ENTERPRISES AFTER EQUITIZATION .2 Methodology and Data collection .3 Ownership structure after equitization .4 Board of Directors Composition .5 The Board of Supervisors.6 Manager orGeneral manager (CEO) .3 Performance and stock price comparison. 81 CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS. 85 v LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF ABBREVIATIONS BOD: Board of Directors GSM: General Shareholders Meeting SOE: State owned enterprises SSC: State Securities Commission HOSE: Ho Chi Minh Stock Exchange HASTC: Ha Noi Stock Trading Center HNX: Ha Noi Stock Exchange OECD: Organization for Economic Cooperation and Development CFA: Chartered Financial Analysts LLC: Limited Liability Company JSC: Joint Stock Company vi LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 4.1: Ownership structure of SOEs after equitization Table 4.2: Composition of Board of Directors Table 4.3: Distribution of chairperson of the BOD by different groups of shareholders Table 4.4: Composition of the Board of Supervisors Table 4.5: Chairperson of the Board of Supervisors by different groups of shareholders Table 4.6: Distribution of managers of surveyed firms by different groups of shareholders Table 4.7: Vinamilk Ownership structure in 2009 Table 4.8: PVFCCo Ownership structure in 2009.
vii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1: INTRODUCTION 1.1 Background Vietnam‟s stock market has only been established and developed for the last ten years. However, it has grown very fast and now plays a more and more important role to the country‟s economic development. Total market capitalization to GDP increased considerably from 3% in 2005 to 38% in 2009. Number of companies listed in 2 stock exchanges (Ho Chi Minh Stock Exchange and Ha Noi Stock Exchange) has also increased dramatically to 457 companies by the end of 2009.
Among which, equitized state-owned enterprises (SOEs) dominate with more than half of the listed companies and holding key industries including power, oil, chemicals, steel…etc. Like many other emerging markets, Vietnam‟s stock market is facing many agency problems, which are the subject of corporate governance. Investor protection is inadequate, related party transactions are pervasive, compliance with accounting standards is weak and disclosure of quality information is limited. These could be major reasons that foreign investors hesitate to invest in Vietnam and hinder the development of the capital market.
In Vietnam, corporate governance is still underdeveloped. Awareness of market participants on corporate governance is limited. The framework for corporate governance is only in the early stages of development with laws and regulations being established. Therefore, a literature review on corporate governance and an examination of corporate governance practices in Vietnam, especially in post-equitized SOEs are necessary for improving and developing a sound corporate governance culture and framework in Vietnam.
The enhancement of corporate governance would help reduce emerging market vulnerability to financial crisis, reinforce property rights, reduce transaction costs and the cost of 8 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com capital, and which would significantly support capital market development (World Bank Corporate Governance Country Assessment, 2006).2 Rationale of the Thesis Corporate governance has been a prominent issue in developed market economies for some considerable time. However, in an emerging and transition economy like Vietnam, it is still unfamiliar and underdeveloped. Legal framework for corporate governance in Vietnam is only in the early stage of development. Awareness of market participants on corporate governance is still limited.
In the meantime, the business environment and the capital market are changing very fast and become more and more complicated, especially after the world financial crisis in 2007-09. The recent break up of Vinashin and the alarming inefficiency in management and operation of state owned enterprises have also attracted attention to corporate governance and make it become one of the current hottest issues. An up-to-date study on corporate governance in Vietnam and in State owned enterprises after equitization is therefore very necessary for developing a sound and healthy corporate governance system in Vietnam.3 Purpose of the Thesis This thesis aims to provide a literature review of corporate governance and an up-to-date evaluation of corporate governance practices in Vietnam. Besides, as the success of Vietnam‟s SOE reform through equitization is significant for the country‟s future economic growth and the improvement in corporate governance is one of the major factors for improving efficiency in equitized SOEs, an examination of the changes in corporate governance of SOEs after equitization is also conducted.
Finally, the thesis is expected to contribute to the limited literature on corporate governance in Vietnam. 9 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.4 Key Research Area This thesis looks at corporate governance practices in Vietnam and focus on listed companies. In addition, an empirical analysis on changes of corporate governance in equitized state-owned enterprises is also conducted.5 Methodology This thesis provides a review of Vietnamese corporate governance that is up- to-date and as complete as possible by assessing corporate governance in 6 areas which are stated in the Organization for Economic Cooperation and Development (OECD) Corporate Governance Principles: (i) corporate governance framework; (ii) rights of shareholders; (iii) equitable treatment of shareholders; (iv) role of stakeholders in corporate governance; (v) disclosure and transparency; and (vi) responsibility of the Board. Besides, as the success of Vietnam‟s SOE reform through equitization is significant for the country future economic growth, an empirical analysis is also conducted to illustrate the changes in corporate governance of SOEs after equitization.
The analysis is mostly based on published and readily available data. In addition, to get deeper views on this area, analysis of corporate governance in 2 typical SOEs has also been made.6 Contribution of the Thesis For a country which is still in the early period of building corporate governance system like Vietnam, the thesis has considerable contributions. First, it provides a literature review on corporate governance and helps improve understanding on this issue. Second, it provides an up-to-date evaluation on Vietnam‟s corporate governance practices and contributes to a limited number of studies on this area in Vietnam.