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Corporate governance in Vietnam Prospective corporate governance method of foreign investors

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CORPORATE GOVERNANCE MEETING IFC WB OECD - MOF 6/12/2004 Corporate governance in Vietnam Prospective corporate governance method of foreign investors – PowerPoint PPT presentation

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Title: Corporate governance in Vietnam Prospective corporate governance method of foreign investors


1
Corporate governance in VietnamProspective
corporate governance methodof foreign investors
CORPORATE GOVERNANCE MEETING IFC WB OECD -
MOF 6/12/2004
2
What is good corporate governance ?
  • A global term, hamornizing the owners and the
    directors interests.
  • A term emphasizing QUALITY, not QUANTITY
  • A term being discussed in the world, by OECD,
    WorldBank, even the Governments
  • Key Features
  • Creating proper priority, showing the success
  • Harmonizing the interests of related partners
    the owners, the managers, the labours and the
    society
  • Increasing the value of enterprises
  • Reducing cost of capital, increasing attraction
    for investors

3
Corporate governance in Vietnam
  • The Law on Enterprises is rather new
  • The term of the Sample Regulations is not clear
  • Both redundance and shortage of regulations (MOF,
    SSC, SBV, )
  • For equitization, the transfer of a company from
    one owner to many owners relating to many issues
    in corporate governance
  • Some issues usually happened in companies of
    Vietnam
  • Lacking a practical and long- term strategy
  • Not clear understanding the role of BODs and
    supervising Board
  • The role of supervising Board is not clear
  • Unequal behaviors for shareholderse
  • The role of independent auditing copanies is not
    considered adequately

4
Proposed Solutions
  • Enterprises Strategy
  • Priority Mechanisn
  • Information on related partners
  • Independent review

5
Enterprises Strategy
  • Issues
  • Opportunities Motivation has reduced advantages
  • The Community do not understand clearly laws
  • Solutions
  • Macro Analysis
  • Micro Analysis
  • Direction Identification
  • Targets Idenfication (strategy finance - time)
  • Disciplines factors

6
  • Enterprises Strategy
  • Priority Mechanisn
  • Information on related partners
  • Independent review

7
Why?
  • MANAGING DIRECTORS
  • Responsibilities
  • Shareholders - Managing business
  • Customers - Seeking the market
  • Creditors - Development of companies
  • Staffs
  • Suppliers
  • Incomes
  • Salary a few times (4-5 times) than average
    salary of staffs
  • Awards of BODs (if in BODs)

8
Previous and current practices
  • Measurements
  • Not have compesation Committee
  • With old rate through increasing
  • Some ones accompany competitors
  • Shortcomings
  • Safety
  • Not considering priority as an instrument for
    long-term targets but competion
  • Not enough to attract the talents Lack of good
    management and succesfull teams
  • Results
  • Knowledge escaping
  • Encouragement focusing on short term targets .
    Not concentrations
  • Development prevention for enterprises and
    economy due to lack of big investment

9
Some comparative data
  • Chief Executive Officers salary (VND mill/month )

Foreign manufacturing companies Big companies of Vietnam Small and Medium sized companies of Vietnam Average of Vietnam
20.2 7.4 9.0 8.2
  • Salary of staff not managing in foreign banks in
    Vietnam (VND mill/month)

Less 25 Average More than 75
Basic salary before tax 14.5 20.8 26.4
SourceMercer
10
Some comparative data
  • United State-2003
  • Average salary of CEO 9.2m 301 times than
    American average workersõ (30,564/year)

Source Businessweek
11
Implementation
  • Establishing a compensation committee (CC)
  • CC includes members in BODs in or out of
    companies
  • Annual Meeting to review results of CEO and set
    the salary and awards
  • Criteria ROE, ROI, ROA, assets circle

12
How much ?
  • Currently (1-3 years), salary of CEO should be
    around
  • 20-30 times than average salary of staffs

13
Structure
14
Why?
  • Associating with long term targets, increase
    responsibilities and obligations as well as
    transparency
  • Concentrating on core business
  • Practically, above rate is paid by many
    companies(even not equitized ones)
  • Contributing to increase salary regime, promoting
    productivity
  • Attracting the talents and labours circulation
    easierly
  • Operational structure reduction
  • Law on Enterprises, Article 80 no limitedá -gt
    high working capacity
  • New Law on personal income encourages high income
    people and domestic labour usage.

15
  • Enterprises strategy
  • Priority Mechanism
  • Information to related partners
  • Independent review

16
What is IR ?
  • IR is considerd as relation governance between a
    company and current and expected sharholders to
    help them understand clearly and attract them to
    invest in the companies.
  • IR is also considered as a marketing activity to
    introduce true pictures on activities of
    potential of the company with current and
    expected investors

Marketing
Public relation
Relation with investors
  • Principles
  • Commitments to declare truly information to
    current and expected investors though they are
    good or bad

17
Targets of IR
18
Communication Contents
General information on the company
General information on operational environment
Qu?n tr? công ty
CONTENTS
  • Finance

Information for shareholders
Update activity situation
Unexpected issues
Settlement of crisis
19
Who ? Target Objects
  • Target objets of IR
  • Shareholders (current / potential / individuals /
    institutions)
  • Analysists/ financial experts and investment
  • Public communication agencies
  • State management agencies
  • Provincial Community
  • Creditors and Customers
  • Staffs.

20
How ? Instrument of IR
  • Marketing instrument, public relation and
    finance
  • Annual Reports and financial reports
  • Corporate governance (internal management rules)
  • Pubic mean of communication (newspapers)
  • Investment guides for investors (Letters / News
    )
  • Events (Conferences, Seminars, copanies visits )
  • Internet / intranet (web, forum )
  • Analysized reports (finance/ investment/ market
    )
  • Shareholders Registration Procedures
  • Companies visits as schedule or sudden
  • Welcom investors
  • Principles
  • Obeying regulations of information declaration of
    SSC and STC
  • accuate information

21
How ? Group IR
  • IR activities can be managed by
  • A team or a board of IR inside the company
  • A professional company IR outside.
  • Currently, in the listed companies Staff on
    information declaration
  • Request for references
  • Information declaration team
  • Managed by members of BODs

22
when? Planning IR
  • IR activities needs planned before to ensure
    efficiecy
  • Copany needs building IR plan and determine the
    time of imlementation for each specifically in a
    year
  • Investors desire to reveive information timely.
    Any postponed or cancelled issues can lead to bad
    information
  • Principles
  • Information needs declaring quickly and timely,
    even both good or bad one

23
Examples
24
  • Enterprises Strategy
  • Priority Mechanism
  • Information for related partners
  • Independent Evaluation

25
Relation of the owner management in joint stock
companies
BODs
Supervising Board
Management
Investors
Independent auditing
  • Priority under results and responsibilities
  • More than 50 shareholders are public companies
  • Independence
  • Professional
  • Concentration

26
The role of auditing companies
  • 3 functions
  • Build up financial reports
  • Identifying book-entry principles
  • Examing applying book - entry
  • Independent review on companies situation, so,
    shareholdesr Congress can have the rights to
    decide auditting companies
  • Relation with auditing companies is active and
    mutual understanding one
  • Recent Parmalat, Enron, Worldcom, Daewoo is due
    to fails in relation between public companies and
    auditing companies

27
Some issues How to set mechanism to
  • Select auditing companies
  • Examine auditing process
  • Protect the companys interests
  • Advise on book - entry principles
  • Declare necessary information to have the most
    independent reports

28
The role of Supervising Board
  • About auditing companies
  • Advising on conditions and scope of auditing
  • Proposing selected auditing companies
  • Advising on answering problems of auditing
    companies
  • Examing management lettes of auditing companies
  • Reviewing financial statements truly
  • Reviewing performances of auditing companies

29
The role of Supervising Board
  • Advising for BODs on
  • Book Entry Policies
  • Issues required for subjective views
  • Unexpected events
  • Big Adjustments for financial statements
  • Obeying rules on accounting
  • Settling risks in business of the company
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