November 26, 2024
CORPORATE GOVERNANCE IN VIETNAM: INSIGHTS AND CHALLENGES
INTRODUCTION
With Vietnam deepening its engagement with the global economy, corporate governance has emerged as an increasingly pertinent matter within the nation’s economic reform process. Corporate governance plays a crucial role in attracting foreign investments and establishing sound capital markets., the role of good governance bears repetition.
UNDERSTANDING CORPORATE GOVERNANCE IN VIETNAM
The corporate governance in Vietnam emphasizes transparency, accountability and efficient leadership provision, principles which are more critical for success in a globalized world.
The major laws that govern the corporate governance structure in Vietnam are the Law on Enterprises and the Law on Securities, and their regulations laid down by the State Securities Commission (“SSC”). Publicly listed companies are required to follow certain standards of governance which include the requirements on the publication of their financial accounts and that of annual reports.
THE ROLE OF GOVERNANCE IN ECONOMIC GROWTH
Strategically, Vietnam has also become an attractive destination for foreign direct investment (“FDI”) due to its improving economy. For companies to realize this potential, governance practices aligned with international standards must be established. In this regard, corporate governance aims at fostering investor confidence and promoting long term viability.
KEY CHALLENGES IN VIETNAM’S CORPORATE GOVERNANCE
Despite progress, several challenges hinder the effective implementation of corporate governance in Vietnam:
- Concentration of Ownership: A significant number of companies are family-owned or state-controlled, leading to potential conflicts of interest.
- Transparency Issues: Limited disclosure practices can deter foreign investors and undermine trust.
- Regulatory Framework Gaps: While laws are in place, enforcement remains inconsistent.
- Board Independence: Many companies struggle to maintain truly independent boards due to entrenched familial or political ties.
STEPS TOWARD IMPROVED GOVERNANCE
The Vietnamese government has introduced various initiatives to enhance corporate governance, such as:
- Strengthening governance codes to align with international norms.
- The government is encouraging training programs for board members and executives to adopt best practices.
- Promoting ESG (Environmental, Social, and Governance) principles to cater to the rising demand for sustainability.
OPPORTUNITIES FOR LAW FIRMS AND CONSULTANTS
The increasingly complex global governance model creates new possibilities for the professionals in particular:
- Help in implementing the local and international standards in governance.
- Facilitating the creation of the board structure and relevant policies and practices to be in line with the legal requirements.
- Providing leaders with adequate training and development to enable them to utilize contemporary instruments of governance.
CONCLUSION
For Vietnam, corporate governance is at the turning point. With the country’s continued quest for foreign investors, harmonizing rules with global practices must be a key priority. If the present challenges are tackled along with the available opportunities, Vietnam will promote a corporate structure which will enhance the competitiveness of the nation. The country’s transformation in company governance marks a new chapter for businesses, investors, and practitioners, the investors and practitioners who are willing to participate in the change.
HOW WE CAN HELP?
- Our team of experts offers tailored insights and recommendations, ensuring practical and sustainable governance solutions for each client.
- Our team assists in designing and implementing effective corporate governance frameworks.
- We provide compliance support, training guidance, and policy development assistance.
For more information or queries, please email us at
[email protected]
Key Contact
Surendra Singh Chandrawat
Managing Partner
