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Foreigners fret over corporate governance
Poor corporate governance is becoming the biggest concern for foreign investors in Viet Nam, a survey by US-based auditing and market research firm Grant Thornton has found.
Corporate governance (CG) and skill/experience of management was a concern for 21.4 per cent of the respondents while transparency was second with 18.7 per cent.
"Good CG is the most important tool for investors to know what happens in the company they want to invest in," Matthew Lourey, Director of Grant Thornton, explained.
CG is defined as the ways in which a firm safeguards its financiers like shareholders and creditors and involves the relationships between a company's management, board, shareholders, and other stakeholders.
It also provides the structure through which the objectives of the company, the means of attaining them and monitoring performances are determined.
"Good CG brings confidence to investors," Lourey said.
But since most enterprises in Viet Nam are small or medium-d, they are not familiar with CG.
"When investing in Viet Nam, foreign investors would like to bring their experience in CG to Vietnamese companies," Lourey added.
In many cases, foreign investors would like to provide good systems, experienced people, and advice to improve CG.
Nguyen Thanh Thai, Director of the Phu My Bridge Corporation, in which foreign investors own a 30-per-cent stake, said: "A good company board knows how to balance internal and external strengths, and should have experience in the industry in which it does business and in accounting, finance, and legal issues.
"All this helps a business reduce risks and increase profits."
Investors might look at the potential of a company before investing in it but they also look for strong CG and leadership, he said.
"Potential, good CG, and good management are the things that attract investors," he summed up.
Awareness of the need for good CG is increasing in Viet Nam, with enterprises increasingly seeking strategic investors with experience to take them to the next level.
"However, the change in attitude towards CG is still not institutionalised," Lourey said.
It is recognised better in listed companies.
"Companies listed on the stock market are paying more and more attention to CG," Tran Anh Dao, Head of the HCM City Stock Exchange's Listing Management and Assessment Department, said.
"And with better CG, they get better business."
Thai added: "The stock market influences companies to think more about CG but they should think about good CG long before thinking about the stock market."
According to the World Bank's Doing Business database, Viet Nam ranks 93rd in the world in terms of ease of doing business, 177th in protecting investors, and 121st in trust it engenders in investors.
"Along with measures by the Government to create a healthier investment environment, companies can improve their image themselves through good CG," Lourey said.
Globally, around 80 per cent of investors are willing to pay a high price for a company with good corporate governance and Viet Nam is no exception.
"Our investors are ready to pay a premium for a well managed company with less risk and more return," he added.
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