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Corporate governance, business administration ‘overlap’
Most state-run enterprises still lack transparency and they have not encouraged external experts to take part in corporate governance and supervision, according to a recent survey by the Central Institute for Economic Management (CIEM).
Lack of transparency
The results of the CIEM’s survey of 400 state-owned enterprises show that the majority of these enterprises do not provide timely, accurate and accessible information. They only release information internally or report to their owners or at shareholders’ meetings. Few businesses publicize their information via websites, publications, or the mass media.
Such a closed approach to information has exerted a negative impact on external supervision of state-owned enterprises and restricted related parties, potential investors, and external policy analysts in making objective observations. Only a small number of corporations have announced information necessary for improving corporate governance such as their policies on risk management, salaries, bonuses for senior managers, and in-house transactions.
Up to 80 percent of the surveyed enterprises do not send yearly financial reports to business registration agencies, which creates many difficulties for these agencies in their later inspections. Only half of the enterprise owners receive mid-year corporate financial reports. This reflects discontinuous information links between businesses and the state owners and consequently, the state does not have sufficient information to exercise its responsibilities in a timely, effective and professional manner like investors in the market economy.
Board of Directors not independent enough
International practices encourage businesses to attract and create favourable conditions for outside experts, including the board of directors, to participate in managing and supervising enterprises. However, this is not the case in Vietnam.
The boards of enterprise directors consisted mainly of corporate executives or those with interests and rights closely associated with the executive board. Therefore, they are not independent and objective enough to represent the interests of other parties related to the companies. This was found even in completely foreign-invested enterprises and in multi-owned corporations.
Presently, state-owned enterprises, especially those with 100 percent of their investment coming from the State, have no clear-cut criteria for assessing the activities of their boards of directors or their presidents, which are crucial for determining if they are performing well, and make timely personnel changes possible.
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