HCM City (Biz Hub) — Corporate governance at listed companies is weak in Viet Nam, increasing the risk they face, experts warned at a conference in HCM City yesterday.
Le Cong Dien, deputy director of the State Securities Commission of Viet Nam (SSC)'s Inspection Department, said most companies' corporate governance standards are below average.
He was referring to a 2012 corporate governance scorecard of 100 listed companies in Ha Noi and HCM City, which rated them at just 42.5 per cent compared to 77 per cent in Thailand, and 74 per cent in Hong Kong.
"They follow laws and rules to avoid being punished, but do not believe that laws and rules would help their companies function healthily and transparently," he said.
The importance of good corporate governance cannot be underestimated and should be a priority for companies, shareholders, and governments alike, he said.
Enhancing corporate governance brings increased protection for shareholders, additional security to employees and directors, and advantages for companies in the competitive environment and for governments as they seek to create an attractive environment to entice investments, he said.
The risks and costs resulting from inadequate attention to good corporate governance can be significant, from both the financial and reputational angles, he said.
Failure to implement adequate corporate governance practices can result in substantive damage to a company's brand as well as its performance along with personal exposure for employees and directors, he said, adding this creates significant operational risks for many companies and a diminished competitive edge.
Susan E. Loftus, CEO and general director of insurer AIG Viet Nam, said: "Regulatory investigations have moved to the forefront of exposures that board members face in Viet Nam.
"The right preparation in this increasingly stronger regulatory environment is essential to leading a successful and profitable organisation."
Owen Hakes, a partner at KPMG, said: "The role of each manager in risk management is more and more important. And the individual responsibility of managers needs to be clarified."
Strict laws and the ability of in-house controllers and levels of punishment would force companies to significantly improve their corporate governance, he said.
"The biggest fault in managing a company is not implementing good control."
David Lee, an investigations lawyer based in Hong Kong, underlined the increasing individual responsibility, saying "this is the best way to reduce management risks."
He suggested that whistle blowers or in-house controllers must be good enough to immediately discover any problems at the company, but companies must also have a good system to verify what whistle blowers reveal.
Some companies that have very good policies fail to apprise all their staff about them, and in such cases, when the system does not work smoothly, someone must take responsibility.
Jason Kelly of AIG Asia Pacific said that responsibility must be fixed for even tiny problems and top managers have to be reminded that even criminal liability is a possibility.
"Corporate governance and liability management protection for company executives" conferences are being organised by AIG and KPMG, Norton Rose Fulbright, PARIMA — the region's risk management organisation — in seven countries in May and June.
They began on May 6 in Singapore and moved to Malaysia, Indonesia, Philippines, and Viet Nam.
They will be held next in mainland China before concluding in Hong Kong on June 26. — VNS