Highly capable and diverse boards of directors that adhere to social responsibility are crucial for corporate sustainability, experts said during a forum in HCM City on December 7.

The forum was held by Viet Nam Institute of Directors (VIOD) and Viet Nam Corporate Governance Initiative (VCGI), both of which focus on promoting good corporate governance practices.

Amar Gill, managing director of BlackRock, a New York-based global investment management corporation, said that to achieve corporate sustainability, a company has to focus on its operation and long term vision, and examine its management capability and impact on the environment and society.

In addition to keeping the best interests of shareholders, boards of directors need to carefully monitor business strategy planning and implementation as well as effective resource allocation.

Risk management regarding finance, business operations and climate change is also crucial.

Gill also said that companies must keep track of their impact or “footprint” on the environment and society and minimise the negative impact.

If not, they risk losing their “social licence to operate”, which refers to stakeholders’acceptance of a firm’s business practices.

Vu Thi Thuan, chairwoman of Traphaco, a Vietnamese pharmaceutical company, said that companies should manage their risks well as investors always look to the future.

In the case of Traphaco, the company invested in its own ingredient zones to harvest high quality materials, because it could not afford a shortage of materials or low quality ingredients.

She also said that awareness of the importance of climate change and management to ensure sustainability should be improved.

Boards should also have diversity, including people of different backgrounds and experiences, and both men and women.

“The diversity of board members helps them evaluate issues from a variety of perspectives before making decisions, and complements each other to increase the effectiveness of the boards of directors,” said Dr. Vu Bang, a member of the Prime Minister’s Advisory Group and the chairman of VCGI.

However, Vu Quang Thinh, CEO and board member of Dynam Capital, which specialises in asset management, said that the diversity of many boards of directors in Viet Nam, especially in family-owned businesses, is limited.

Many boards of directors in Vietnamese companies are composed primarily of relatives, as opposed to fully independent members.

Many Vietnamese board members generally have similar backgrounds and experiences, which mean they may be used to a limited number of ways of operating.

Viet Nam’s corporate governance has seen improvement over the years due to development of regulations and assistance from consultant firms and business groups, according to VIOD.

Nonetheless, it is still lackluster compared to other ASEAN countries. More regulations to ensure clarity and fairness, as well as higher quality and responsible boards of directors, are required. — VNS