To interrupt your regularly scheduled program, here’s a bit of news that’s both interesting and important.
On 5 April 2018, a host of public companies, assisted by international non-governmental organizations, launched the Vietnam Institute of Directors (“VID”).
The VID is designed to provide instruction to CEOs and directors of publicly traded companies. The instruction will be in best practices of corporate governance as dictated by law in Vietnam and by international standards.
VID supporters include:
- the International Finance Corporation,
- the Ho Chi Minh City and Hanoi Stock Exchanges,
- the State Securities Commission, and
- Switzerland’s State Secretariat for Economic Affairs.
The Institute aims to encourage business ethics and transparency, create a pool of independent board members, and enhance the professionalism of Vietnamese boards. It will deliver workshops, seminars, conferences, and board events on important governance topics, mainly through its flagship Governance Excellence Programmes.
As reported in Vietnam Investment Review, Tran Van Dung, chairman of Vietnam’s State Securities Commission said, “This is an important milestone for Vietnam, as the country must address the urgent needs of the market in the context of global integration and raising capital from foreign investors.”
The idea of improving the corporate governance capabilities of directors, both in-house and independent, is exciting. Long has Vietnam, as with most developing countries, struggled to improve its corporate governance. It simply becomes a question of how well directors take advantage of this new development.
While I have reported before in the Client Alert (Indochine Counsel’s flagship newsletter) corporate governance has a couple of important repercussions for companies in Vietnam.
First, for those companies that are seeking investment capital from venture capitalists or other private investors, good corporate governance allows sellers to influence the valuation of their company. The valuation is the most important number that could possibly come between local directors and investors, so the ability to show a history of good corporate governance improves the likelihood of a high valuation
Second, for companies listing on the HOSE or the HSE, good corporate governance records provide an important clue in valuation for IPOs. The valuation becomes the signpost by which investors on the bourse buy with an expectation of increasing profits, or see the stock price tumble. And though valuation has many, many elements, corporate governance is one element which can be easily affected by directors by simply adopting the habits of a good corporate governance system.
Next week we will return to our regularly scheduled programming, but in the meantime, please feel free to visit the Vietnam Investment Review article here.