Corporate governance improved to motivate enterprises

Corporate governance is the key for businesses to grow

In Vietnam more than 14,000 businesses close each month, economists say attributing it to barriers facing startups and weak corporate governance, especially in joint stock companies.

Phan Duc Hieu, Deputy Director of the Central Institute for Economic Management, said Government resolutions have targeted both quantitative and qualitative growth of businesses. He said corporate governance is the key to realizing these resolutions.

“Good governance helps a business mobilize capital more easily from shareholders and investors, and also helps the company avoid internal disputes which may affect its operations or even may lead to bankruptcy,” Hieu explained.

In joint stock companies, the rights of shareholders are very important. The more transparent the regulations imposed on enterprises are, the more motivated investors are in putting their money into the enterprises.

So protecting shareholders' rights and interests is an essential part of corporate governance.

But some provisions of the current Law on Enterprises make it more difficult for shareholders and investors to exercise their rights.

Dau Anh Tuan, Head of the Legal Department of the Vietnam Chamber of Commerce and Industry, underscored the necessity of improving corporate governance, adding that

the habit of giving family members key positions in a joint stock company has significantly hampered good corporate governance.

“The revised Law on Enterprises must improve corporate governance and should be accompanied by a detailed program that establishes a “corporate governance ecosystem”. In other countries, there are institutes and associations that help businesses promote good corporate governance and enable minority shareholders to make recommendations to protect their interests,” said Tuan.

The revised Law on Enterprises will safeguard minority shareholders, encourage greater investment, improve Vietnam’s business environment, and bring corporate governance more in line with international practice.