Analysis and Insights
Hanoi, 15 March 2023
In accordance with international practices of modern corporate governance, independent directors play a crucial role in ensuring transparency, effectiveness, and sustainability of corporate governance activities, aimed at better protecting the legitimate rights and interests of stakeholders. This practice becomes even more important as the public ownership of companies becomes more widespread in Vietnam, and the separation of roles and responsibilities between shareholders and corporate management becomes increasingly crucial.
In Vietnam, the current legal framework has been significantly updated with more detailed regulations on independent directors, applicable not only to public companies and credit institutions but also to non-public joint stock companies. However, the implementation of independent director regulations in practice still mainly focuses on formality and compliance purposes rather than truly aiming at the effectiveness that independent directors could bring.
As a professional association for independent directors in Vietnam, the Vietnam Independent Directors Association (VNIDA), in cooperation with its strategic partner, FiinGroup Vietnam Joint Stock Company (FiinGroup Vietnam), has conducted a “Report on Independent Directors Survey in Public Companies in Vietnam“. The overall objective of the survey is to examine the current situation, evaluate the role of independent directors in public companies in Vietnam, and identify the challenges and issues that independent directors/companies are facing. Based on that, suitable proposals and recommendations are made to address difficulties and challenges.
The findings and recommendations in the report can provide a foundation and basis for stakeholders, including legislative and regulatory bodies, professional advisors, investors/shareholders, businesses, and other relevant parties, to improve the role and function of independent directors, as well as towards better corporate governance in Vietnam.
“The strengthening of legal provisions on independent directors shows that the Vietnamese legislature has correctly recognized and highly valued the importance of independent directors in corporate governance. This also demonstrates the efforts of state agencies in developing a sustainable capital market in Vietnam in general and upgrading the securities market in particular. As a professional social organization for independent directors in Vietnam, VNIDA desires to conduct this report to provide an overview of the current legal provisions regarding independent directors and the actual application of these regulations in Vietnam. From there, suitable solutions are proposed to enhance the actual role of independent directors and towards a transparent, effective and sustainable corporate governance system.”, said Mr. Dang The Duc, Vice President and Secretary General of VNIDA.
“Improving the quality of corporate governance, including promoting the role of independent directors in a substantive and suitable manner to the Vietnamese market conditions, is an important factor in supporting the sustainable development of the Vietnamese securities market. As a financial data analysis unit, we participated in this project with the desire to accompany and work together with VNIDA and market members to promote sustainable market development goals,” said Mr. Nguyen Quang Thuan, Chairman of FiinGroup Vietnam.
The survey and the report have been carried out with the primary technical support from the International Finance Corporation (IFC) through the SECO-funded Vietnam Integrated ESG Program. The project also received the valuable support from the other partners including the Vietnam Institute of Directors (VIOD), Ernst & Young Vietnam Limited (EY Vietnam), and Indochine Counsel.
You can download the full report HERE.
VNIDA and FiinGroup hope that the report will contribute to improving the role and effectiveness of independent directors in Vietnam, developing and elevating independent directors as a profession, and raising the corporate governance standards and practices in Vietnam.
VNIDA is a professional association for independent directors in Vietnam, with a mission to promote best practices in corporate governance, enhance the value of independent directors, and improve the effectiveness of the board through networking, training, sharing of experiences, and protecting the interests of members to enhance the professionalism, independence, transparency, and integrity of independent directors. For more information, please visit: https://www.vnida.vn/.
FiinGroup is Vietnam’s leading provider of financial data analytics platforms, business intelligence and industry research service to local and foreign investors in capital market and corporates to grow their business in Vietnam. For more information, visit: https://www.fiingroup.vn.