Listed firms fall flat on governance

HA NOI — Poor corporate governance is undercutting the ability of listed companies to gain investor confidence, according to a ranking of 100 firms made by the International Finance Corporation (IFC).

None of the 100 firms listed achieved a high enough score in the IFC table to qualify for a rating of ‘good corporate governance'.

A score of 65 to 75 per cent, based on five criteria – the rights of shareholders, equitable treatment of shareholders, the role of stakeholders in corporate governance, disclosure and transparency, and board of management – was needed to attain the rating.

The reviewed companies are the leading enterprises by capitalisation on the nation's stock exchanges and together account for over 90 per cent of market capitalisation.

The survey showed the role of stakeholders in corporate governance achieved a low score of only 29.2 per cent, listed firms also performed poorly on the quality of the board (35.3 per cent) and of disclosure and transparency (39.4 per cent).

IFC consultant Anne Molyneux said the corporate governance in Viet Nam was driven more by compliance with regulatory requirements than comitment to higher practices of sound governance.

Voluntary elements of good governance, such as conducting external audits or ensuring roles of stakeholders, were not receiving sufficient attention from companies, she said.

A representative from the State Securities Commission – a partner with the IFC in conducting the survey – said that listed firms had not yet seen the benefits brought about by a good corporate governance.

Yet the IFC survey indicated that return on equity was 23-25 per cent in companies with better corporate governance scores, compared to 16.6 per cent in companies with the poorest governance scores.

Return on assets was also better in the survey's better managed companies, at 11.3 per cent, compared to just 8.3 per cent in companies with poor governance.

Ha Noi Stock Exchange deputy director Nguyen Vu Quang Trung also noted that listed companies had achieved improvements in corporate governance. All maintained websites which fulfilled disclosure requirements, he said.

IFC analysts suggested companies begin to improve governance by focusing on intensive efforts in such areas as internal audit, related-party transactions and risk management. Extensive training was suggested for both executives and the media, enabling the latter to comment appropriately on corporate governance practices and assist in increasing public awareness the issue.

Source: vnagency.com.vn