In the contemporary global economic landscape, corporate governance (CG) has transcended from a mere regulatory requirement to a strategic asset pivotal for attracting international investment. For Vietnamese enterprises, elevating CG standards is not only essential for enhancing corporate value but also for fostering a transparent and stable business environment conducive to sustainable growth.
The Imperative of Corporate Governance
Global Investment Trends
The past two decades have witnessed a significant shift towards responsible investment, with the market currently valued at approximately US$158 trillion. Investors are increasingly prioritizing environmental, social, and governance (ESG) factors to mitigate risks and ensure long-term returns. In this milieu, robust CG practices serve as a cornerstone for building investor confidence and attracting sustainable capital inflows.
Economic Advantages of Strong Governance
Empirical research underscores the economic benefits of robust CG. Studies by McKinsey and the World Bank indicate that companies with strong governance are valued 10–20% higher and enjoy 10–15% lower capital costs when raising funds. These figures highlight the long-term value that effective governance delivers, not only for businesses but also for broader community growth.
Current State of Corporate Governance in Vietnam
ASEAN Corporate Governance Scorecard
Despite the recognized benefits, corporate governance standards in Vietnam remain among the lowest in the ASEAN region, as per the ASEAN Corporate Governance Scorecard (ACGS). This underscores an urgent need for targeted initiatives to elevate governance standards and strengthen investor trust.
Initiatives for Improvement
In response to these challenges, the Vietnam Institute of Directors (VIOD) has launched the ‘VNCG50’ Corporate Governance Scorecard. This framework, adapted from the ACGS but tailored to Vietnam’s unique circumstances, aims to help leading companies adopt best practices in governance, contributing to the overall improvement of national CG standards.
Role of Corporate Governance in Market Advancement
Upgrading Market Status
The State Securities Commission (SSC) emphasizes that enhanced governance is pivotal for upgrading Vietnam’s stock market from frontier to emerging market status. Achieving this milestone requires companies to adhere to stricter financial reporting and governance standards that meet international investor expectations.
Benefits of Market Advancement
Compliance with such standards not only strengthens investor confidence but also mitigates risks of misinformation and fraud, enhances stock liquidity, and attracts foreign capital. This progression is essential for integrating Vietnam more deeply into the global financial system and accessing a broader pool of investment capital.
Case Study: FPT Group’s Governance Practices
Technological Integration
FPT Group, a leading Vietnamese enterprise, has leveraged information technology, green transformation, and artificial intelligence to improve governance. The company employs a real-time data-driven governance system, enabling swift and precise decision-making, thereby meeting increasingly stringent global investor demands.
Outcomes
FPT’s approach exemplifies how effective governance, underpinned by technological integration, can optimize management processes and enhance competitiveness in the global market. This case underscores the potential benefits for other Vietnamese enterprises aiming to attract international investment through improved CG practices.
Conclusion
Enhancing corporate governance standards is imperative for Vietnamese enterprises seeking to attract international investment and achieve sustainable growth. By adopting robust CG practices, companies can improve their valuations, reduce capital costs, and build investor confidence. Initiatives like the ‘VNCG50’ Corporate Governance Scorecard and the SSC’s emphasis on market status advancement are critical steps towards this goal. As demonstrated by FPT Group, integrating technology into governance frameworks can further enhance efficiency and competitiveness, positioning Vietnamese enterprises favorably in the global market.
