MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY SUMMARY OF PHD THESIS Applying the Guidelines of the Organization for Economic Cooperation and Development (OECD) to corporate governance in[.]
MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY - SUMMARY OF PHD THESIS Applying the Guidelines of the Organization for Economic Cooperation and Development (OECD) to corporate governance in enterprises with controlling state capital in Vietnam NGUYEN MANH HUNG Major: Business Administration Code number: 9340101 Hanoi – 2023 The thesis is completed at: Foreign Trade University, 91 Chua Lang, Dong Da, Hanoi Science instructor: Assoc., PhD Ngo Quoc Chien Assoc., PhD Tang Van Nghia Reviewer 1: Reviewer 2: Reviewer 3: INTRODUCTION Research title explanation The topic title was selected and approved in 2016-2017, the time when the concept of SOEs was stipulated in the Law on Enterprises 2014: "State-owned company means any enterprise of which 100% charter capital is held by the State." In order to improve the efficiency of using state capital invested in enterprises, in the context that Vietnam is focusing on speeding up the equitization process of SOEs, the number of SOEs owned by the State with 100% of the capital has decreased sharply Many of these enterprises have turned into jointstock companies, in which the State holds the controlling capital (over 50%) The research object is selected by the researcher as "enterprises with controlling state capital" to ensure that the research object is large enough, has many commonalities in the management model, and proposes solutions to improve governance efficiency and be suitable for the target group of the OECD Guidelines However, the Law on Enterprises 2020 has an adjustment on the concept of SOEs, which stipulates: “A “state-owned enterprise” means an enterprise that more than 50% charter capital or voting shares of which is held by the State" Thus, this concept is basically consistent with the object and scope that the author has chosen for the previous research topic Therefore, the author would like to keep the title of the thesis and use the phrase "state-owned enterprises" instead of the phrase "enterprises dominated by state capital" in the contents of the thesis Rationale Through many stages of formation and development, SOEs have always accompanied the process of building Vietnam's economy, and have been making an important contribution to stabilizing the macro-economy, ensuring the economic balance, and social security support By 2021, Vietnam will have about 500 enterprises with 100% charter capital held by the State and nearly 200 enterprises controlled by the State (out of 320 enterprises with State contributed capital) Vietnam's SOEs are holding huge market shares in several sectors such as energy, telecommunications, banking, etc., and contribute more than 29% of the country's GDP (MPI, 2022) With a particularly important role in the economy, in recent years the issue of management innovation to improve the operational efficiency of state-owned enterprises has been the top concern of the Government and policymakers, including corporate governance The Organization for Economic Co-operation and Development (OECD) has researched and published the OECD Guidelines on Corporate Governance of State‐Owned Enterprises Building on practical experience, the Guidelines provide specific recommendations on how to address corporate governance issues in SOEs The OECD Guidelines on Corporate Governance of SOEs have been studied and applied in many countries around the world over the years and are of practical value for research and application in corporate governance in SOEs in Vietnam The current SOE governance mechanism is unclear and tight, leading to the recent rounds of SOE restructuring often not being effective in the long term One of the reasons is that SOE governance is slow to be innovated, can not keep up with development requirements according to market mechanisms and international practices, and has not met the requirements of the restructuring process of SOEs The operation of enterprises has many inadequacies, weaknesses, low productivity and business efficiency, and weak competitiveness From the above analysis, the researcher chose the topic "Applying the Guidelines of the Organization for Economic Cooperation and Development (OECD) to corporate governance in enterprises with controlling state capital in Vietnam" to his doctoral thesis with the desire to contribute to modernizing corporate governance and improving the performance of SOEs Research objectives and tasks 3.1 Research objectives Based on theoretical issues of corporate governance in SOEs, the OECD Guidelines on Corporate Governance of SOEs, the current state of SOE governance in Vietnam, and international experience, the thesis proposes solutions for the management of SOEs using the OECD Guidelines to improve governance system capacity and improve the business performance of SOEs in Vietnam 3.2 Research tasks (i) Systematize the theory of corporate governance in SOEs, (ii) Analyzing and evaluating the current state of corporate governance in SOEs in Vietnam, (iii) Introduction to the OECD Guidelines and international experience in manipulating them, (iv) Proposing solutions to effectively apply the OECD Guidelines to the governance of SOEs in Vietnam Research objects and research scope 4.1 Research objects The research object of the thesis is corporate governance in SOEs, the OECD Guidelines, and the implementation of these guidelines to SOE governance in Vietnam 4.2 Research scope Research content: issues of corporate governance in SOEs, the OECD Guidelines on SOE governance, the current state of SOE governance in Vietnam, and the proposed application of the OECD Guidelines Research space: conduct research, survey for SOEs in Vietnam, and some international experience through the study of secondary documents Time frame: Since the Law on Enterprise 1995 was promulgated, through amendments to the legal regulations on SOE governance, it is proposed to apply the updated 2015 OECD Guidelines to achieve the objectives for SOE governance to 2030 Research methodology The thesis uses a combination of analytical methods, interpretation methods, systematization methods, synthesis methods, statistical methods, comparative - contrasting methods, field survey research methods, and methods of combining theory and practice to understand the research problem Research questions and research hypothesis Question 1: What is corporate governance in SOEs according to OECD guidelines? What content is included? Question 2: What are the problems facing corporate governance in SOEs in Vietnam today? Question 3: Why is it necessary to apply corporate governance principles according to the OECD Guidelines in SOEs in Vietnam? Question 4: What is the trend in applying the OECD Guidelines and what are effective solutions to improve corporate governance in SOEs and increase the applicability of the OECD guidelines in Vietnam? Research hypothesis: the application of a corporate governance framework according to the OECD Guidelines can help improve the performance of SOEs in Vietnam The contributions of the dissertation Through the research, the thesis has some new contributions: (i) Systematize and clarify theoretical issues of corporate governance in SOEs, (ii) OECD Guidelines on SOE governance and effectiveness results of the application, (iii) Limitations and weaknesses in SOE governance in Vietnam, (iv) Implementing the OECD Guidelines to improve the governance quality and performance of SOEs in Vietnam Research structure Beside the table of contents, lists of table and abbreviations, preface, conclusion, appendices, the thesis is divided into chapters as follows: Chapter 01: Literature review Chapter 02: The rationale for State-Owned enterprises, corporate governance for State-Owned enterprises and Implementing OECD guidelines on corporate governance in Vietnam StateOwned enterprises Chapter 03: Practices into corporate governance for SOEs and the implement of the OECD guidelines in State-Owned enterprises in Vietnam recently Chapter 04: Implementing OECD guidelines on corporate governance in Vietnam State-Owned enterprises CHAPTER 01: OVERVIEW OF RESEARCH RELATED TO THE THESIS TOPIC 1.1 Research overview 1.1.1 Research on corporate governance Corporate governance has been studied very early, which includes contents related to processes, procedures, policies, regulations, laws and institutions to guide businesses the manner of acting, directing and controlling activities to achieve goals (Berle and Means, 1932) After that, studies on the structure of corporate governance were identified including the role of the Board of Directors, the General Meeting of Shareholders, the obligations of the manager, how the General Meeting of Shareholders operates; shareholder rights and the role of auditors and relevant regulators A prominent study was by OECD (2004) when it introduced the concept of corporate governance as follows: “Corporate governance is the system by which enterprises are managed and controlled The corporate governance structure regulates the distribution of power and responsibilities among the various parties involved in the business such as the board of directors, managers, shareholders, stakeholders, and the placement of regulations and procedures to make decisions on company matters In this way, corporate governance also creates a structure by which to define the objectives of the enterprise, how to achieve those goals and maintain the performance of the enterprise” This is a highly scientific research work containing theories and views on corporate governance prevailing in OECD member countries that can be applied in corporate governance practice 1.1.2 Research on corporate governance in SOEs Corporate governance in SOEs is an issue of great interest to many countries, international organizations as well as the scientific community, notably the OECD Guidelines on Corporate Governance of State‐Owned Enterprises, first issued in 2005 (updated in 2015), including basic principles including: (i) Ensuring an effective legal framework for SOEs, (ii) State acting as the owner, (iii) Equitable treatment of shareholders; (iv) Relationships with stakeholders, (v) Transparency and disclosure, and (vi) Responsibilities of SOE boards This is a highly appreciated study and has been consulted by many countries to develop a set of corporate governance rules for their own SOEs, especially countries with transition economies for SOEs operating in a market-based economy Other typical studies mention focusing on in-depth analysis on ownership, ownership rate and size of the Board of Directors, mandatory social responsibility of SOEs Some countries, when studying the application of SOE governance, focus on three issues: (i) Corporate governance reform should be seen as a reform of the entire governance system in SOEs; (ii) The government should focus its efforts on improving corporate governance on SOEs that are a major contributor to the economy, and (iii) The improvement of corporate governance should promote the ownership role of the State, professionalize the corporate governance apparatus and ensure publicity and transparency in governance While implementing corporate governance, the issue of prioritizing objectives in SOEs and how to balance commercial and non-commercial objectives is often raised In addition, solutions to improve corporate governance performance in SOEs can include three tasks: defining clear objectives, separating SOEs from political interference, and improving transparency information transparency The above studies have created a fairly complete theoretical basis for corporate governance and created a good premise for further scientific studies on corporate governance in SOEs This is also a good basis for research on corporate governance for state-owned enterprises in the world in general and in Vietnam in particular 1.1.3 Research on capital management and equitization of SOEs When researching on issues related to the operation of SOEs, the issue of equitization of SOEs is of interest to many researchers Because equitization helps SOEs attract capital and experience in organizing production and business activities from investors and employees, promoting business autonomy, improving efficiency and competitiveness of the enterprises The equitization studies have provided an overview of the general theory of equitization in SOEs, some issues related to corporate governance such as characteristics of equity in equitized SOEs, ownership issues, the representative of State capital in SOEs, capital management in SOEs Some solutions proposed by the research to improve the efficiency of the equitization and divestment of SOEs, include (i) Expanding objects of equitization and divestment of state capital, (ii) Completing policies and laws on equitization and diversification of ownership of SOEs, (iii) Consistently and thoroughly implement the market principle for the divestment of state capital, and (iv) Enhance the responsibility of the leader in equitization and divestment of state capital Effective management of state capital in enterprises has also been studied quite comprehensively through the systematization of policies on investment of state capital in enterprises as well as methods of investment and management of state capital in enterprises through different stages In particular, the issue of owners and the organization of the apparatus performing the owner’s representative functions for state-owned companies has been studied by scholars The relevant conclusions about the management of state capital in enterprises in Vietnam have been made such as: Policy on state capital investment in enterprises, method of state capital management invested in each business is complete and renewed However, investment activities and management methods of SOEs also revealed many shortcomings, which significantly affected the performance of these enterprises In addition, recommendations to improve the efficiency of capital management at SOEs in Vietnam have also been made, including (i) Consolidate and improve the operational capacity of the Committee for the Management of State Capital at Enterprises, (ii) Clearly stipulate that the owner's representative agency is fully responsible for supervising SOEs, managing state capital at enterprises, ensuring efficiency, preserving and increasing the value of state capital invested in enterprises, (iii) The owner's representative agency shall issue and implement the state ownership policy for each SOE, (iv) Supplement the legal provisions on the mechanism to monitor and evaluate the results of performing the function of representing the state owner based on evaluation criteria, (v) Improve the capacity and effectiveness of supervision of the owner's representative agency; build, manage and operate a national data system on all state-owned enterprises 1.1.4 Research on SOE governance in Vietnam Research on corporate governance began to be popular in the late 1990s and early 2000s, along with accelerating the process of equitization and divestment of state capital in Vietnamese enterprises Research results have shown some limitations on corporate governance in Vietnam such as: unfair access to information of shareholders, other benefits have not been fully implemented, and the BOD structure is not independent; the tools to control transactions of related parties are weak, the operation of the Supervisory Board is not effective and independence is not guaranteed At the same time, a number of studies have analyzed the current situation of the legal framework related to corporate governance for SOEs after equitization and partly assessed the current situation of corporate governance for this type of enterprise in exercising the rights and obligations of the Board of Directors, and at the same time, proposed a number of solutions as a basis for stakeholders to refer to, apply, improve and improve the effectiveness of post-equity SOE governance However, these studies have not comprehensively and deeply assessed the corporate governance contents of SOEs A number of studies at specific enterprises (Vietnam Airlines, Vietcombank) have made assessments on the applicable corporate governance model; Activities of the Board of Directors, Board of Management and Supervisory Board; Share information, shareholder relations and information disclosure and transparency activities; At the same time, it also proposed some solutions to improve corporate governance at SOEs In addition, there have been empirical studies on the relationship between corporate governance and performance of companies in Vietnam, focusing on the following factors: (i) board size; (ii) the representation of female members in the Board of Directors; (iii) being the chairman of the Board of Directors and the CEO at the same time; (iv) educational qualifications of members of the Board of Directors; (v) working experience of the Board of Directors; (vi) independent (external) members of the Board of Directors; (vii) remuneration for the Board of Directors; (viii) the ownership of the Board of Directors; (ix) major shareholder The research results show that the representation of female members, being the chairman of the Board of Directors and the CEO at the same time, the working experience of the Board of Directors, and the remuneration of the Board of Directors have a positive relationship with the performance of the business (measured by ROA - return on assets) while board size has a negative relationship 1.2 Evaluation of the research situation 1.2.1 Clarified issues - Systematize the theory of corporate governance, clarifying the difference in concepts, characteristics and differences of corporate governance in SOEs - Pointing out the necessities and requirements for improving the performance of SOEs through the application of modern SOE governance principles, which are issued in the OECD Guidelines, which has been effectively applied in many countries around the world - Pointing out the core factors associated with effective corporate governance in SOEs, including ownership regime, remuneration regime, information transparency, ensuring the interests of shareholders, structure of the board of directors/members… - Propose ways to ensure a balance in the relationship between the State and stakeholders in SOEs in order to address the challenges posed in the effective operation of SOEs - Point out the challenges of improving the efficiency of SOE governance in parallel with the process of equitization and divestment of state capital in these enterprises - Through the study in a number of specific enterprises, initially pointed out the most basic issues of corporate governance in SOEs in Vietnam; and at the same time, it is recommended that some aspects of the OECD Guidelines be applied to certain challenges and difficulties 1.2.2 Research gap - The research works have only considered, evaluated and analyzed a number of specific enterprises, but have not yet delved into the study of corporate governance in SOEs in Vietnam in a comprehensive and systematic manner Therefore, a study with a broader scale and a more multidimensional view of corporate governance in SOEs in Vietnam is essential - The studies have not been associated with effective governance practices, nor with the principles of corporate governance that have proven their superiority in practice outlined in the OECD Guidelines, so the research clarifies the nature and role of corporate governance, identifying difficulties and challenges associated with the basic principles of corporate governance, as a basis for proposing solutions to apply these principles effectively higher in SOEs is a decisive factor in improving the performance of SOEs - The studies have not highlighted the important reasons from the corporate governance perspective for SOEs, the recommendations are not attached to the universal principles of the OECD, and have not really solved the problems posed to the performance of SOEs 1.2.3 The thesis issues continue to research Comprehensive study on corporate governance in SOEs following OECD guidelines with important principles for reforming the governance system in SOEs in Vietnam; provides recommendations for applying the OECD Guidelines to improve corporate governance in SOEs in Vietnam CHAPTER 02 THE RATIONALE FOR STATE-OWNED ENTERPRISES, CORPORATE GOVERNANCE FOR STATE-OWNED ENTERPRISES AND IMPLEMENTING OECD GUIDELINES ON CORPORATE GOVERNANCE IN VIETNAM STATE-OWNED ENTERPRISES 2.1 Overview of enterprises and SOEs 2.1.1 Definitions of Enterprise “Enterprise” means an organization that has a proper name, assets, premises, is established or registered in accordance with law for business purposes (Clause 10, Article Law on enterprises 2020) 2.1.2 Overview of SOEs 2.1.2.1 Definitions State-owned enterprises exist in almost every country in the world There are various interpretations of SOEs, however, based on many research papers on SOEs, it is confirmed that SOEs are enterprises in which the State holds control and domination The vast majority of people believe that the State's control and domination is obtained by owning a majority of capital of enterprises According to Aharoni (1986), in general, SOEs have three main characteristics: (i) SOEs are part of the public sector, must be owned by the State; (ii) SOEs are also a type of enterprise engaged in the production and sale of goods and services; (iii) SOE's revenue must also be related to costs SOEs are also divided into commercial SOEs and non-commercial SOEs (Muiris, 2009) The OECD (2005) introduces the concept: “SOEs refer to enterprises in which the State has control through full, majority or significant minority ownership.” In Vietnam, according to the Law on Enterprises 2014, “State-owned company means any enterprise of which 100% charter capital is held by the State” However, this regulation has been amended in the Law on Enterprises 2020, “A “state-owned enterprise” means an enterprise more than 50% charter capital or voting shares of which is held by the State as prescribed in Article 88 of this Law.”; Clause 1, Article 88 of Law No 59/2020/QH14 stipulates: “State-owned enterprises shall be limited liability companies or joint stock companies, including: a) Wholly state-owned enterprises (100% of charter capital of which is held by the State) b) Partially state-owned enterprises (over 50% of charter capital or voting shares is held by the State, except the enterprises specified in Point a Clause of this Article).” 2.1.2.2 The role of SOEs SOEs play an important role in the national economy The role of SOEs is shown in many aspects with many goals in terms of economy, politics and society as well as other development orientations (Le Quoc Khanh, 2020) According to the OECD (2015), the role and existence of SOEs is due to: Firstly, SOEs will be more suitable than the private enterprise model when SOEs become monopolistic enterprises in an economic sector where a transport/supply network is a vital requirement for the provision of goods/services in the economy; second, SOEs are engaged in providing the goods and services essential for the economy in areas where private sector enterprises have no incentive to participate; third, SOEs can provide services such as health and education that would not be adequately provided in a free market competition system; fourthly, SOEs may decide to engage in economic activities that can be overproduced by private sector enterprises with many externalities; fifth, SOEs may engage in sectors that cannot be effectively controlled or taxed for private sector enterprises and are unable to attract investment SOEs can be established with different objectives: maximizing social benefits, maximizing business efficiency or serving different interest groups With the aim of maximizing social benefits, SOEs are mainly concerned with creating jobs, providing foreign currency, and promoting the development of new technologies For the maximization of business efficiency, SOEs will aim for profit and maximize the interests of shareholders For serving the interests of different interest groups, it may lead to the appointment or appointment of employees or consumers to the Board of Directors of the company or to serve the political goals of a party 2.1.2.3 SOEs and the trend of equitization When researching on SOEs, an issue that many researchers are interested in is the tendency to equitize SOEs Due to the changing nature of the ownership ratio, the equitization of SOEs will greatly affect corporate governance in this group of enterprises In Vietnam, the equitization of SOEs is understood as the process of converting SOEs 100% owned by the State into joint stock companies, whereby the State withdraws its equity in SOEs and allows the Other economic sectors participate in business ownership (Chu Tuan Linh, 2017) In the world, there is a popular term called privatization whose content also has many similarities with the concept of equitization Privatization in the most general sense is the conversion of part or all of the state-owned capital into private ownership The transformation process can be carried out by the State completely withdrawing capital or withdrawing a part of State ownership for economic sectors other than the State to participate in joint ownership (Haque, 2000) The process of reducing State intervention through the privatization and equitization of SOEs has taken place strongly in the world and in Vietnam in recent years due to: (i) the rampant development of SOEs, but they are not organized and not have a good governance system, so they operate inefficiently, (ii) operate inefficiently, so SOEs become a burden on the state budget, (iii) there is a change of opinion on the role of the State in the market economy, (iv) the attractiveness of joint stock companies, (v) the equitization of SOEs, which is closely related to individual ownership that should be respected and developed in both capitalist and socialist regimes (Hoang Tuan, 2016) 2.2 Corporate Governance in State-owned enterprises 2.2.1 Overview of Corporate Governance 2.2.1.1 Definitions Corporate governance appeared very early along with the formation and development of enterprises Corporate governance is concerned with the process of planning, organizing, leading and controlling the activities of the members of the organization, using resources to achieve success in the set goals (Le Quoc Khanh 2020) One of the achievements of the process of developing corporate governance models is the separation between the owner and the manager, using the owner's capital investment in production and business activities of the enterprise According to the OECD (1999, 2005): “Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.” This definition of the OECD can be considered as the broadest definition of corporate governance, it has been applied by many countries around the world to build a legal system on corporate governance In Vietnam, from a legal perspective, the concept of "corporate governance" appears in the Corporate Governance Regulations applicable to companies listed on the Stock Exchange/Securities Trading Center by The Ministry of Finance issued in March 2007, according to which corporate governance is defined as follows: “Corporate governance is a system of rules to ensure that the company is oriented and controlled effectively for the benefit of shareholders and people related to the company” In many later legal documents, although not giving a specific definition of corporate governance, the Law on Enterprises 2020, the Law on Securities 2019 and other important guiding documents have established a corporate governance framework towards meeting the principles of effective corporate governance of the OECD (Department of Corporate Finance, Ministry of Finance, 2022) 10 on Enterprises 2020 defines the legal framework for corporate governance for all businesses including SOEs The legal framework for corporate governance with state ownership is determined to improve governance effectiveness and operational efficiency, including: forms of SOEs, degree of centralized control, anti-conflicts of interest and ensure transparency in the operation of SOEs, fair information, information related to management agencies, appointment and composition of the Board of Members (BOM) and the Board of Directors (BOD), requirements for information disclosure, which are considered important elements in the corporate governance framework in SOEs (Corporate Finance Department, Ministry of Finance 2022) According to the provisions of point a, clause 1, article 88 of the Enterprise Law 2020, if 100% of charter capital of an enterprise is held by the State, its organizational model shall be a single share-holder limited company in which 100% of charter capital is held by the State; a parent company of a state economic group, a parent company of a state corporation, a parent company in a group of parent companies - subsidiary companies or a single share-holder limited company that is an independent company of which 100% charter capital is held by the State According to the provisions of Point b, Clause 1, Article 88 of the Enterprise Law 2020, an enterprise where State holds over 50% of charter capital or of voting shares, its organizational model shall be either a limited liability with two or more shareholders, or joint-stock company with more than 50% of charter capital held by the State Due to the difference between SOEs and enterprises in general in terms of ownership, there are many differences in SOE governance compared to corporate governance in general Corporate governance of SOEs is subject to many constraints On the one hand, it ensures the management of the State, but on the other hand, it also creates restrictions on the activities of enterprises Therefore, controlling the production and business activities of SOEs is a regular and mandatory requirement In addition, the goals of SOEs as well as SOE owners create many differences in the organization of SOE governance activities 2.2.2.2 Characteristics of corporate governance of SOEs Operations of SOEs are governed by legal regulations and corporate governance practices to improve the performance of these companies in order to achieve the objectives set by the business and its owners However, SOEs still have their own characteristics of their form of enterprise and are different from private sector enterprises, which are stated in the following contents: (i) SOEs owned by the State or joint ownership of capital at a controlling level, (ii) the problem of representation in SOEs, (iii) the management of conflicting goals (profit and non-profit goals), (iv) the problem of information transparency of SOEs being weaker than that of private sector enterprises, (v) compared to private sector enterprises, corporate governance of SOEs always faces many challenges when it comes to achieving its goals effectively, (vi) in many countries, SOEs cannot change their board of directors by takeover or proxy contest and most not go bankrupt 2.3 OECD Guidelines on Corporate Governance of State-Owned Enterprises 2.3.1 Introduction OECD stands for Organization for Economic Co-operation and Development, established in 1961 The predecessor of the OECD is the Organization for European Economic Co-operation (OEEC) of 16 European countries, aiming to restore the economy and monitor aid allocation Currently, the OECD has 38 members, divided into the following regions: - Europe (27 members): Austria, Estonia, Greece, Italy, Netherlands, Slovakia, Switzerland, Belgium, Finland, Hungary, Latvia , Norway, Slovenia, Turkey, Czech Republic, France, Iceland, Lithuania, Poland, Spain, United Kingdom, Denmark, Germany, Ireland, Luxembourg, 11 Portugal, Sweden; Americas (6 members, members from North America and from South America): Canada, Chile, Colombia, Mexico, USA and Costa Rica (38th newest member); Asia (3 members): Israel, Japan, Korea; Oceania (2 members): Australia, New Zealand The OECD has a lot of influence over developed countries in formulating policies for economic cooperation and development OECD is now one of the most prestigious international organizations in research field; building and maintaining a very large database of information on most policy fields (except for defense) such as economy, culture, education, etc OECD data, information and reports are valuable and highly reliable 2.3.2 Contents and fundamentals of the OECD Guidelines on Corporate Governance of SOEs 2.3.2.1 Rationales for state ownership (including 06 principles) 2.3.2.2 The state’s role as an owner (including 06 principles) 2.3.2.3 Equitable treatment of shareholders and other investors (including 03 principles) 2.3.2.4 Stakeholder relations and responsible business (including 03 principles) 2.3.2.5 Disclosure and transparency (including 05 principles) 2.3.2.6 The responsibilities of the boards of state-owned enterprises (including 06 principles) CHAPTER 03 PRACTICES INTO CORPORATE GOVERNANCE FOR SOES AND THE IMPLEMENT OF THE OECD GUIDELINES IN STATE-OWNED ENTERPRISES IN VIETNAM RECENTLY 3.1 Practices into corporate governance for SOEs 3.1.1 Overview Up to now, Vietnam has around 500 enterprises with 100% charter capital held by the State and nearly 200 enterprises in which the State holds controlling shares and 150 enterprises with capital contributed by the State, operating in a number of key sectors and fields of the economy (MPI 2022) Investments of SOEs in key and important sectors, fields and areas of the economy have helped reduce the burden from the state budget in the implementation of important infrastructure investment projects of the country (Ho Sy Hung 2022) However, SOEs still create many negative cases of loss and waste of state assets in some economic groups and state corporations, which have not been remedied so far Reason for this phenomenon is that the thinking and methods of corporate governance of SOEs have not yet met and adapted to the requirements of reality Corporate governance being weak and not renewed can lead to wasteful use and depletion of natural and social resources (Pham Duy Nghia 2004) Basically, the current law on corporate governance of joint stock companies is relatively synchronous and in line with international practices The provisions of the law have created a suitable legal basis for the organization and operation of state-owned enterprises in the form of joint stock companies Listed SOEs shall comply with the provisions of Circular No 116/2020/TT-BTC dated December 31, 2020 issued by the Ministry of Finance and other relevant documents For SOEs that are one-member limited liability companies, there are many documents regulating the organization and operation of this form of company 3.1.2 For corporate governance model The legal framework on corporate governance of SOEs has been formed and is gradually being completed The main laws governing corporate governance in Vietnam are the Law on Enterprise 2020, the Law on Securities 2019, which sets out corporate governance requirements applicable to listed companies and public companies The Accounting Law 2015 and the Law on Independent Audit 2011 set out the legal framework for financial reporting, accounting and auditing in the corporate sector in Vietnam In addition, other laws (Law on Investment 2005 12 (updated in 2020), Law on Competition 2018, Law on Credit Institutions 2010 and Law on Insurance Business 2010) further strengthen the governance framework SOEs must also comply with anti-corruption, bankruptcy, trade, competition, construction, labor, bidding and tax laws (Corporate Finance Department, Ministry of Finance 2022) SOEs in Vietnam mainly operate in the form of joint stock companies under the model of parent company - subsidiary company Accordingly, the model of corporate governance includes: General Meeting of Shareholders; Supervisory Board, Board of Directors (including functional committees); The Management Board is headed by the General Director and the functional directors The organizational structure of the parent company is built on the principle of assignment and management according to functional blocks of work, which have a close relationship with each other The General Director manages and administers through decentralization to directly handle specific tasks of the division through the directors who are in charge When establishing a model on governance, businesses ensure to implement important governance principles that are: Ensure good corporate governance; ensure the interests of shareholders; equitable treatment of shareholders and other investors; ensure the role of related parties; transparency in operations and ensure the Board of Directors and Supervisory Board effectively lead and control the business 3.1.3 Activities of the Board of Directors and other parts 3.1.3.1 Board of Directors (BOD) Boards of directors of state-owned enterprises in Vietnam include the Chairman of the Board of Directors and members of the Board of Directors Depending on the charter of the enterprise and the operating regulations of the Board of Directors of the enterprise, the number of members of the Board of Directors will be determined, usually in the current enterprises it is 7–10 members and the term is usually years In addition, the organizational structure of enterprises also has functional committees under the Board of Directors such as Audit Committee, Strategy and Investment Committee, Remuneration and Appointment Committee The Board of Directors decides on the strategy, mid-term development plan, annual business plan of the enterprise and makes timely adjustments in line with the market situation The Board of Directors approved key issues related to the development strategy of the enterprise such as corporate governance, investment, basic construction in accordance with the development orientation of the enterprise, and decided on market development, marketing and information technology towards a centralized management model 3.1.3.2 Supervisory Board The Supervisory Board has the authority to perform on behalf of the General Meeting of Shareholders the obligation to supervise the management and administration of the Board of Directors, the General Director and all business activities of the Company in accordance with the provisions of law and the Charter enterprise and take responsibility before the General Meeting of Shareholders for the performance of assigned tasks The main tasks include: (i) Monitoring the legitimacy in the activities of members of the Board of Directors, the General Director, (ii) Monitoring the implementation of the Resolutions of the General Meeting of Shareholders, ( iii) Monitoring the financial situation; financial statement review 13 3.1.4 Compensation mechanism and remuneration for the Board of Directors and Supervisory Board 3.1.4.1 Compensation mechanism In current Vietnamese SOEs, the remuneration of members of the Board of Directors and the Supervisory Board is usually approved by the Annual General Meeting of Shareholders as a percentage (%) of the profit after tax Remuneration for members of the Board of Directors is usually 0.15% - 0.3% of profit after tax, depending on the policy of each enterprise Remuneration for the Supervisory Board is usually 0.04% - 0.1% of the enterprise's profit after tax 3.1.4.2 Other compensation mechanisms Others may include: Car usage policy, Phone usage policy, social insurance regimes, health insurance regimes and other types of insurance, Periodic health examination policy, and Travel expense policy 3.1.5 Shareholder relations and disclosure 3.1.5.1 Shareholder rights are fully met The enterprise always encourages shareholders to be more aware and exercise their rights including the right to vote, the right to receive dividends, the right to nominate people for the Board of Directors, the Supervisory Board, the right to approve the annual financial statements and the right to access information about the operation of the enterprise In addition, shareholders are also provided with conditions to attend and vote at the Annual General Meeting of Shareholders 3.1.5.2 About dividend payment The most important right of shareholders is to receive dividends Therefore, businesses always maintain a cash dividend policy that is always stable from 12% to 15% Enterprises also standardize the dividend pay-out process At the same time, the Investor Relations Department works closely to review and accelerate the progress of dividend pay-out to individual shareholders 3.1.5.3 Ensure equitable treatment of shareholders The implementation of policies to ensure equity between major shareholders and minority shareholders is always a focus of enterprises to ensure that shareholders are provided with the same information, including information on time and dividend payout ratio, information on the issuance, information on invitations to the Annual and Extraordinary General Meeting of Shareholders, creating conditions for shareholders to exercise their voting rights 3.1.5.4 Enhance transparency of information In addition to the full compliance with periodic and irregular information disclosure under the law, many businesses have proactively enhanced communication through diversifying information channels to investors, especially financial statements, investments, business performance results, etc 3.2 Assessment of the corporate governance practices in Vietnamese SOEs By conducting sociological surveys through questionnaires using a questionnaire for appropriate subjects at SOEs, the analysis of collected data has shown some notable findings on the current state of SOE governance in Vietnam 14 3.2.1 On the awareness of corporate governance Basically, SOEs are now equipped with knowledge related to corporate governance through various channels Among them, 28.3% responded that their company did not establish corporate governance policies, while 71.7% responded that there were regulations on corporate governance in the company charter or in the corporate governance regulations The survey results also show that SOEs after equitization attached great importance to corporate governance issues, with the most important thing being the need to ensure an effective corporate governance structure (4.9/5 points) 4.9/5 points) Following that are issues such as compliance with legal regulations (4.59/5 points), equitable treatment of shareholders (4.49/5 points), and disclosure and transparency of information (4.33/5 points) 3.2.2 On the corporate governance of SOEs Regarding the rights of shareholders and the General Meeting of Shareholders, when asking about the number of times the General Meeting of Shareholders, including the annual and extraordinary meetings, it can be found that the number of Meetings varies greatly among companies While some companies hold 1-2 meetings per year, others organize 13, 15 or even 26 meetings per year Regarding the activities of the Board of Directors of the company, opinions are that the Board of Directors of the company has the function of controlling, consulting and operating as well as ensuring the company's corporate governance structure and model in a sustainable way Regarding the operation of the Supervisory Board, almost all companies have a Supervisory Board that is elected through the General Meeting of Shareholders, and this Board has also exercised some of the rights as regulated, however the activity has not been appreciated Regarding the issue of salary and other income for members of the Board of Directors, Director, Supervisory Board, 78% responded that income and salary are commensurate, 5.2% responded that it is not and 16.8 % did not answer this question 3.2.3 About corporate governance efficiency In general, most SOEs are now aware that corporate governance is an issue that needs attention and focus Most of the surveyed SOEs have built their own corporate governance code based on Vietnam regulations and legal sources and the corporate governance scorecard However, author finds that the corporate governance principles of SOEs have not yet been built entirely on the basis of the OECD Principles of Corporate Governance of SOEs, most of which are based on the provisions of the Vietnam law (despite the fact that Vietnam regulations are built quite similar to the Code of Conduct of the OECD, especially the Law on Enterprise 2020 or the Law on Securities 2019) It shows that although in theory enterprises not directly refer to the OECD guidelines, the OECD Guidelines have been in fact applied to a certain extent to the current corporate governance of SOEs Although the comments were self-rated as quite effective, some also suggested several solutions to improve the efficiency of corporate governance at their businesses 3.2.4 General assessment Firstly, corporate governance of SOEs is based on many legal regulations governing activities such as the Law on Enterprise 2020, the Law on Securities 2019, etc, which sets forth regulations for shareholders and the general meeting of shareholders, the Board of Directors, the CEO, the Supervisory Board, the disclosure of information and control of related transactions However, in ensuring effective corporate governance, many other regulations are 15 missing such as those related to shareholders' rights, regulations on the compensation mechanism of the Board of Directors, the CEO, the Supervisory Board, and the need to develop a model on corporate governance to develop sustainably Secondly, through conducting a survey of SOEs, it can be seen that these enterprises have researched, consulted, understood, and placed great importance on corporate governance activities Most importantly, enterprises must comply with legal regulations and ensure equitable treatment of shareholders Thirdly, SOEs are aware of the need to ensure the interests of shareholders, and recognize the roles and functions of the Board of Directors, the Supervisory Board, and the Management Board Fourthly, there is a difference in the assessment of the importance of corporate governance activities between two groups of companies: those without corporate governance policies and those with corporate governance policies 3.3 Some practical applications of the OECD Guidelines on corporate governance of Vietnamese state-owned enterprises 3.3.1 Bao Viet Group 3.3.2 Airports Corporation of Vietnam (ACV) 3.4 Some comments The application of the OECD Guidelines on Corporate Governance of SOEs in Vietnam is at an early stage Accordingly, SOEs fully apply around 7.7% of principles; relatively fully apply 64.1% of principles and partially apply 28.2% of principles (EVN 2022) Hereunder are some practical applications of the OECD Guidelines on corporate governance of Vietnamese SOEs 3.4.1 Regarding the principle of "Ensuring the basis for an effective corporate governance framework" SOEs are governed by the law on enterprises, the management and use of state capital and assets invested in production and business and other specialized laws The Constitution, the Law on Enterprises, the Law on Management and the Law on Management and Use of State Capital Invested in Production and Business at Enterprises 2014 and the system of related documents have separate regulations on the state ownership functions and the state management functions for all forms of SOEs, being a good condition to minimize conflicts of interest in SOE governance; significantly reduce the risk of unequal treatment by state management agencies with enterprises of all economic sectors In the form of a joint stock company, in general, the law on organizational and management structure and operating mechanism does not differ between SOEs and private sector enterprises The particularity (if any) lies in the relationship between state shareholders and representatives exercising the rights and obligations of the state shareholders Overall, the current law on corporate governance of joint-stock companies is relatively complete, consistent and suitable for international practices 3.4.2 Regarding the principle "The State ‘s role as an owner" The exercise of the rights and responsibilities of the state owner has taken a new step It can be affirmed that the regulation on the agency representing the owner in the Law on Management and Use of State Capital invested in production and business at enterprises in 2014 and in the Government issuance of Decree No 131/ND -CP dated September 29, 2018 establishing the Committee for Management of State Capital at Enterprises (CMSC) is an 16 important legal premise to improve accountability for performing the function of state owner, towards the goal of State ownership concentration goal follows a fairly common model of OECD member countries on SOE governance The establishment and operation of CMSC has helped separate the state management function from the state capital management function in enterprises, which is an important key for the owner agency to operate more professionally and effectively Although the role of the state capital owner in enterprises has been transferred from ministries and state agencies to CMSC, the owner agency is still facing many difficulties and obstacles to in performing its tasks due to the following fundamental reasons: (i) the new legal framework for state capital ownership agencies in enterprises has not yet been issued, with many overlapping and unclear regulations, (ii) functions, tasks and organizational structure of CMSC are not suitable for requirements of tasks, (iii) there is no specific mechanism on remuneration, salary and bonus, recruitment of personnel, (iv) there is an overlapping of functions and duties for the State Capital Investment Corporation (SCIC), (v) there is no clear coordination mechanism associated the responsibilities of state management agencies with CMSC, and (vi) many SOEs still belong to other ministries and agencies that have not been transferred to CMSC The above issues have been and are adversely affecting the implementation of the State's role as an owner in SOEs 3.4.3 Regarding the principle of "Equal treatment of shareholders" The protection of related party transactions and minority shareholder rights is of greater concern Basically, joint stock companies with a controlling share of state capital have quite fully conducted the General Meeting of Shareholders in accordance with the law and the charter of the enterprises, including annual and extraordinary meetings However, in fact, there are still many SOEs that are slow to organize shareholder meetings according to regulations, with insufficient numbers of meetings Shareholders, especially minority ones, are not truly cared for and not fully exercise their rights and obligations towards SOEs, particularly in cases where SOEs face difficulties in business operations In some cases, shareholders are not provided with sufficient information as required 3.4.4 Regarding the principle of “Relation with Stakeholders” The protection of interests of stakeholders in SOEs has also received greater attention Related parties may include all organizations and individuals involved at different levels in the business operation process, such as customers, employees, suppliers, creditors, local communities, professional social organizations, and even state agencies However, in addition to positive achievements, in some SOEs, ensuring rights of related parties has not been fully met as required The implementation of SOEs responsibilities to related parties is not proactive and has manifested in various forms, such as: there is inadequate task delegation, supervision, and assessment of social responsibility; the consultation of the community, residents and customers directly affected by the activities of SOEs is a mere formality; The State and the agency representing the owner have not yet guided and applied high standards of business ethics to the system of representatives of state capital as well as those appointed as members of the Board of Directors, members of the Board, President of SOEs; there are cases of employees being redundant during the restructuring, equitization, and organizational reorganization and their minimum rights have not been guaranteed as prescribed In addition, the implementation of responsibilities towards creditors of SOEs has not been handled harmoniously, particularly for SOEs that own inefficient projects, which have not been thoroughly resolved and have prolonged losses 17 3.4.5 Regarding the principle of “Transparency and disclosure” Compliance with legal requirements on information disclosure remains a challenge in SOE governance in Vietnam, particularly for wholly SOEs, although the benefits of increased transparency are enormous Timely availability of reliable economic data facilitates the communication of policy changes from the businesses to owners, investors and the public, helping to reduce uncertainty of the market as well as increase risk awareness, thereby improving governance efficiency About 55% of non-state enterprises have implemented information disclosure activities, while 45% have not yet publicly disclosed information; many companies have not submitted reports to the competent authorities for disclosure as required The percentage of state ownership representative agencies with separate sections on information disclosure of SOEs on the web portal is still low, the data (if any) is not fully updated within the legal timeframe Some SOEs perform disclosure in a formal manner; voluntary transparency has not been seriously implemented; responsibility for information disclosure has not been focused; the agency representing the owner has not fully disclosed information of the enterprises they represent as required by law 3.4.6 For the principle of "Responsibility of the Boards of State-owned enterprises" The work carried out by the Board Members and Boards of Directors of SOEs has actually applied many modern management practices Regarding the responsibilities of the Board Members/Board of Directors at SOEs, the right to nominate the Board Members/Board of Directors and the method and conditions for nomination, regulations on independent members, gender regulations, etc may vary among enterprises, but have generally approached to apply the OECD Principles of Corporate Governance In addition, issues related to the salary of Board members/Board of Directors, management and risk management board in SOEs are important issues that are publicly disclosed However, the management, administration, supervision and inspection activities associated with the functions of the Board Members/Board of Directors in wholly state-owned enterprises still have many problems In particular, the main limitations include: internal control has not been highly effective The performance of the controller's duties has not really detected the wrongdoings of enterprises because the controller has not had the necessary independence with the enterprise, especially in terms of salary, bonus and source of income In some state-owned corporations and controlling companies that play a key role in the economy, the Board Members/Board of Directors has not been assigned one of the most important authorities in modern governance framework, which is the full authority to appoint, replace, dismissing high level leadership positions, including the CEO The salary payment, as well as the monitoring and evaluation mechanism of the Board Members for CEO associated with long-term goals and missions have not been widely applied in practice Competition in the selection of members of the Board Members/Board of Directors has not been widely applied In addition, many SOEs have not paid attention to renewing internal corporate governance, applying science and technology and innovative changes to reduce costs and improve labor productivity CHAPTER 04 IMPLEMENTING OECD GUIDELINES ON CORPORATE GOVERNANCE IN VIETNAM STATE-OWNED ENTERPRISES 4.1 International experience in implementing OECD guidelines on corporate governance of SOEs 18 OECD guidelines have been researched and applied widely in many member and nonmember countries of OECD, which improves corporate governance efficiency, ensures transparent and effective management in SOEs and maintains fair competition with other forms of enterprises 4.1.1 Ensuring a legal framework and rules on ownership function of SOEs In general, most of the reviewed countries have made efforts to improve the legal framework to perform state ownership function by adopting the coordinating agency model and introducing other legal documents To a certain extent, these changes enhanced the transparency on the legal basis of state ownership and strengthened the coordination in state ownership practices of administrative agencies Around two third of these countries have brought national practices closer to the standards of the SOE guidelines However, in some other countries, ownership of SOEs is still exercised on an ad-hoc basis by individual ministries rather than on a whole-of-government basis Most of these countries have yet to develop an explicit government ownership policy which clearly outlines the rationales for state ownership Such differences from the “ownership centralization” standard of the SOE Guidelines have been mitigated in several countries through the recent introduction of policy documents (e.g on board nomination practices, internal controls, etc.) establishing corporate governance requirements or standards applicable to all SOEs In this respect, Argentina and Chile have issued corporate governance guidelines on a comply-or-explain basis However, the Argentinian government has introduced neither the rationales for state ownership nor an ownership policy Also, except for listed companies, there is no proper connection between commercial and/or sectorial objectives in the country Some reviewed countries include Argentina, Austria, the Czech Republic, France, Korea and Lithuania 4.1.2 Fair competition of current SOEs The result shows that less than one fourth of the reviewed countries made changes in legal framework and national practices related to ensuring fair competition in the presence of SOEs from 2015 to 2020 Several countries have pursued competitive neutrality to a certain extent in various ways through ownership, competition, public procurement, tax policies or and regulations or combination of these policies Further measures to ensure market consistency of debts and equity financing suitable complaints handling, enforcement and implementation mechanisms in consistency with recommended international commitments It should also be noted that when SOEs are compensated for their public service obligations, companies should account separately for economic and non-economic activities Separation of accounts allows for monitoring of public funds provided by the government for public service obligations In the case of an internationally-active SOE, transparency and disclosure is important as regulators and other market actors need to ensure that the SOE does not depart from commonly accepted corporate norms or that the nature of their operations is fully disclosed prior to their market entry Some reviewed countries include Czech Republic, France, Lithuania, Costa Rica and Hungary 4.1.3 Equitable treatment of shareholders and other investors Around half of the reviewed countries have made important changes in practice related to equitable treatment of SOEs shareholders, particularly by subjecting SOEs wholly or partially to national corporate governance codes (or SOE-specific codes where applicable) Though these changes are not specific to SOEs, they apply to any SOEs with non-state minority shareholders listed on a stock exchange Notably, the Czech Republic, Germany, Italy and Latvia have made progress regarding the implementation of the OECD Principles of Corporate 19 Governance, an internationally-agreed instrument that aims at enhancing rights of shareholders and enhancing efficiency of corporate governance at the same time Some countries surveyed in this report are Estonia, Germany, Italy and Lithuania 4.1.4 Relation with stakeholders and responsible business One third of the countries surveyed in this report have made material changes in national practices concerning stakeholder relations and responsible business conduct (RBC) in companies, including SOE While most of the countries surveyed not have an overarching policy framework to promote or implement RBC in the SOE sector, one third of the surveyed countries have taken steps to enhance RBC practices by introducing new requirements with regard to internal controls, ethics and compliance programs These changes have generally resulted in a stronger alignment of national practices with the standards of the OECD Guidelines, which call for SOEs to implement high standards of RBC and for the state shareholder to explicitly disclose its expectations in this regard This indicates that awareness of the importance of RBC as a core business issue has increased in recent years Besides, increasing pressure for accountability and transparency in all forms of corporate behavior is supporting innovations and improvements in practices by SOEs At the same time, it is important to note that any costs related to obligations and responsibilities that an SOE is required to undertake in terms of public services and RBC should be covered in a transparent manner Some reviewed countries include Israel, Korea, New Zealand, Switzerland, the Czech Republic, France, Germany, Lithuania, Spain, Argentina, Poland, and Estonia 4.1.5 Transparency and disclosure Around two-thirds of the countries surveyed for this report have introduced or strengthened requirements for disclosure and transparency in the SOE sector in the last five years, thus bringing national practices more in line with the standards of the SOE Guidelines Changes have included, for example, new requirements concerning the role of audit committees in SOEs, clarifications regarding the role of the state in selecting audit firms and the introduction of aggregate reporting on the entire SOE portfolio in some countries Almost all the reviewed countries have established SOE-specific disclosure and requirements and some form of performance evaluation system for SOEs, by developing performance contracts or performance indicators The frequency of reporting often depends on the size and operations of a given company In some countries, transparency requirements are often stricter for SOEs, based on additional guidance or requirements set out in applicable laws Some reviewed countries include Argentina, Brazil, Czech Republic, Finland, Iceland, Korea, Poland, Sweden, and the United Kingdom 4.1.6 Responsibilities of the boards in SOEs With the widespread commercialization of SOEs in recent decades, governments have attempted to professionalize board directors and entitled them with greater power and autonomy OECD Guidelines suggest that an SOE board should constitute a “sufficient number of competent non-executive board members who are capable of independent judgment” They should act with integrity and be held accountable for their actions In this regard, two-thirds of the countries reviewed for this report have made notable efforts and progress over the past five years However, while good practice calls for an SOE’s board to oversee and incentivize management, corporate boards in the reviewed countries are still often closely linked to state ministries, or are bypassed by the government on main board responsibilities such as appointment of CEOs Frameworks for nominating and appointing board members and senior 20 executives should be more transparent and consistent, since countries reported some cases of close ties between the senior executives and the political decision makers affecting decision process for appointment Corporate governance arrangements of SOEs should further evolve to clearly clarify and delineate the respective roles of the ownership entity and SOE boards of directors in the relationship with executive management Overcoming these challenges requires even-handed regulation, professional state ownership practices, independent boards of directors and monitoring SOE performance based on clearly defined objectives, supported by high standards of disclosure and accountability A key way to achieve these objectives is by implementing the OECD Guidelines Some countries surveyed in this report include Belgium, Brazil, Costa Rica, Chile, Czech Republic, Spain, Korea 4.2 Awareness and application for adoption of OECD guidelines on corporate governance in SOEs in Vietnam OECD guidelines also provide advice to countries on how to manage their responsibilities more effectively as company owners, thus helping SOEs to increase competitiveness, efficiency and transparency Developed firstly in 2005, OECD guidelines were amended in 2015 to take into account developments since their adoption and to reflect the experiences of the growing number of countries that have taken steps to implement them Not only widely recognized in countries across the world, in Vietnam, the implementation of good corporate governance practices, especially OECD Guidelines, has become explicit Accordingly, the Ministry of Planning and Investment has drafted the project “Application of modern governance on SOEs; transparency of investment and business activities of state owners” (submitted to the Prime Minister) The governance framework standardization, especially targeting SOEs engaging in economic activities, allows SOEs to have autonomy to achieve their defined objectives and limit interference in management activities (Pham Thi Tuong Van, 2022) From 2017, Resolution No 12 on 6/3/2017, the 5th Conference of the 12th Central Committee of the Party requires institutionalization on restructuring, renewing and improving efficiency of SOEs, new issues have been identified such as: - Determine the SOE's participation in the implementation of political and social tasks assigned by the State according to the mechanism of State orders, competitive selection, publicity, and clear determination of implementation costs - Relatively complete and synchronous regulations on economic and financial relations between the State and SOEs, especially rights and obligations that are fully and transparently implemented in accordance with the law and the market regime - Eliminate mechanisms for direct administrative intervention, subsidies for SOEs, and unequal treatment of enterprises of other economic sectors, especially in accessing state resources, credit, and land, resources, investment opportunities, business, finance, taxes, etc - Consolidate multi-owned state economic groups according to international practices; clearly define the scale and scope of activities in accordance with the management and administration capacity ; require SOEs to establish effective internal control and governance systems to prevent, detect, and handle law violations and conflicts of interest; clearly define the tasks, powers and responsibilities of the management positions in the management system and ensure that responsibility goes hand in hand with authority 21 - Determine the principle that wages and bonuses of SOEs employees and managers must be associated with labor productivity and in accordance with the market mechanism The contents of the above Resolution are quite similar to the spirit of the OECD Guidelines on Corporate Governance at SOEs As mentioned above, according to the report of the Ministry of Planning and Investment, Vietnam has applied all 39 principles in the OECD's updated set of guidelines on corporate governance at SOEs in 2015; however, only 7.7% of principles have been fully applied, 64.1% of principles are relatively fully applied and 28.2% of principles are partially applied (Electricity of Vietnam 2022) However, this is still a valuable practice showing that this application trend is popular in Vietnam 4.3 Specific solutions 4.3.1 The principle of “Ensuring an effective legal framework and management” The legal framework for SOE governance should be built on a scientific basis and in line with the modern corporate governance principles recommended by the OECD The ownership function should be separated from other functions that affect the operating conditions of SOEs, especially those with the ability to regulate the market The state should make efforts to simplify and rationalize the operating principles and legal models of SOEs The legal form of SOEs should allow creditors to request the procedures for dissolution and bankruptcy of SOEs All responsibilities and obligations of SOEs in terms of production, provision of public services and other social responsibilities must be clearly defined by law Such obligations and responsibilities must be disclosed and the costs involved must be transparently reimbursed SOEs should not be exempt from general laws and regulations Stakeholders, including competitors, must have access to the right to compensation and fairness if their legitimate rights are violated 4.3.2 The principle of “The ownership role of the State” Diversification of ownership and equitization of enterprises in which the state plays the role of owner are implemented The issue of determining the owner is a key factor to create motivation for corporations and member enterprises SOEs can diversify their ownership by promoting enterprises equitization, issuing bonds, and participating in the stock market, which can raise additional capital for state economic groups The government needs to create an adequate legal framework for the agency that is assigned the right to coordinate state capital in enterprises, especially for joint stock companies, which allows SOEs to have the right to be independent and proactive in all activities to achieve the defined goals, with very limited administrative interference in the operation of the business Through the promulgation of operating regulations and charters, the State needs to strengthen decentralization of authorization to the agency representing the owner, the representative of state capital, Board of Directors, General Director of the enterprise, and clearly define the responsibilities of business leaders 4.3.3 The principle of “Equitable treatment of shareholders” Corporate governance must ensure that all shareholders have the right to participate, vote, propose an agenda and raise questions in the General Meeting of Shareholders In fact, many businesses even set out (within the current legal regulations) principles to facilitate shareholders' participation in the general meeting of shareholders by simplifying the submission and petition procedures, changing the agenda; reducing the minimum share ratio to have right to propose changes to the agenda or issues that need be voted on at the General 22 Meeting of Shareholders; adding the criterion of the number of shareholders (regardless of the shareholding ratio) to the conditions for proposing congress convention and agenda; loosening the conditions for asking questions and receiving answers from the Board of Directors at the General Meeting of Shareholders; increasing the preparation time for shareholders attending the meeting of shareholders by sending meeting invitations and accompanying documents earlier than the stipulated time (many businesses also send shareholders detailed audit reports so that shareholders have more information for discussion); etc 4.3.4 The principle of “Stakeholder relations” To avoid possible negative consequences, many other OECD member countries have taken various measures to improve corporate governance in SOEs These measures are based on the following requirements and orientations which includes enhancing the role of stakeholders in corporate governance SOEs must always pay attention to the interests of related parties (which can be understood as those with interests associated with the operation of the enterprise in general and particularly corporate governance, including creditors, customers, suppliers, employees, communities and state management agencies in this situation) 4.3.5 The principle of “Transparency and disclosure” It is necessary to add a regulation requiring Annual Report to present more clearly about business risks and major fluctuations to assist investors in properly valuing the company's shares, rather than in analyzing the financial ratios only The disclosure of brief resumes of the Board of Directors members should be added in the Annual Report Professional capability, working experience, risk of interest conflicts, independence and objectivity degree, and possible time and material resources of members are what shareholders/investors are interested in, which need to be updated to enhance their surveillance capabilities There are additional regulations requiring disclosure of information about the presence of members of the Board of Directors in the meetings of the Board of Directors so that shareholders can monitor and evaluate the diligence and responsibility of their representatives in implementing corporate governance However, if only sufficient information according to regulations is required, without a mechanism to monitor and evaluate the accuracy of the information provided, the information transparency will be limited Therefore, it is necessary to develop strict and appropriate monitoring methods, focusing on evaluating the performance/investment according to the overall financial criteria, not on every specific project/activity; to increase the application of information technology in monitoring SOEs activities to ensure the effectiveness of early detection of violations, warning of risks causing loss of state capital in SOEs 4.3.6 The principle of “The responsibility of the Boards of state-owned enterprises” In order for the Board of Directors/Members to operate effectively, it is necessary to focus on implementing the basic issues including: (i) the mechanism for selecting personnel to join the Board of Directors/Members, (ii) ensuring independence and autonomy of the Board of Directors/Members, (iii) developing an open, transparent, democratic and lawful operating regulation, and (iv) an appropriate remuneration regime for members of the Board of Directors/Members As for the mechanism for selecting personnel to join the Board of Directors/Members, the models around the world are still considered, recruited and appointed by state ownership agencies However, it is necessary to develop a mechanism for recruitment and appointment through public recruitment examinations, with clear standards and conditions, and with benefits 23 and responsibilities based on annual and periodical work performance It is also essential to research and consider hiring a Director/General Director, a member of the Board of Directors/Members with a feasible and appropriate business plan The attraction and use of talented people in a way that does not include discrimination between party members or outsiders, Vietnamese in or out of the country In addition, it is necessary to increase the number of independent members outside the state agencies participating in the Board of Directors/ Members of SOEs To ensure their independence and autonomy, The Board of Directors/Members must be given the right to have autonomy, self-responsibility and focus on the functions of strategic direction and supervision of the executive apparatus to meet high standards of competence, independence, integrity and to help the SOEs be operated and governed in a transparent, justifiable, professional and highly efficient manner; in order to balance power, enhance responsibility and improve independent decision-making capacity of the Board of Directors/ Members with the Director/General Director SOEs need to develop a separate operating regulation of the Board of Directors/ Members, which clearly defines their roles in the management of the enterprise, rights and obligations for Board of Directors/ Members, and related rights assigned in governance company At the same time, it is necessary to perform the function of management supervision and strategic direction according to the objectives set by the Government and the ownership agency, which includes delineating the roles and responsibilities of the director/general director to avoid overlaps and conflicts between company supervisory and governance functions and corporate governance and management (functions of director/general director); taking responsibility for the implementation of the company's strategic goals, reinforcing ethical values, company culture and risk management; coordinating with the executive board of the enterprise to provide the representative agency with accurate, timely and clear information about the company's operations This is not only about information limitations on an organization's financial performance, but also about compliance with important laws and regulatory requirements and any behavior that is completely inconsistent with our values or corporate code of conduct In addition to the above issues, the quality of management and administration of the Board of Directors/Members also depends on the application of typical technologies in the Fourth Industrial Revolution or digital transformation into the governance of SOEs 4.3.7 Legal framework for corporate governance In order for SOEs to have an appropriate legal framework for the corporate governance system, it is necessary to review, amend, supplement and complete the system of guiding documents on the Enterprise Law and other relevant legal documents Accordingly, the regulation of the authority, order and procedures for exercising the rights and responsibilities of the owner's representative agency for state enterprises is related to the charter of organization and operation of the enterprise; strategies and plans; corporate cadre work; investment and financial activities of enterprises; business monitoring and evaluation Completing the legal framework for corporate governance should adhere to recommended rules for SOEs such as the OECD Guidelines on Corporate Governance in SOEs (2005, 2015), Code of Best Practice of Corporate Governance (2019) of the SSC and IFC, the SCIC Code of Corporate Governance (2016) drawn 24 up based on the G20/OECD Principles of Corporate Governance, etc has very important implications for corporate governance of SOEs The completion of the legal framework on public governance in SOEs certainly plays a great role in improving the business efficiency of SOEs Accordingly, applying modern principles of corporate governance of SOEs on completing the legal framework will lead to the standardization of the current public governance model at SOEs 4.3.8 Raising the awareness about corporate governance for SOEs of OECD SOEs must conduct training to raise awareness among managers and all members about the nature and role of corporate governance in SOEs in accordance with OECD guidelines so that they can improve their performance CONCLUSION Corporate governance is a key factor to enhance operational efficiency as well as modernize the management system so that enterprises can operate in accordance with market economic conditions and international integration Strengthening and innovating corporate governance, especially at SOEs, may effectively set up governance structures, set goals, and monitor the implementation of corporate goals SOEs operate in many key fields, hold key sectors of the economy, and lead the national economy However, despite being equipped with abundant resources, the performance of SOEs in many areas is still limited, failing to meet the requirements of solving key economic tasks Ineffective corporate governance at SOEs leads to inefficient operating apparatus, loss of assets, and low competitiveness compared to private sector enterprises, especially compared to foreign investment capital enterprises The autonomy and self-responsibility of SOEs according to market principles have many problems and are not consistent with the principles and practices common in the world Basically, corporate governance in SOEs is not different from corporate governance in general However, in order to achieve effective goals, corporate governance in SOEs must follow modern international standards, good governance practices, especially OECD corporate governance principles to operate effectively in business The study of the principles of corporate governance in OECD SOEs through the OECD Guidelines helps managers have the right direction in governance However, the application requires managers to be fully aware of these principles as well as to be very creative and flexible to best manage and apply the principles Based on the current situation of corporate governance in SOEs in Vietnam, experience and trends in applying the set of guidelines in countries around the world, the author has proposed a number of solutions according to each criterion in the OECD Guidelines However, due to limited resources and knowledge, the thesis research inevitably has some limitations The researcher is looking forward to receiving comments and suggestions from the Evaluation Council and teachers to develop the thesis