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VIETNAM ACADEMY OF SOCIAL SCIENCES GRADUATE ACADEMY OF SOCIAL SCIENCES L TRAN LUONG DUC THE GOVERNANCE OF PUBLIC COMPANIES UNDER THE VIETNAMESE LAW NOWADAYS Major: Economic Law Major code: 9.38.01.07 SUMMARY OF THE DOCTORAL DISSERTATION IN LAW Hanoi - 2019 The dissertation completed at Graduate Academy of Social Sciences, Vietnam Academy of Social Sciences Supervisors: Assoc Prof Dr Nguyen Nhu Phat Assoc Prof Dr Duong Duc Chinh Reviewer 1: Assoc Prof Dr Tang Van Nghia Reviewer 2: Assoc Prof Dr Bui Thi Huyen Reviewer 3: Assoc Prof Dr Duong Dang Hue The dissertation will be defended at Graduate Academy Level Council of dissertation assessment at Graduate Academy of Social Sciences, Vietnam Academy of Social Sciences, 477 Nguyen Trai, Thanh Xuan, Hanoi Time: ………… date ……… month …… …year 2019 The dissertation may be found at: - Vietnam National Library; - Graduate Academy of Social Sciences Library INTRODUCTION The necessity of the research topic In Vietnam, the legal framework for public company governance is basically mentioned in the 2005 Law on Enterprises, the 2014 Law on Enterprises, the 2006 Law on Securities, the Law on amending and supplementing a number of Articles of the 2012 Law on Securities, Decrees guiding the implementation of the Law on enterprises, the Law on securities, and documents guiding the implementation, have shown quite fully the need to adjust the law in this field Actually, however, the current legal framework for public company governance in our country has still many gaps, not really protecting the legitimate rights and interests of shareholders and the consequence is that a deep division among groups of shareholders in the company as a basis for large-scale mergers and acquisitions To overcome these limitations, it is necessary to improve the efficiency of law enforcement of public company governance, strengthen the role and capacity of securities market management agencies; continue to improve legal regulations on corporate governance By examining comprehensively “The governance of public companies under the Vietnamese law nowadays” will contribute to further interpret scientifically public company governance and propose some solutions to improve the provisions of the law on corporate governance in general and public company governance in particular in Vietnam Research purpose and tasks 2.1 Research purpose The research purpose of the dissertation is based on the results of interpretation of theoretical and practical basis of legal regulations on public company governance in our country, and on the basis of comparison and reference to mechanism of public company governance under the law of some countries around the world and general practices so as to make recommendations to improve and enhance the effectiveness of the law on public company governance in Vietnam today 2.2 Research tasks The dissertation seeks to clarify the following tasks: - Analyzing concepts, characteristics and contents of corporate governance in general and public companies in particular Analyzing and assessing the need to adjust by the law of corporate governance relations, the legal regime for public company governance in the legal documents, priciples of management, internal organizational structure, advantages and disadvantages of public companies, and referring and analyzing the legal structure of public company governance - On the basis of comparison with regulations on public company governance under the international practices and laws, the study analyzes and clarifies characteristics of public company governance in Vietnam - Analyzing and evaluating the legal framework on public company governance in Vietnam which prescribed by the Law on Enterprises, the Law on Securities and other relevant legal documents; the reality of application and enforcement of these laws by public companies and relevant agencies and organizations; and then identifying the strengths and weaknesses of these laws - Clarifying the necessity and objectivity of improving the law on public company governance, and proposing recommendations and solutions to improve the efficiency of public company governance under the Vietnamese law Research subjects and scope 3.1 Research subjects The research subjects of the dissertation are opinions, jurisprudence, models of corporate governance in general and public company governance in particular; Vietnamese legal documents on public company governance; OECD’s governance principles, foreign laws on public company governance; practices of developing, applying and enforcing the law on public company governance in Vietnam 3.2 Research scope - Regarding contents The dissertation just analyzes and evaluates the provisions of the law on public company governance which stipulated by the Law on Enterprises, the Law on Securities and relevant legal documents The study analyzes the provisions of the law on shareholder’s rights and protection of shareholder’s rights; management apparatus and power division in the company; the law of preventing and resolving interest conflicts, self-interested transactions; transparency and information disclosure; inspection, supervision and handling of violations - Spatially and time + Spatially: the dissertation just examines theoretical and practical issues of the law on public company governance in Vietnam, in which, having comparisons, experiences of some countries on building and enforcing law on public company governance + Regarding time: the dissertation just examines issues since 2006 (since the 2005 Law on Enterprises took effect) Methodology and research methods 4.1 Methodology In order to clarify the research issues, the dissertation based on methodology of Marxism-Leninism on dialectical and historical materialism, the State and the Party’s points of view on economic development in the innovation period 4.2 Research methods - Method of analysis and synthesis: This method is used in all chapters of the dissertation Specifically, it is used to learn and present phenomena, viewpoints, contents, elements of public company governance and the law on public company governance; analyze and draw out perspectives, regulations and operation of corporate governance and Vietnamese law on public company governance; thenceforth, the study presents assessment, conclusion, recommendations and suitable solutions to improve the provisions of the law - Systematical method is used in all chapters and sections of the dissertation to turn contents and each issue of the dissertation into a perfect whole with reasonable layout, coherence, inherit and develop issues and contents to achieve research purposes of the dissertation - Method of comparative law: this method is mainly used in chapter and Specifically, it is used to refer principles, practices and good guidelines on corporate governance and experiences in building and improving the law on public company governance of some countries around the world, and OECD’s corporate governance principles New contributions of the dissertation The dissertation is an intensive, comprehensive and systematic research work on the issues of corporate governance in general, the provisions of the existing law on public company governance in both theoretically and practically and expressed in the following contents: - Examining systematically and interpret based on theoretical and practical basis of concepts, legal and scientific foundation, the law and issues related to public company governance - Evaluating correctly and accurately the current status of the provisions of the law on public company governance in Vietnam It also points out inadequacies and shortcomings of this issue - Examining experience of some countries around the world in building and improving the law on public company governance - Identifying scientific arguments for improving the law of Vietnam on public corporate governance and propose some suggestions and solutions to improve the Vietnamese law on public company governance Theoretical and practical significance of the dissertation - Theoretically: The dissertation is a systematic, comprehensive and intensive research work on theoretical issues of public company governance By modern and appropriate research methods, the study explains theoretical and practical issues, it analyzes and evaluates theoretical issues, basis and form of the law on public company governance, thenceforth, it draws conclusions about the content of the law on public company governance in Vietnam today - Practically: the dissertation makes objective comments and assessment, reasons and results as well as limitations of the law on public company governance The dissertation’s results, especially theoretical and practical issues in comparison to foreign law will contribute to making recommendations to ensure to correctly apply and build the provisions of the law on public companies consistent with the socio-economic development of Vietnam The opinions and solutions to improve the Vietnamese law on public company governance in this dissertation may be a reference for legislators and competent authorities in completing the law on public corporate governance in Vietnam The dissertation is also a reference for studying, researching and teaching law on corporate governance Structure of the dissertation Besides the introduction, conclusion and references, the dissertation includes chapters: Chapter 1: Literature review Chapter 2: The theoretical issues and the law on public company governance Chapter 3: The reality of the law on public company governance in Vietnam Chapter 4: Directions and solutions to improve the law on public company governance in Vietnam Chapter LITERATURE REVIEW 1.1 Research situation 1.1.1 Research works on theoretical issues on corporate governance “Corporate governance” by Christine A Allin gave an overview of corporate governance issues The author has summarized, analyzed and evaluated some basic theories on corporate governance, the role of shareholders and parties related to corporate governance, and studying ownership structure of types of companies; structure of internal governance such as the roles, powers and responsibilities of the Board of Management (BOM), Director, Chairman of BOM, members of BOM and secretary “Theories of Corporate Governance The Philosophical Foundation of Corporate Governance” by Clarke T also has a similar approach “Corporate Governance: Principles, Policies, and Practices” by Bob Tricker and “Corporate Governance: Theories, Principles, and Practices” by John Farrar referred to legal issues on corporate governance such as the distribution of power between BOM and General Meeting of Shareholders, the legal status of BOM, obligations of the manager; rights and obligations of shareholders; transparency and the role of auditors and the audit committee in corporate governance “Comparative Company Law: Text and Cases on the Laws Governing Corporations in Germany, the UK and the US” by Andreas Cahn and David C Donald and “European Comparative Company Law” by Mads Andenas and Frank Wooldridge approached from the perspective of comparing law of countries in terms of establishment; types of companies in each country; equity capital and loan; management and administration; the involvement of employees in corporate governance In addition to foreign documents, there are also many research works on corporate governance in Vietnam “Corporate governance: improving competitiveness and access to capital in the global market” by Ira M.Millstein, Michel Albert, Sir Adrrian Cadbury, Transport Publishing House, 1998 This book is considered a report to submit to the OECD led by Ira M Milstein “Monograph of economic law” by Pham Duy Nghia, Hanoi National University Publishing House, 2004 This book gives an overview of Vietnam’s economic law, especially it introduces the concept and meaning of corporate governance “The law on enterprises – capital and management in the joint stock companies” by Nguyen Ngoc Bich (2004, 2009), Youth Publishing House, HCMC This book presents what the law on enterprises stipulates on capital and management of joint stock companies In this book, the author explains the issues of corporate governance in one chapter (the author uses the term “driving the company”) In sum, in these research works, the theoretical issues on corporate governance have been presented in detail, from different perspectives such as the history of corporate governance, theories of corporate governance, the concept of corporate governance, as well as elements and models of corporate governance and major contents of the law on corporate governance These research findings are the basis for comparison, analysis and evaluation in the dissertation so as to build a system of theoretical bases and grounds to assess practical activities and experiences to improve the law on public company governance in Vietnam 1.1.2 Research works on the reality of the law on corporate governance Based on the theoretical basis of corporate governance, the book “Corporate Governance: Theories, Principles, and Practices” by John Farrar examines the provisions of the law on corporate governance based on the legal provisions on the roles of shareholders and parties related to corporate governance, rights and obligations to study the ownership structure of various types of companies and the internal governance structure By similarly approaching, the book “Corporate Governance: Principles, Policies, and Practices” by Bob Tricker examines the legal provisions on corporate governance of the UK and the US, or the book “Corporate Governance: Theories, Principles, and Practices” by John Farrar examines the legal provisions on corporate governance of Australia and New Zealand These research works provide an overview of the provisions of the law on corporate governance of countries as a basis for the dissertation to compare and learn experiences of other countries By considering corporate governance as an internal element of the company, the book “Comparative Company Law: Text and Cases on the Laws Governing Corporations in Germany, the UK and the USA” by Andreas Cahn and David C Donald or the book “European Comparative Company Law” by Mads Andenas and Frank Wooldridge provided an overview of the law on enterprises of German, the UK and the US, in which, they compare to provisions of the law on enterprises in each aspect of corporate governance of these countries Foreign research works on corporate governance related to Vietnam, namely: “Public Enforcement and Corporate Governance in Asia: Guidance and Good Practices”; Copyright OECD (2014) Corporate governance report on the Observance of Standards and Codes (ROSC) - assessing the situation of corporate governance in Vietnam (June 2006) This report provides an assessment of the corporate governance framework of Vietnam including the fields of law and regulation, mechanism of inspection and enforcement, market and especially the stock market Report on corporate governance in the years (2011-2012; 2013-2014; 2015-2016) These reports are documents that reviewing the situation of corporate governance in Vietnam’s largest company, in which, summarizing the strengths and weaknesses of the legal framework for corporate governance in each area (shareholder’s rights and basic ownership functions, equal treatment with shareholders, the role of stakeholders in corporate governance, information disclosure and transparency, responsibilities of the BOM) “CEO & BOM - Handbook of modern corporate governance and management” by Nguyen Tri Hung, Nguyen Trung Thang - Ho Chi Minh City Publishing House, 2009 “Company - Capital, management and disputes under the 2005 Law on Enterprises” by Nguyen Ngoc Bich, Nguyen Dinh Cung, Knowledge Publishing House, 2009 In this book, the author studies the power structure in joint stock companies and shareholders and General Meeting of Shareholders, BOM, Director/Director General, Board of Controllers, selfinterested transactions, and the control of company operations In order to clarify the content of the study, in addition to assess and review the actual provisions of Vietnamese law on corporate governance, these authors have compared to good practices, legal provisions on corporate governance of several countries in the world from perspective of comparison, the book “Corporate governance in East Asia after the 1997 crisis” by Truong Thi Nam Thang, National Economics University Publishing House, 2010 This book analyzed the regulatory frameworks for corporate governance of the listed and public companies in four East Asian countries, including Indonesia, South Korea, Malaysia and Thailand after the 1997 crisis, in which, referring legal reform of corporate governance in these countries In short, above research works have generally assessed the legal framework of corporate governance in several countries around the world and Vietnam, although these works have not intensively mentioned public company governance, from different perspectives, these research results are the basis for comparing, analyzing, evaluating and learning foreign legislative experience on corporate governance so that the dissertation makes the theoretical basis, as well as assessing the practice and experience to improve the law on the governance of public companies in Vietnam 1.1.3 research works propose solutions to improve the law on corporate governance “Report on the Observance of Standards and Codes (ROSC): Corporate governance country assessment - Vietnam” by Worl Bank in 2013 Report the scorecard on corporate governance over the years (2011-2012; 2013-2014; 2015-2016), copyrighted by IFC; most recently Report on corporate governance for the listed companies in Vietnam in 2018 by HCMC and Hanoi Stock Exchange Based on the analysis and evaluation of the legal framework on corporate governance in Vietnam, the Report makes a number of recommendations such as: Establishing better cooperation among management agencies and strengthening authority, human resources and independence of the Securities Commission; Improving the protection of minority shareholders, controlling transactions of relevant parties, changing the operational mechanism of the General Meeting of Shareholders; Establishing professionalism and operational efficiency of the BOM; Increasing transparency with the participation of independent auditors; publicity of ownership structure and management activities In addition, the study also utilizes theory of market economy; theory of legal entities, natural persons, theory of risks and risk control; theory of contract 1.2.2 Research questions and hypotheses Q1: What is public corporate governance? Why we need to adjust by law on the relationship of corporate governance? What are the legal structure of public corporate governance? H1: There should be a unified understanding of public corporate governance Thenceforth, referring interpretation needs to be adjusted by law for this relationship with the characteristics of public company governance Q2: Which corporate governance principles and good corporate governance practices are used as a reference for public corporate governance in Vietnam? H2: The OECD Code of Conduct is now widely applied, helping OECD member and non-member countries could assess and improve the legal, organizational and managerial framework for corporate governance in such countries and provide guidelines and recommendations for the stock market, investors, companies and relevant stakeholders in the process of developing good corporate governance Q3: What is the content of the provisions of the existing law on public company governance in Vietnam? How does apply them in practice? H3: Basically, the provisions of the existing law on public company governance in Vietnam have partly met the requirements of reality, and assessed to good practices of corporate governance in the world Actually, however, the application of these provisions is not effect, there are many limitations and inadequacies in the application process, even some contents have not been adjusted by the law Q4: with the limitations and inadequacies mentioned above, what are the directions and solutions to improve and overcome? H4: In order to complete the provisions of the law on public corporate governance in Vietnam, it is necessary to properly assess the real situation of applying these provisions in practice, and on the basis of studying experience of improving the law on corporate governance in the world, including distinct characteristics originating from Vietnam’s history and economic development process Conclusion of chapter 11 By reviewing literature, the dissertation makes comments and assessment: it argues that domestic and foreign research works are valuable material source not only theoretical aspects but also high practical values in order for the dissertation continues to improve the legal framework on the governance of public companies in Vietnam At the same time, the author also identifies the issues need to be solved and further examined in this dissertation Chapter THE THEORETICAL ISSUES AND THE LAW ON PUBLIC COMPANY GOVERNANCE 2.1 The theoretical issues on public company governance 2.1.1 Concept of corporate governance First, in a broad sense, corporate governance is a system of rules and mechanisms to organize effectively company for the benefit of the company and society Accordingly, “corporate governance” is defined as the rights and responsibilities of managers, supervisors as well as mechanism to ensure implementation Specifically, clearly defining the content of division of rights, obligations and responsibilities among the company owner, General Meeting of Shareholders, Director, Board of control and relevant persons of the company, and setting up rules and procedures to make decisions about company affairs The institutions governing this relationship are concretized in the Corporate Law, the Commercial Law, the Law on Securities, the Law on Corporate Governance, the Bankruptcy Law, and other relevant laws Second, in a narrow sense, corporate governance is understood as the internal corporate governance institutions The corporate governance regulates the relationship among owners each other; between them and the executive management apparatus of the company, thereby preventing the abuse of power, minimizing unnecessary risks to the company and its owner, and the institutions are primarily in the laws of business organization (the Corporate Law, or the Law on Enterprises) For public company governance, these contents are also stipulated by the Law on Securities, listing regulations, international corporate governance practices and internal regulations This is also the approach and the basis for the dissertation 2.1.2 The governance of public companies Public corporate governance is inseparable from the concept of corporate governance in general, which is a set of mechanisms related to corporate 12 governance and control It sets out a way to divide rights and obligations among members of a company, including shareholders, the BOM, the Board of Directors and relevant stakeholders However, with its “public” nature (economic organization, centralized management mechanism, separation between ownership and manager, the participation of a large number of shareholders, with a large scale of capital and ability to access to various sources) the way of managing public companies needs to comply more strictly and meet the requirements of the law on corporate governance compared to other types of companies Such requirements are often defined by the law on enterprises, the law on securities or listed rules on the stock market and other relevant legal documents depending on the legislative and business environment of each country In addition to high compliance with provisions of the law on corporate governance, public companies themselves must build and follow rules of good corporate governance practices to create confidence for investors and increase the attractiveness in attracting capital 2.1.3 Principles of public company governance - Ensuring the basis for an effective corporate governance framework - Shareholders’ rights - Equal treatment for shareholders - Information disclosure and transparency - Responsibilities of the BOM - The role of stakeholders in the governance of public companies 2.1.4 Model of public company governance 2.1.4.1 Internal governance model of the public companies * Based on ownership structure - The centralized-ownership structure is a system of corporate governance of those inside - The decentralized-ownership structure is a system of corporate governance of those outside * Based on internal governance structure - Unitary board or one-tier board model - Dual board or two-tier board model - Mixed models 2.1.4.2 Corporate governance model of some countries in the world 13 Research works in the world have mentioned corporate governance model that is the UK-US model developed to be based on the representative theory and the governance model based on the decentralized ownership; German model, this is a typical one for the continental Europe, developed based on stakeholder theory, centralized ownership-based governance system; Japanese model based on theory of manager and centralized ownership-based governance system 2.1.4.3 Suggestions for Vietnam Currently, the corporate governance models of each region have certain strengths and weaknesses, but applying any model for Vietnam is inappropriate because of differences of culture, society, business practices, economic development level and legal institutions of each country Vietnam could apply this model but there should be adjustment in accordance with situation of Vietnam In addition, Vietnam should refer to the OECD’s Corporate Governance Code of Conduct to build a legal framework on public corporate governance that is appropriate to its conditions 2.2 Theoretical issues of the law on the governance of public companies 2.2.1 It is necessary to adjust the relationship of the governance of public companies by law The law on corporate governance protects the rights of shareholders, prevents the abuse of power of managers, business executives and majority shareholders themselves The law on corporate governance ensures and realizes the ownership rights and business freedom stipulated by the law The law on corporate governance aims to create a corporate governance environment corresponding to social values The law on corporate governance recognizes, protects and facilitates exercising the rights of investors The law on corporate governance is also a safe legal corridor for the activities of investors The law on corporate governance ensures the harmonization of interests of stakeholders 2.2.2 Legal regime for public company governance If we understand the concept of “corporate governance” in a narrow sense, the law on public company governance is a system of legal provisions 14 governing the relationship of internal management organization of the public company that just stipulated by the Corporate Law (the Law on Enterprises), the Law on Securities, regulations on listing and relevant documents In a broad sense, the law on public company governance is a system of provisions of the law governing social relations arising from the management and control of the company to achieve certain goals In addition, if we approach from perspective of accountability, besides the provisions of the law, the system of self-regulation or in other words “good practice rules” is also content to be reviewed The content of the law on public company governance includes: The role of BOM, General meeting of shareholders; Powers, responsibilities, obligations of managers; Shareholder rights, protecting shareholder rights; monitoring mechanisms for executive and managerial activities; Transparency, information disclosure; mechanism of power distribution in public companies - General law on corporate governance - Specialized law on public company governance - Internal documents of public companies 2.2.3 Structure of the law on corporate governance 2.2.3.1 Regulations on shareholders’ rights and protection of shareholders’ rights 2.2.3.1 Regulations on management system and power division in public companies 2.2.3.3 Regulations on the prevention of interest conflicts and monitoring potentially self-interested transactions and relevant interests 2.2.3.3 Regulations on transparency and information disclosure 2.2.3.4 Regulations on inspection, supervision and handling of violations of public company governance activities Conclusion of chapter - The concept of public company governance is inseparable from the concept of general corporate governance, which is a set of mechanisms related to corporate governance and control It sets out a way to divide rights and obligations among members of a company, including shareholders, the BOM, the Board of Directors, and relevant stakeholders However, with its “public” feature, the way of managing a public company needs to comply with and meet 15 more and higher requirements of the law on corporate governance than other types of companies - The law on public company governance includes: Regulations on Shareholders’ rights and protection of shareholders’ rights; Regulations on the management system and power division in public companies; Regulations on transparency and information disclosure; Regulations on the prevention of interest conflicts and monitoring of potentially self-interested transactions and relevant interests; Regulations on the inspection, supervision and handling of violations of public company governance activities Chapter THE REALITY OF THE LAW ON PUBLIC COMPANY GOVERNANCE IN VIETNAM 3.1 The reality of regulations of the law on public company governance 3.1.1 Regulations of the law on shareholder rights and protection of shareholder rights Regulations on shareholder rights stipulated in the 2014 Law on Enterprises are quite adequate and in line with international practices While implementing, however, there are still some problems: - The right to attend the meeting and vote at the General meeting of shareholders - The right to nominate people to the board of management - Mechanism and mode of exercising the right to transfer shares and nominate people to the BOM and the Supervisory Board - The right to request cancellation of resolutions of the General Meeting of Shareholders and the BOM - The right to sue of shareholders - The right related to stock or share transfer 3.1.2 The provisions of the law on the management apparatus and division of power in public companies 3.1.2.1 General Meeting of Shareholders 3.1.2.2 BOM and members of BOM 3.1.2.3 Director/Director General 3.1.2.4 Supervisory Board and its members 3.1.2.5 Secretary of the company 16 The internal governance structure of the public company is stipulated in the 2014 Law on Enterprises, which continues to inherit the provisions of the 2005 Law on Enterprises but there are amendments and supplements of new regulations that are more appropriate with international practices and new situation to replace the old regulations While implementing, however, there are some problems in the provisions of the law Namely, regulations on meetings, approval of decisions of the General Meeting of Shareholders; Regulations on the structure and authority of the BOM; elect and dismiss members of the BOM; Regulations on structure, authority of the Supervisory Board, elect and dismiss members of the Supervisory Board 3.1.3 The provisions of the law on prevention of interest conflicts and monitoring potentially self-interested transactions and relevant interests The law has the detailed and specific provisions for shareholders of the company and the regime and modes of controlling the company’s transactions with shareholders in accordance with the corporate governance principles of the OECD However, there are still some inadequacies in the provisions of the law on prevention of interest conflicts and monitoring potentially selfinterested transactions and relevant interests as follows: - Information disclosure of major shareholders - The content of “related person” is not complete 3.1.4 The provisions of the law on transparency and information disclosure Some inadequacies related to the regulations on public company’s information disclosure - Form and language of information disclosure - Time for information disclosure - The target group must disclose information is incomplete - Some regulations on information disclosure of public companies are unclear, it is difficult to determine the time of information disclosure 3.1.5 Inspection, supervision and handling violations of public company governance Supervision activities of public companies are built by the two-level supervision model: (1) The first level: Supervision through intermediary organizations such as: Stock Exchange, Stock Exchange Center, Securities Depository Center (2) Second level: State Securities Commission 17 Securities market inspection activities are conducted on the basis of the provisions of the law in documents such the 2010 Law on Inspection and the Law on Securities The executing agency is the Securities Inspection Handling violations: Public companies, the relevant organizations and individuals who violate or not comply with the provisions of the law on corporate governance, depending on nature and seriousness of their violations, they will be administratively sanctioned or examined for penal liability under the provisions of the law 3.1.6 Evaluating provisions of Vietnamese law on public company governance 3.1.6.1 Advantages First, Vietnam has built up a relatively complete system of legal documents to serve as a basis for enforcing public company governance Second, the content of regulations on public company governance is issued and built based on practical legal conditions, the situation of enterprises and referring international experiences Third, enhancing the openness and transparency of organizations and individuals participating in the stock market, protecting interests of investors 3.6.1.2 Limitations First, some provisions of the law on public company governance are overlapping and not uniform Second, some provisions of the Law on Enterprises are not really consistent with reality and international practices Third, limitations of the provisions of the law on securities when applying for public companies 3.2 The reality of law enforcement on public company governance 3.2.1 Overview of the reality of law enforcement on public company governance in Vietnam Based on the results of assessing the situation of corporate governance of public companies over the years in the corporate governance scorecard Report, it can be seen that Vietnam has continuously made efforts in creating a legal framework for corporate governance, the efforts of public companies to improve the implementation of legal regulations on corporate governance However, it can be seen that Vietnamese businesses are unfamiliar with progressive governance practices In addition to efforts to promote compliance 18 and meet basic governance requirements, the dissemination and support to implement such practices are necessary 3.2.2 The reality of law enforcement on public company governancet in each field - On the rights of shareholders - The issue of treatment among shareholders - Responsibilities of the BOM - On information disclosure and transparency - On controlling company’s transactions with relevant parties 3.2.3 Assessing the reality of law enforcement on public company governance 3.3.2.1 Advantages - Most of public companies have been aware of responsibilities and the need of corporate governance and have made certain efforts in set up internal documents to make regulations on internal governance - The application of principles and regulations on corporate governance has significantly improved the operations of public companies by increasing openness and transparence, the rights and interests of shareholders are well protected, the functions, duties, powers and responsibilities of administration agencies and executive board in the company are more clearly defined - Regarding supervision and enforcement: The State Securities Commission, the State Bank and the Ministry of Finance all have a relatively clear jurisdiction - Enhancing the publicity and transparency of organizations and individuals participating in market activities, especially public companies 3.3.2.2 Limitations - Actually, the law enforcement on corporate governance of public companies is largely arbitrary, not really protecting the legitimate rights and interests of shareholders - Activities of the BOM are not really effective - Activities of the Supervisory Board are formal - Transparency and information disclosure have not been fully implemented and there are many violations in this area - Actually, shareholders’ rights have not been guaranteed yet 19 - The way to control the company’s transactions with relevant parties is still very limited - The authority of the State Securities Commission in inspecting, examining and verifying violations of securities activities and the securities market is incomplete, and the authority of the State Securities Commission is not associated with regulations on the authority of relevant agencies, this leads to unsuccessful implementation of functions of managing, supervising and enforcing securities and stock market Conclusion of chapter Vietnam has had a relatively comprehensive system of legal documents as a basis for the implementation of corporate governance of public companies The 2014 Law on Enterprises is a law of establishing legal framework that contains basic regulations on corporate governance for types of businesses of Vietnam Meanwhile, the Law on Securities provides basic principles of corporate governance, thereby, management agencies issue detailed documents and guidelines on governance so as to apply for public companies Regulations on public company governance in our country have been increasingly closing to good practices of corporate governance in the world However, the provisions of the law on public corporate governance still has many inadequacies related to the governance structure and model; functions, duties and authority of the General Meeting of Shareholders, the BOM and the Supervisory Board; mechanisms to protect rights and interests of shareholders; mechanism to control and prevent interest conflicts; issues of transparency and information disclosure in corporate governance Some provisions of the guiding documents are not consistent with other legal documents This has caused confusion of authorities and public companies themselves Chapter DIRECTIONS AND SOLUTIONS TO IMPROVE THE LAW ON PUBLIC COMPANY GOVERNANCE IN VIETNAM 4.1 Directions to improve the law on public company governance 4.1.1 The need to improve the law on public company governance Over the years, the legal framework for corporate governance in Vietnam has been relatively fully developed, in accordance with common principles and practices Actually, however, specific governance framework of public companies is largely arbitrary, not really protecting the lawful rights and 20 interests of shareholders Namely: (1) Ensuring the rights of shareholders in general and minority shareholders in particular is still ineffective; (2) There has not been a strict compliance with the publicization; (3) Not controlling the company’s transactions with relevant parties; (4) Internal control is formal and ineffective; (4) The role and position of the BOM are not appreciated Due to this reason, it is necessary to further improve the provisions of the law on public companies 4.1.2 Viewpoints of improving the law on public company governance - Improving the content of institutions on public company governance must be based on the characteristics of Vietnam’s market economy - The law on public company governance must be consistent with the characteristics of Vietnamese business culture - Ensuring the consistency of the law on public company governance - The law on public company governance must meet the requirements of international economic integration 4.2 Solutions to improve the provisions of the law on public company governance 4.2.1 Solutions of ensuring the uniformity of the provisions of the law on public company governance 4.2.2 Solutions to improve the provisions of the law on shareholders’ rights and protection of shareholders’ rights 4.2.3 Solutions to improve the provisions of the law on the management apparatus and division of power in public companies 4.2.3.1 Improving regulations on the General Meeting of Shareholders 4.2.3.2 Improving regulations on the BOM 4.2.3.4 Improving regulations on the Supervisory Board 4.2.4 Solutions to improve the provisions of the law on transparency and information disclosure 4.2.5 Solutions to improve the provisions of the law on prevention of interest conflicts and monitoring potentially self-interested transactions and relevant interests 4.2.6 Solutions to improve the provisions of the law on inspection, supervision and handling violations of public company governance activities 4.3 Solutions to support and improve the efficiency of law enforcement on public company governance 21 4.3.1 For state management agencies 4.3.2 For Stock Exchanges 4.3.3 For organizations related to corporate governance 4.3.4 For public companies Conclusion of chapter Enhancing corporate governance means contributing to the stable and sustainable development to improve company’s operation and accessibility to external capital In contrast, a weak framework of corporate governance will reduce investors’ trust and not receive external capitals, reduce the company’s economic values and may lead to bankruptcy or merger of corporation which increase the risks to the national economic system Thus, improving and strengthening a system of law on public company governance play an extremely important role Corporate governance well will minimize the vulnerability of the economy before financial crisis, serving public policy planning of the Party and the State as well as solutions to improve the legal framework for corporate governance; Strengthening the role and capacity of management agencies and support public companies; Enhancing the position of the BOM in accordance with the legal status and its practical significance in corporate governance; Strengthening and improving the system of inspection, control and the independence, professionalism and effectiveness of the Supervisory Board; Improving transparency and publicization; Ensuring equal treatment and the rights of shareholders, this probably contributes to improving the quality and efficiency of corporate governance in our country 22 CONCLUSIONS After examining the law on the governance of public companies in Vietnam, the study draws the following conclusions: Corporate governance in general and public company governance in particular, are a key element to promote the efficiency of market, economic development and investors’ trust Corporate governance involves a set of relationships among the Board of Directors, the BOM, shareholders and other relevant stakeholders Corporate governance also establishes the structure so as to build the company’s goals, determine means to achieve such goals, and monitoring the implementation of these goals The legal institutions on the governance of public companies have a very important position in regulating economic relations, it is considered a tool to support and protect the interests of investors and society; provide tools of managing platform to improve the company’s performance and creating leverage to stimulate the use of resources effectively for development goals In a narrow sense, the law on corporate governance helps to solve the internal conflicts of company itself that is interest conflicts between the company owner and manager, between shareholders with large capitals and others with little capital, between owner and other relevant persons The legal regime on the governance of public companies is an important issue and great economic and social significance To implement effectively regulations in this area contributes to improving public corporate governance, this means contributing to the stable and sustainable development so as to improve the company’s performance and accessibility to external capitals In contrast, a weak framework of corporate governance will reduce investors’ trust and not receive external capitals, reduce the company’s economic values and may lead to bankruptcy or merger of corporation which increase the risks to the national economic system Therefore, building a safe legal corridor for corporate governance is a necessary and urgent requirement Currently, the legal regulations on public company governance in our country have been gradually improved and closer to good practices of corporate governance in the world, especially when comparing with OECD’s principles of corporate governance on the rights of shareholders, equality among shareholders, transparence and information disclose and controlling transactions at risk of conflicts of interest, and the role of stakeholders 23 However, there are still some restrictions around this institution: examples include, there is no unification among the relevant legal documents; a number of the provisions of the law have not been clearly explained, lacking many regulations related to the protection of shareholders’ rights, responsibilities of the BOM, the Supervisory Board; mechanisms of transparence and information disclosure are unclear and there is still limitation in controlling transactions with relevant parties This leads to, in fact, the implementation of the current legal framework for public corporate governance in our country is largely arbitrary, not really protecting the legitimate rights and interests of shareholders, a series of inadequacies related to the organizational structure, the roles and responsibilities of the BOM, Director, General Director, control Board; ensuring shareholders’ rights and interests, publicize information and relevant benefits, supervision-oriented mechanisms; regulations on accounting and auditing, all affect the performance of many public companies Therefore, examining data and improving regulations related to public company governance are one of the necessary requirements to further improve the legal framework for corporate governance in general and the governance of public companies in particular in our country today By examining theoretical and practical issues showed that, it is necessary to improve the law on the governance of public companies and need to stemming from specific directions such as characteristics of Vietnam’s market economy; the law on public company governance must be consistent with the characteristics of Vietnamese business culture; ensuring the consistency of the law on public corporate governance; meeting the requirements of international economic integration; the completion of the law on public corporate governance should be put in the overall solution to improve the economic law From these fundamental viewpoints, the dissertation has proposed some additional solutions to improve the law on public corporate governance, in which, it mainly focuses on the provisions of the Law on Enterprises, the Law on Securities and relevant guiding documents 24 THE AUTHOR’S PUBLISHED RESEARCH WORKS Tran Luong Duc (2018) “New points of the 2014 Law on Enterprises in protecting minority shareholders”, Journal of Industry and Trade, No 7, June 2018 Tran Luong Duc (2018) “Some legal issues on information disclosure in the stock market” Journal of Industry and Trade, No 8, July 2018 25 ... utilizes some typical theoretical bases as follows: - Agency theory - Stewardship theory - Stakeholder theory 10 In addition, the study also utilizes theory of market economy; theory of legal... necessity and objectivity of improving the law on public company governance, and proposing recommendations and solutions to improve the efficiency of public company governance under the Vietnamese... for improving the law of Vietnam on public corporate governance and propose some suggestions and solutions to improve the Vietnamese law on public company governance Theoretical and practical significance