Corporate governance in public corporates listed in Hanoi stock exchanges

effectively for the sake of rights of shareholders and persons related to corporate” [30]. 2.1.1.2. Fundamental theories of corporate governance  Theory about representative  Theory about cost of transaction  Theory about parties with related rights  The principles of Corporate governance of OECD [76] 7 Corporate governance principles of OECD was approved in 1999, completed in 2004 and updated in 2015 with putting the importance of morality in process of corporate governance (with 6 principle groups).  Corporate governance principle of CACG [52] In 1999, CACG (Commonwealth Association for Corporate Governance) issued a set of corporate governance for some developed countries (including 15 principles). 2.1.2. Overview about Public corporate and Governance of Public corporate. 2.1.2.1. Concept of Public corporate In Vietnam, according to Security Law 2006, term “Public corporate” is a joint stock company belonging to three below types:  Corporate has offered Public ally shares  Listed joint stock company in Stock exchange  Corporate with shares are owned by at least 100 investors. 2.1.2.2. Public corporate governance lists in stock exchange An overview, in this research: “Public corporate governance listed in stock exchange is system of activities which control and supervise Public corporate; in which, structure of Public corporate governance is a way of distributing right and responsibility of different parts in related to Public corporate as Board of Management, Board of Director, shareholders, and other related components”. 2.1.2.3. Models of Public corporate governance in the world and in Vietnam - Anglo-Saxon Model - Model in German - Model in Japan - Model in Latin - Model in Vietnam In Vietnam, Organization structure of Public corporate according to Vietnam Enterprise law 2005 with General meeting, Board of Management, Board of Control, Board of Director are divided the right and obligation to make sure implementation of an effective governance structure and ít is a complex model, mixed between two single and double grades. In which, right of shareholders in Public corporate regulated in two major documents is Enterprise Law 2005 and does not change at Enterprise Law 2014 [15] and Ciricular 121/2012/TT-BTC [37]. 2.2. Principles of Corporate governance according to Model of corporate governance scorecard. Corporate governance principle set was approved the first in 1999 and completed in 2004 and updated in 2015 and become international standard for policy makers, corporates, investors and other related right parties in the world by OECD Minister Council. Currently, Corporate governance principle of 8 OECD has been used as an important basis for building Model of corporate governance scorecard with below specific contents: 2.2.1. Protecting shareholder’s right - Shareholders have right to assure for frame of corporate governance to be carried out effectively. - Shareholders have right to be known, participated directly in information, decision related to basic change of corporate. - Right of voting at General meeting. - Right of ownership and transfering shares. - Minority shareholders are protected away from abuse. - Controlling transaction market of corporation acquisition. 2.2.2. Assuring equal behavior between shareholder group - All shareholders must be equally behaved. - Controlling and preventing internal spy transaction or private benefit. - Publishing benefit and transaction of senior officers. - Security market needs to provide transaction with fair price and effectiveness. 2.2.3. Assuring right of related parties about Corpoarte governance - Right of related officers according to regulations of law or bilateral agreement. - Right of sueing and claiming when their benefit is violated. - Regime for labor to be participated in activity of corporation. - Related officers are supplied with full and correct information about corporate governance. - Related officers have right to be transmissed information about relationship, illegal transaction as well as illegal behavior or immorality that make influence directly their rights. - Clear regulation about bankrupt as well as right of creditors. 2.2.4. Assuring the transparence and publishing information - About publishing information with unlimiting important information. - Applying high quality standard in publishing information. - Annual audit must be carried out by an independent and professional audit unit. - Creating condition of approaching equal information, in time and effective for user. 2.2.5. Assuring responsibility of Management Board - Board of Management must be supplied with full information. - Board of Management must be equally behaved to shareholders. - Board of Management must always take a concern to benefit of shareholders. 9 - Board of Management is capacible of giving out independent and objective decision. - Members of Management Board have right to approach correct, suitable and in time information. 2.3. Experience about good governance in the world. 2.3.1. Model, good factual experience about Public corporate governance according to Model of corporate governance scorecard 2.3.1.1. Experience of China 2.3.1.2. Experience of Thailand 2.3.1.3. Experience of Australia 2.3.1.4. Experience of South Africa 2.3.1.5. Experience of Saudi Arabia 2.3.1.6. Experience of Czech Republic 2.3.2. Lessons from Public corporate governance in Vietnam  Assuring basis for an effective corporate governance frame  Shareholder’s right and basic ownership functions.  Equal behavior to shareholders  Role of parties with related right in Corpoarte governance  Publishing information and transparence  Responsibility of Management Board Chapter 3 THE REALITY OF CORPORATE GOVERNANCE IN PUBLIC CORPORATES LISTED IN HANOI STOCK EXCHANGE 3.1. Overview about Stock market and Public corporates listed in Vietnam stock market in general and Hanoi Stock exchange in particular. 3.1.1. Overview on Vietnam Stock market and Public Corporate listed in Vietnam Stock Market. On 11/07/1998, Vietnam Stock market was born throughout issuing Decree No. 48/CP on security and stock market by the Government. Next, at the same day, the Government decided to establish Securities Trading Centre in two big cities: Hochiminh city and Hanoi city (see at appendix 30. 3.1.2. Legal frame for implementing Public corporate governance in Vietnam - Sample article applies for listed corporates according to Decision No.: 07/2002/QĐ-VPCP, dated 19/11/2002 [29]. - Securities law in 2006 [13], Amendment law, supplementing for Security Law in 2010 [12]. - Decision No.: 12/2007/QĐ-BTC, dated 13/3/2007 about issuing statute of corporate governance applying for listed corporates [30]. - Decision No.: 15/2007/QĐ-BTC, dated 19/3/2007 about new article applying for listed corporate [31]. 10 - Ciricular No.: 121/2012/TT-BTC dated 26/7/2012 instructing about corporate governance to Public corporates [37]. - Decree No.: 71/2017/NĐ-CP, dated 06/06/2017 regulating, instructing matters related to Public corporates [19]. 3.1.3. Introducing about Hanoi stock exchange and Public corporates listed in Hanoi stock exchange  Overview of Hanoi stock exchange Hanoi Stock Exchange is established according to Decision No.: 01/2009/QĐ-TTg by Primer Minister on the basis of transfering and re –organizing Hanoi Stock Exchange Centre (Established according to Decision No.: 127/1998/QĐ-TTg and opened on 08/03/2005). (see appendix 4).  Public Corporates listed in Hanoi Stock Exchange Until 31/12/2017, there are 384 Public Corporates listed in Hanoi Stock Exchange and there are some characters, especial as: Currently, Major Public Corporates have operated for 10 years to 20 years (37.17%) and 20 years to under 30 years (26.64%). Quantity of Public corporates have operated for over 50 years accounting for small rate, only 9.54%. Quantity of stocks of Public corporates listed in Hanoi Stock Exchange almost is under 10 million stocks (accounting for 53,62%). In 2017, transaction of group with 10 stocks of Public Corporates with the largest capitalized value in Hanoi Stock Exchange reaching over 4.694 million stocks, transaction value equal to 74.933 billion dongs (accounting for 55,22% transaction value in the market). 3.1.4. Researching typical reality of corporate governance in some typical corporates listed in Hanoi Stock Exchange 3.1.4.1. Hanoi Beer Trading Joint Stock Company 3.1.4.2. Tran Anh Digital World Joint Stock Company 3.2. The reality of applying Regulations of Corporate Governance in Public Corporates listed in Hanoi Stock Exchange: Evaluating according to Model of Corporate Governance scorecard 3.2.1. The reality of applying Regulations of Corporate Governance in Public Corporates listed in Hanoi Stock Exchange 3.2.1.1. Protecting shareholder’s right Table 3.4: Evaluating about right of implementing shareholder’s right in Public Corporations listed in Hanoi Stock Exchange Target (Question) Average value (score) Standa rd deviati on 9. Corporate pays dividend equally and in time 2,824 0,971 10 Shareholders are participated in decisions related to important changes of corporates. 2,849 0,976 11 14. Shareholders are participated effectively and voted in General Meeting, and notified about regulation of General Meeting, including procedure of vote. 2,447 0,991 30. Corporate is allowed to operate effectively and transparently in transaction market of acquisition. 2,887 0,900 32. Every shareholder, including investors who have right to carry out their ownership’s right. 3,082 0,849 Source: Investigated survey result 3.2.1.2. Assuring equal behavior between shareholder groups Table 3.5: Evaluating about equal behavior between shareholder groups in Public corporates listed in Hanoi Stock Exchange Targets (Question) Average value (score) Standard deviation 34. Corporate assures the right of voting according to stock. 2,660 1,124 37. Notifying General Meeting transparently, clearly, fully necessary information and to all shareholders in corporate. 2,792 0,988 43. Internal spy transaction and prohibiting from making use of personal interest 3,088 0,845 46. Transaction with related parties of members of Management Board and senior officers is published clearly about benefit and activity. 2,623 0,972 47. Minority Shareholders are well protected in front of abuse. 2,346 1,055 Source: Investigated survey result 3.2.1.3 Assuring right of related parties about Corporate governance Table 3.6: Evaluating about Assuring right of related parties about corporate governance Targets (Question) Average value (score) Standard deviation 54. Right of parties with related right which is regulated by law or according to bilateral agreement must be respected. 3,321 1,219 62. When benefit of parties with related right is protected by law, parties with related right must have chance to be claimed effectively when their right is violated. 2,862 1,389 64. Regimes of enhancing effectiveness of labor need to be built. 3,774 1,152 68. Parties with related right, including labor and their representative must be freely transmissed their worry 2,799 1,287 12 about illegal works or impropriate morality to Board of Management and this is not affected to their right. Source: Investigated survey result 3.2.1.4. Assuring the transparence and publishing information Table 3.7: Evaluating about publishing information and transparence of Public corporates listed in Hanoi Stock Exchange Targets (Question) Average value (score) Standard deviation 71. Ownership structure of transparent Corporate. 3,799 1,072 77. Quaity of annual report of Corporate. 3,698 1,060 87. Corporate publishes the transparence of Transactions of related parties. 2,925 1,194 90. Member/commissioner Management Board make stock transaction clearly and transparently. 3,660 1,163 92. Corporate audits indepently and audit report 3,258 1,176 95. Corporate uses means of media appropriately and effectively. 3,258 1,176 100. Corporate assures paying/publishing annual report /financial statement in time. 3,403 1,238 104. Corporate has electronic page to publish updated information fully. 3,440 1,172 111. Corporate carries out well relationship of investors. 3,258 1,170 Source: Investigated survey result 3.2.1.5. Assuring responsibility of Management Board  Role and responsibility of members of Management Board Table 3.8: Evaluating about role, responsibility and structure of Management Board of Public Corporate in Hanoi Stock Exchange. Targets (Question) Average value (score) Standa rd deviati on Evaluating role and responsibility of members of Management Board 113. Responsibility of Management Board is determined clearly 2,918 1,000 114. Regulations of Corporate Governance must be determined clearly. 3,321 1,284 118. View/mission of corporate must be determined clearly with consideration and update. 3,805 1,034 Evaluating structure of Management Board 122. Components and structure of Management Board appropriately 1,874 1,048 123. Structure of human resource between appropriate 2,346 0,994 13 departments. 124. Wage structure of departments, members of Management Board appropriately. 1,962 0,899 Source: Investigated survey result  Procedure of Management Board Table 3.9: Evaluating about procedure of Management Board in Public Corporates listed in Hanoi Stock Exchange Targets (Question) Average value (score) Standard deviation 149. Evaluating procedure of meeting and participation of Management Board Meeting. 2,906 1,184 155. Evaluating procedure and process of approaching information. 2,415 1,182 159. Assessing process of appointment and re – election. 2,025 1,142 163. Assessing process of building and approving benefit matters. 2,403 1,170 168. Assessing quality of internal audit 3,132 0,988 172. Assessing quality of riskful supervision process. Specifically: 3,623 1,029 Source: Investigated survey result  Human in Management Board Table 3.10: Assessing human of Management Board in Public Corporates listed in Hanoi Stock Exchange Targets (Question) Average value (score) Standa rd deviati on Human in Management Board 177. Quantity of suitable Management Board human 2,912 0,837 178. Qualification and capacity of Management Board human 3,164 0,980 179. Experience in business and production of Managemetn Board human. 3,132 0,935 Developing members of Management Board and appointing Board of Executive 186. Corporate has program of orienting for new members of Management Board 2,692 1,043 187. Does corporate have policy to encourage Management Board members participating in constant training programs or professional training? 2,403 0,812 188. Corporate publishes the way that Management Board builds plan of human for General Director/CEO/ Key manager. 1,969 0,853 Assessing Management Board, Management Board members and other subdepartments 14 189. Management Board assesses annual effectiveness to General Director/ CEO/ Key manager. 2,497 0,954 190. Corporate assesses annual capacity to Management Board and publishes process of assessment as well as targets using in assessment. 2,082 0,934 191. Corporate assesses annual capacity to each member of Management Board and publishes process of assessment as well as targets using in assessment. 2,063 0,912 192. Corporate assesses annual capacity to sub- departments of Management Board and publishes process of assessment as well as targets using in assessment. 2,377 0,953 Source: Investigated survey result 3.2.2. Result of researching quantitative 3.2.2.1. Testing measure scale of variation Table 3.11: Coeficience of Cronbach’s Alpha of independent variation and dependent variation Observation variation Average of measure scale if removed variation Variance of measure scale if removed variation Correlation of general variation Alpha If removed variation 1.Rights of shareholders: KMO = 0,773; Cronbach's Alpha = 0,876 Q9 11,26 9,575 0,704 0,851 Q10 11,24 9,398 0,736 0,843 Q14 11,64 9,409 0,717 0,848 Q30 11,20 9,681 0,761 0,838 Q32 11,01 10,601 0,620 0,869 2. Đối xử Bình đẳng giữa các nhóm Cổ đông: KMO = 0,759; Cronbach's Alpha = 0,910 Q34 10,85 11,078 0,813 0,882 Q37 10,72 11,888 0,817 0,881 Q43 10,42 12,739 0,825 0,883 Q46 10,89 12,620 0,704 0,904 Q51 11,16 11,973 0,731 0,899 3. Role of parties with related right: KMO = 0,732; Cronbach's Alpha = 0,915 Q54 9,43 11,766 0,857 0,874 Q62 9,89 10,881 0,830 0,884 Q64 8,98 12,588 0,795 0,896 Q68 9,96 11,992 0,759 0,907 4. Publishing information and transparence: KMO = 0,782; Cronbach's Alpha = 0,969 Q71 26,90 72,142 0,767 0,970 Q77 27,00 70,443 0,882 0,965 15 Q87 27,77 68,543 0,875 0,965 Q90 27,04 69,239 0,861 0,966 Q92 27,44 67,906 0,928 0,963 Q95 27,44 67,906 0,928 0,963 Q100 27,30 68,729 0,828 0,967 Q104 27,26 69,851 0,818 0,968 Q111 27,44 68,172 0,917 0,963 5. Role and responsibility of Management Board: KMO = 0,755; Cronbach's Alpha = 0,926 Q113 5,94 4,813 0,831 0,906 Q114 6,02 5,550 0,858 0,899 Q118 5,91 4,283 0,884 0,868 6. Structure of Management Board: KMO = 0,734; Cronbach's Alpha = 0,923 Q122 4,31 3,354 0,799 0,929 Q123 3,84 3,416 0,848 0,884 Q124 4,22 3,641 0,894 0,855 7. Process of Management Board: KMO = 0,867; Cronbach's Alpha = 0,965 Q149 13,60 25,875 0,920 0,955 Q155 14,09 26,435 0,867 0,961 Q159 14,48 26,859 0,862 0,961 Q163 14,10 25,559 0,967 0,950 Q168 13,37 27,868 0,913 0,957 8. Human of Management Board: KMO = 0,702; Cronbach's Alpha = 0,812 Q177 6,30 2,994 0,634 0,774 Q178 6,04 2,397 0,717 0,685 Q179 6,08 2,678 0,647 0,759 9. Developing members of Management Board and appointing Board of Executive: KMO = 0,725; Cronbach's Alpha = 0,913 Q186 4,37 2,425 0,866 0,856 Q187 4,66 3,390 0,761 0,929 Q188 5,09 2,985 0,887 0,829 10. Assessing Management Board, members of Management Board and Sub – departments: KMO = 0,708; Cronbach's Alpha = 0,764 Q189 6,52 5,517 0,406 0,790 Q190 6,94 4,983 0,573 0,703 Q191 6,96 4,840 0,642 0,666 Q192 6,64 4,674 0,647 0,661 Source: Processing investigation data by SPSS 22 3.2.2.2. Analyzing result of regression Table 3.12: Result of regression analysis 16 Independent variation Unstandardized Coefficients Standardized Coefficients t Sig. Collinearity Statistics B Std. Error Beta Tolerance VIF (Constant) 0,000 0,035 0,000 1,000 Right of shareholders 0,207 0,049 0,207 4,193 0,000 0,510 1,961 Equal behavior to shareholders 0,232 0,044 0,232 5,241 0,000 0,632 1,582 Role of parties with related right 0,288 0,047 0,288 6,171 0,000 0,568 1,760 Publishing information and making transparence. 0,289 0,051 0,289 5,712 0,000 0,485 2,062 Role and responsibility of Managemetn Board members 0,157 0,047 0,157 3,356 0,001 0,566 1,766 Structure of Management Board 0,044 0,037 0,044 1,197 0,233 0,902 1,109 Process of Management Board 0,007 0,039 0,007 0,192 0,848 0,834 1,199 Human of Management Board 0,061 0,037 0,061 1,649 0,101 0,909 1,100 Developing Management Board and Executive Board 0,008 0,036 0,008 0,219 0,827 0,942 1,061 Assessing Management Board and sub – departments -0,007 0,038 - 0,007 - 0,198 0,843 0,878 1,139 R = 0,904; R 2 = 0,817; Giá trị F = 65,966***, Sig (F) = 0,000 * level of statistic meaning p < 0,05 ** level of statistic meaning p < 0,01 *** level of statistic meaning p < 0,001 17 3.3. General assessment on the reality of Corporate Governance in Public Corporates listed in Hanoi Stock Exchange 3.3.1. Achievement sides - More pay attention to protect right of shareholders, supply information for shareholders in front of General Meeting with full and more detail. - Paying dividend must be carried out in time and equally between shareholders. - Taking more concern to policy of protecting customer’s right. - Strengthening more measures to prevent and solving abuse of purchasing for the sake of individual. - Publishing regulation of operation/structure of governance/article of Corporate to assure the transparence. 3.3.2. Limited sides - Right of shareholders participating in contents of programe is limited. - Notification about General Meeting is not fully supplied. - Right of customer is still effected. - Quality of publishing information of Public Corporates is not good. - Role and responsibility of Management Board members are not determined clearly. 3.3.3. Causes - Paying more attention to production and business without taking concern to activities related to shareholders about matters of protecting right of shareholders. - It major stays at medium and small, limited financial capacity so establishment of sub – departments is quite difficult. - Awareness of some people, customers are limited so they are themselves taken advantage of. - There is not any set of official target to measure and assess transparent level and publish information of Public corporations listed. - Regulations of law is lack of stability and identity. Chapter 4 PROPOSING POLICIES AND SOLUTIONS TO IMPROVE QUALITY OF CORPORATE GOVERNANCE IN PUBLIC CORPORATES LISTED IN HANOI STOCK EXCHANGE 4.1. Analysing circumstance and predicting Corporate Governance operation of Public corporate listed in Vietnam stock exchange in the circumstance of international integration. In the circumstance of global integration, corporate governance has developed via regime of transmiting from this country to others. It is necessary to understand the importance of this, the Government has been issuing legal frame with the role of building regulations of corporation governance and role 18 of corporation governance education. In 2005, National Assembly approved Enterprise law and Investment law, and then ít was Security Law in 2006 and amended in 2010. Besides, legal frame is specified in Decree, Ciricular and documents instructing to make detail contents in law. Thanks to changes close follow the reality of Vietnam Public corporates and leapfrog trend of global integration, situation of corporation governance of Public corporates in Vietnam has good development steps. In the next time, predicting about corporate governance activity of Public corporates listed in Vietnam Stock Exchange shall have much fluctuation to meet the demand of development and international integration. 4.2. Point of view and orientation for improving quality of corporation governance of Public corporations in Vietnam in the circumstance of international integration. 4.2.1. Point of view about improving quality of corporate governance of Vietnam Public corporations in the circumstance of international integration. The Government needs to do research and put out targets and ways of doing fiercely and appropriately. Point of view of improving quality of corporate governance must reflects specific conditions and meets requirement of intrinsic requirement of Vietnam market economy, the other side, it is necessary to receive progressive value and ít is suitable with routine and international custom. 4.2.2. Orientation of improving quality of corporate governance of Vietnam Public corporates in the circumstance of international integration.  About protecting shareholder’s right  About Assuring equal behavior between shareholder teams  About Assuring right of related parties about corporate governance  About Assuring transparence and publishing information  About Assuring responsibility of Management Board 4.3. Proposing solutions to Public corporates listed in Hanoi stock exchange in improving quality of corporate governance 4.3.1. Solutions about protecting shareholder’s right - Paying dividend equally and fairly for shareholders - Improving right of shareholders participating in decisions related to important changes of Public corporates - Implementing thoroughly right of voting of shareholders as well as regulations about General Meeting. - Assuring activities effectively and transparently in acquisition transaction market. 4.3.2. Solutions