Tiểu luận Analyze and evaluate the quality of FPT's corporate governance | Môn kinh tế vĩ mô ( chất lượng cao)

lOMoAR cPSD| 47206071 lOMoAR cPSD| 47206071 Table of Contents
I. INTRODUCTION ....................................................................................................... 1
OVERALL ABOUT FPT .......................................................................................... 3
II. CORPORATE GOVERNANCE ANALYSIS2.1. Analysis of factors that shape
the quality of governance system in Vietnam ............................................................. 5
2.1.1. Efficiency of local capital markets...............................................................3 ... 5
2.1.2. Extent to which the legal system provides protection to all shareholders ..... 5
2.1.3. Enforcement of regulations ............................................................................ 6
2.1.4. Societal and cultural values ............................................................................ 7
2.2. Board of Directors: Duties and Liabilities ........................................................ 8
2.2.1. The operations of the Board ........................................................................... 8
2.2.2. Board committees ........................................................................................... 9
2.3. Board of Directors: Structure and Consequences ......................................... 11
2.3.1. Market for directors ...................................................................................... 11
2.3.2. Director compensation.................................................................................. 11
2.4. Board of Directors: Structure and Consequences ......................................... 12
2.4.1. Board Independence ..................................................................................... 12
2.4.2. The size and structure of a board of directors .............................................. 20 2.4.3.
Consequences.............................................................................................34 ........ 27
III. EXECUTIVE COMPENSATION AND OWNERSHIP STRUCTURES ............ 29
3.1. Analysis of the firm’s Executive compensation .............................................. 29
3.2. Analysis of the firm’s Executive Equity Ownership ...................................... 31
3.3. Analysis of the firm’s ownership structures ................................................... 33
3.3.1. Foreign ownership ........................................................................................ 33
3.3.2. Institutional ownership ................................................................................. 33
3.3.3. State ownership ............................................................................................ 34
3.3.4. Executive Equity Ownership......................................................................44
3.3.5. Small/large investor....................................................................................45
IV. CONCLUSION AND RECOMMENDATIONS.................................................46
4.1. CONCLUSION...............................................................................................46
4.2. RECOMMENDATION..................................................................................47
REFERENCE LIST..................................................................................................50 I. INTRODUCTION
In both the technology and retail sectors, effective corporate governance is essential due
to the unique challenges these industries face, such as rapid technological
advancements, fierce global competition, and the increasing importance of protecting
sensitive customer data. Companies in these sectors must not only comply with
regulations but also adopt ethical business practices that foster trust among customers,
investors, and other stakeholders. Robust governance frameworks enable companies to
manage risks, make well-informed decisions, and build and maintain strong lOMoAR cPSD| 47206071
reputations—factors that are especially critical in industries that thrive on innovation and consumer confidence.
FPT Corporation, one of Vietnam’s leading technology and telecommunications firms,
plays a pivotal role in the country's tech landscape. With a wide-ranging portfolio that
includes software development, IT services, and digital transformation, FPT's corporate
governance practices are vital to its market performance and credibility. Effective
governance at FPT ensures that the company maintains a balance between pursuing
growth and ensuring accountability. This balance is crucial in aligning the interests of
management and shareholders while also ensuring that the company operates within
ethical and regulatory boundaries.
This essay will critically examine the corporate governance framework of FPT
Corporation, with a particular focus on key governance elements such as the structure
and responsibilities of the board of directors, executive compensation practices, and
mechanisms for protecting shareholder interests. In addition, it will delve into the
ethical aspects of FPT’s operations, highlighting the importance of transparency and
accountability in corporate decision-making. By evaluating these factors, the essay will
assess the overall effectiveness of FPT’s governance practices and propose
recommendations for enhancing oversight and raising ethical standards within the company. 2 lOMoAR cPSD| 47206071 OVERALL ABOUT FPT
Founded in 1988, FPT Corporation stands as one of Vietnam’s most prominent
technology and telecommunications firms. Initially established as The Food Processing
Technology Company, FPT shifted its focus to information technology (IT) in the 1990s
as Vietnam’s tech sector began to evolve. Over time, the company has grown into a
leader in Vietnam’s digital transformation, offering services across various industries
including software development, telecommunications, and information technology
services. FPT has played a crucial role in advancing Vietnam’s position in the global
tech landscape through its commitment to innovation and its expansive portfolio, which
now includes educational services, software outsourcing, and telecommunications.
Obviously, the company’s ability to adapt to changing market conditions and its
strategic pivot towards IT in its early years have been key factors in its enduring success.
Today, FPT operates on a global scale with a presence in over 30 countries. Its extensive
operations span across sectors such as telecommunications, IT infrastructure, and digital
services with the company playing a pivotal role in advancing Vietnam’s position in the
international tech ecosystem. In addition to its core IT services, FPT manages a variety
of subsidiaries, including FPT Shop, a leading tech retail chain, and several educational
and financial service ventures. The company’s diversified operations not only contribute
to its overall revenue growth but also solidify its status as a key player in multiple
industries. With a focus on digital transformation and innovation, FPT continues to
expand its global footprint, working with top-tier clients and partners on critical
technological solutions such as cloud computing, artificial intelligence (AI), and software development.
In 2023, FPT achieved a significant milestone recording a global revenue of over VND
51.95 trillion, which is a testament to its strong international performance and the
increasing demand for digital transformation services. Besides, the company’s domestic
operations also saw robust growth, despite challenges posed by the global economic
environment with a focus on maintaining strong partnerships with local businesses and
public sector entities. Through its dedication to technological innovation and its 3 lOMoAR cPSD| 47206071
commitment to delivering cutting-edge solutions, FPT has not only secured its place as
a leader in Vietnam’s technology sector but also as a respected name on the global stage. 4 lOMoAR cPSD| 47206071
II. CORPORATE GOVERNANCE ANALYSIS 2.1. Analysis of factors that shape
the quality of governance system in Vietnam
2.1.1. Efficiency of local capital markets
The efficiency of Vietnam’s local capital markets has seen substantial improvements in
recent years driven by the development of both the Ho Chi Minh City Stock Exchange
(HOSE) and the Hanoi Stock Exchange (HNX). These markets have become more
liquid with enhanced participation from both domestic and foreign investors. According
to Vietnam Ministry of Finance's report in 2024, The efficiency of Vietnam’s local
capital markets has seen notable progress with the total market capitalization reaching
approximately VND 6 quadrillion (USD 246.7 billion) in 2023, marking a 9.5%
increase from the previous year and accounting for about 62% of the country’s GDP. In
addition, The increasing participation of both domestic and foreign investors as
evidenced by 350,000 new investor accounts, has contributed to a growing investor
base, bringing the total number of securities accounts to 7.4 million, or 7.5% of the
population. This exceeds the 5% target set by the government’s longterm market
development plan (Vietnam Ministry of Finance, 2024). Apparently, efficient capital
markets in Vietnam allow for better allocation of resources, improved price discovery,
and greater investor confidence, all of which are crucial for companies looking to expand and innovate.
However, Market volatility remains an issue, along with limitations in foreign investor
access and transparency levels, which are still below those of more developed financial
markets. Therefore, achieving long-term market efficiency will require continued
regulatory reforms, especially in corporate governance and financial disclosure
practices to ensure that information flows smoothly and transparently.
2.1.2. Extent to which the legal system provides protection to all shareholders
Although Vietnam has made great efforts to improve policies and laws to protect
investors' rights, the level of protection of shareholders' rights, especially small
shareholders, is still limited. According to the World Bank, Vietnam ranks 160/189
countries in terms of protecting investors' rights. The current Enterprise Law lacks clear 5 lOMoAR cPSD| 47206071
regulations, making it difficult and costly for shareholders to sue managers. The 2014
Enterprise Law has made positive adjustments. Specifically, the conditions for
organizing the General Meeting of Shareholders have been relaxed. Previously, to hold
the first meeting, at least 65% of voting shares were required, but now only 51% are
required. This makes it easier for small shareholders to gather opinions and participate
in decisions without having to wait for the third meeting. However, the regulations on
voting ratio still have many shortcomings. Although reduced, this can create advantages
for large shareholders in passing decisions. Some experts believe that a higher ratio will
better protect the interests of minority shareholders. In addition, information disclosure
and the right to sue managers also need to be further improved, so that shareholders can
easily monitor and protect their interests, avoiding to manipulate stock prices like the
case of Mr.Trinh Van Quyet. Thus, building a clear and transparent legal system not
only protects the interests of shareholders but also creates conditions for the sustainable
development of the stock market.
2.1.3. Enforcement of regulations
Enforcement of regulations in Vietnam’s corporate governance has shown gradual
improvement, largely driven by the efforts of the State Securities Commission (SSC)
and international collaborations, such as those with the Japan International Cooperation
Agency (JICA), which have focused on enhancing market surveillance, investor
protection, and overall compliance (Vietstock, 2023). Key measures have been
implemented to improve corporate disclosures, curb insider trading, and strengthen
penalties for non-compliance. In 2023, approximately 90% of listed firms were found
to be compliant with reporting requirements, signaling progress in regulatory adherence
(The Investor, 2023). In reality, FPT serves as a notable example maintaining rigorous
compliance with both domestic laws and international governance standards, evident in
its timely financial disclosures and strong adherence to environmental, social, and
governance (ESG) criteria (Vietnam Corporate Review, 2024).
However, despite these positive developments, the enforcement landscape in Vietnam
still faces challenges. Issues such as inconsistent application of regulations, resource
limitations within regulatory bodies, and bureaucratic inefficiencies hinder effective 6 lOMoAR cPSD| 47206071
implementation (Vietnam Business Insight, 2024). This inconsistency is evident in the
uneven enforcement across sectors and regions, often resulting in a weaker compliance
culture among smaller firms (SSC Annual Report, 2024). Additionally, while recent
updates, such as the 2024 amendments to credit institution laws and land management
regulations have provided broader intervention powers to the State Bank of Vietnam
(SBV) to enhance financial stability, bureaucratic delays and limited audit capacities
remain obstacles to uniform enforcement (Vietnam Securities Update, 2024). Thus,
strengthening the regulatory institutions’ capacity and ensuring consistent application
of laws are essential steps toward building greater investor confidence and achieving a
more transparent corporate environment.
2.1.4. Societal and cultural values
Vietnam’s societal and cultural norms have a profound impact on corporate governance,
shaping the way companies operate and make decisions. Values such as collectivism,
hierarchical respect, and relationship-driven decision-making play a significant role in
boardroom dynamics and business strategies. These traditional norms often emphasize
community welfare, gradual consensus-building, and trustbased relationships, which
can sometimes conflict with modern governance expectations like transparency and
independence (Debt Explorer, 2023). For instance, personal connections and long-term
affiliations within boards can challenge the establishment of fully independent decision-
making structures. However, the increasing influence of globalization and the demand
for international investment are gradually driving Vietnamese firms to adopt global
governance practices, including international reporting standards and a focus on
Environmental, Social, and Governance (ESG) criteria (Vietnam Business Insight, 2024).
FPT Corporation serves as a clear example of how cultural values are intertwined with
corporate governance. As one of Vietnam’s major technology firms, FPT’s approach
emphasizes ethical governance, corporate social responsibility (CSR), and community-
focused initiatives, reflecting traditional values of trust and societal contribution (FPT
Annual Report, 2023). In 2023, the company’s “Made-by-FPT” ecosystem, which
reported a 45% revenue growth, illustrated its commitment to both innovation and social 7 lOMoAR cPSD| 47206071
development with initiatives like digital education for rural communities and
sustainable technology projects. Overall, FPT’s strong collaboration with government
bodies and local communities further underscores its alignment with Vietnamese
societal expectations, where businesses are expected to contribute not only
economically but also socially.
Nevertheless, integrating traditional governance approaches with modern practices
poses challenges. The cultural preference for consensus-driven decision-making and
respect for hierarchy can slow down reforms, as rapid changes are often viewed as
disruptive to established relationships (Vietnam Corporate Governance Review, 2024).
FPT’s governance model reflects this careful balance, progressively incorporating
global standards while maintaining core Vietnamese values. This includes efforts to
diversify its board, increase transparency, and ensure compliance with international
governance norms (Market Insights, 2023). As Vietnam continues to pursue “emerging
market” status by 2025, finding harmony between local cultural values and global
governance standards will be crucial for sustainable development and stronger investor
confidence (The Investor, 2023).
2.2. Board of Directors: Duties and Liabilities
2.2.1. The operations of the Board
The board of directors (BOD) plays a pivotal role in corporate governance, responsible
for strategic guidance, financial oversight, and regulatory compliance. In Vietnam, this
role is codified by the Law on Enterprises (2020) and the Securities Law, which outline
the duties and liabilities of board members. These duties include acting in the best
interest of the company and its shareholders to ensure transparency, and avoiding
conflicts of interest (Vietnam Corporate Governance Review, 2024). The board’s core
functions encompass long-term strategy formulation, risk management, and
performance evaluation of the executive team as well as the approval of significant
decisions like mergers and acquisitions (SSC Annual Report, 2024). Recent figures
indicate that around 85% of Vietnamese listed companies now adhere to detailed board
operation guidelines, which involve regular board meetings, annual evaluations, and 8 lOMoAR cPSD| 47206071
transparent decision-making processes reflecting a shift towards international best
practices (The Investor, 2023).
However, while Vietnamese boards are increasingly aligning with global standards,
challenges still remain. Despite improvements, effective board operations are
sometimes hindered by inconsistent enforcement of governance rules across sectors and
resource limitations within regulatory bodies (Vietnam Business Insight, 2024).
Additionally, directors in Vietnam typically dedicate around 20 hours per month to
board matters, which is consistent with international norms, but increasing regulatory
demands have extended the duration and complexity of board meetings (Debt Explorer,
2023). As Vietnam seeks to attract more foreign investment and elevate its market
status, further strengthening of board operations, particularly in terms of transparency
and accountability will be essential for sustaining investor confidence and promoting
sustainable corporate growth (The Investor, 2023).
2.2.2. Board committees
Board committees are a vital part of corporate governance established to handle specific
responsibilities such as audit, risk management, nominations, and remuneration. These
specialized sub-groups within the board enhance governance efficiency by focusing on
complex tasks and ensuring compliance with regulations (Vietnam Corporate
Governance Review, 2024). In Vietnam, key committees like the Audit Committee and
the Nomination and Remuneration Committee are common among publicly listed
companies. By 2023, approximately 70% of these firms had established such
committees, which reflects progress in governance practices (The Investor, 2023).
However, there is variation in the scope and authority of these committees with larger
corporations generally having more independent and comprehensive committee
structures than smaller firms (Debt Explorer, 2023).
In particular, FPT Corporation serves as an example of effective committee-driven
governance. The company has established several key committees, including the
Internal Audit Committee, Compensation Committee, and Risk Management
Committee and Development Policy Committee , each with distinct roles. The Audit
Committee, for instance, oversees financial reporting, internal controls, and regulatory 9 lOMoAR cPSD| 47206071
compliance, ensuring adherence to both local and international standards. This focus is
crucial, given FPT’s global operations (FPT Annual Report, 2023). Meanwhile, the
Compensation Committee handles executive pay and performance-related incentives,
aligning management decisions with shareholder interests (Market Insights, 2024). The
Risk Management Committee assesses financial and operational risks, which is
particularly important given FPT’s expansion into digital transformation and global IT services.
On the other hand, the effectiveness of board committees largely depends on their
independence, structure, and authority. Best practices in governance as highlighted by
Larcker and Tayan (2011) suggest that audit committees should consist of independent
directors, with regular external audits to ensure compliance and accountability. FPT
aligns with this model by maintaining independent oversight in its key committees,
supporting transparent decision-making and minimizing potential conflicts of interest
(Vietnam Business Insight, 2024). The role of these committees is also reinforced by
Vietnamese regulations, which mandate their establishment in public companies to
promote robust governance and financial integrity (SSC Annual Report, 2024). As a
result, when Vietnam continues to refine its governance framework, the strategic
function of board committees will remain crucial in building investor trust and aligning
corporate practices with international standards (The Investor, 2023). 10 lOMoAR cPSD| 47206071
2.3. Board of Directors: Structure and Consequences
2.3.1. Market for directors
The market for directors in Vietnam is undergoing significant development, which
illustrates broader global trends in corporate governance. Directors are increasingly
sought for their skills, experience, and ability to enhance board effectiveness. The
selection process for directors in Vietnam is guided by the Enterprise Law, which
emphasizes transparency and merit-based recruitment to strengthen board quality
(Boatright, 2014). This approach aims to ensure that board members possess diverse
skills, industry knowledge, and the capacity for independent oversight. As of 2023,
about 45% of listed companies in Vietnam have independent directors on their boards,
a growing trend that aligns with international best practices (Vietnam Corporate
Governance Review, 2024). Obviously, this focus on independence is crucial for
improving board performance, ensuring objectivity, and fostering transparency in
decision-making (Larcker & Tayan, 2011).
Furthermore, the evolving director market in Vietnam is characterized by efforts to
enhance diversity, inclusivity, and independence within boards. Recent amendments to
the Enterprise Law have introduced more rigorous criteria for director selection,
including provisions to promote gender diversity and ensure that boards are equipped
with the skills necessary for strategic oversight (Vietnam Business Insight, 2024).
Additionally, companies now employ external consultants and recruitment firms to
identify gaps in board capabilities and fill them strategically, further professionalizing
the selection process (Debt Explorer, 2023). Despite these advancements, challenges
remain, particularly due to the limited pool of qualified independent directors with
strong governance backgrounds. However, as Vietnam’s governance landscape
continues to mature, the market for directors is expected to become more competitive
and aligned with international standards, supporting broader corporate governance
improvements across the country (The Investor, 2023).
2.3.2. Director compensation
Director compensation is a crucial element of corporate governance, serving to attract,
motivate, and retain skilled individuals capable of providing effective oversight. In 11 lOMoAR cPSD| 47206071
Vietnam, compensation for board members typically includes a mix of fixed fees,
performance-based incentives, and equity components. This approach aligns director
incentives with shareholder interests that foster long-term value creation (Larcker &
Tayan, 2011). Besides, recent trends in Vietnamese corporate governance reflect
increased transparency in director compensation with clear structures designed to
ensure accountability and alignment with company performance (Vietnam Corporate
Governance Review, 2024). As of 2023, the average annual compensation for directors
in Vietnam ranged from VND 1.2 billion to VND 4.8 billion varying based on company
size and industry (ManpowerGroup, 2023).
FPT Corporation exemplifies the shift toward performance-linked director
compensation with its remuneration policy blending fixed pay, bonuses, and stock
options. In 2023, FPT reported a 12% increase in average director compensation driven
by the company’s 20.1% growth in profit before tax (FPT Annual Report, 2023). This
structure aligns directors’ interests with FPT’s strategic objectives, incentivizing them
to prioritize long-term value creation (BCTN, 2023). The compensation framework is
also subject to annual reviews and shareholder approval during the company’s Annual
General Meetings (AGM) which ensures fairness and compliance with governance
standards (Market Insights, 2024).
2.4. Board of Directors: Structure and Consequences
2.4.1. Board Independence
a) Independence of the chairman
The independence of the chairman is widely recognized as a fundamental aspect of
effective corporate governance. Separating the roles of the chairman and CEO is
considered best practice because it reduces conflicts of interest, strengthens oversight,
and ensures clearer accountability (Larcker & Tayan, 2011). This governance structure
allows the chairman to focus on strategic guidance and board operations while the CEO
handles day-to-day management enhancing the overall checks and balances within a
company (Corporate Governance Matters, 2024). In Vietnam, although the Law on
Enterprises (2020) does not require this separation, there is growing adoption among 12 lOMoAR cPSD| 47206071
publicly listed firms to align with international standards (Vietnam Corporate Governance Review, 2024).
Despite these advancements, the adoption of independent chairmanship remains
inconsistent across Vietnam, particularly among smaller firms where resource
limitations and traditional governance models often result in combined roles (The
Investor, 2023). However, as more Vietnamese companies aim to meet international
governance standards and attract foreign investment, the trend toward separating the
chairman and CEO roles is likely to continue enhancing corporate accountability and
transparency (Debt Explorer, 2023).
b) Lead independent director
The role of the Lead Independent Director (LID) is gaining prominence in Vietnam’s
corporate governance landscape, particularly in larger publicly listed companies. The
LID serves as a critical intermediary between the board and management to ensure that
the board operates independently from management influence, especially when the
chairman is not fully independent. This role is especially significant in contexts where
there may be conflicts of interest or executive overreach. For example, in companies
like FPT, which have embraced this governance practice, the LID has been instrumental
in guiding discussions around CEO performance, executive compensation, and
succession planning (Boatright, 2014). By providing independent leadership, the LID
helps the board maintain objectivity and makes decisions that are free from undue management influence.
In Vietnam, the concept of a Lead Independent Director remains relatively new but is
increasingly being adopted by top-listed companies. Vingroup, one of the country's
largest conglomerates, has included the role of a LID as part of its governance
framework to provide additional oversight of executive power (VNIDA, 2023). This
shift toward adopting LIDs reflects a broader global trend because studies have shown
that the presence of an LID can strengthen financial performance and risk management
(Larcker & Tayan, 2011). In the Vietnamese context, having a Lead Independent 13 lOMoAR cPSD| 47206071
Director not only fosters board independence but also aligns with global best practices
as it ensures more effective checks and balances on management actions.
Furthermore, Vietnamese regulations emphasize the need for independent governance
structures. In companies like FPT, more than one-third of board members are
independent, contributing to a well-rounded and objective decision-making process.
This composition is complemented by the presence of a Lead Independent Director,
who plays a pivotal role in steering discussions on issues where management may have
a conflict of interest, further reinforcing the board's independence. Additionally, the LID
ensures that the board focuses on critical areas such as financial oversight, risk
management, and strategic direction, which are vital for companies with extensive
global operations, such as FPT (Boatright, 2014).
On the other hand, incorporating independent board committees, such as those focused
on executive compensation and audit functions, further strengthens corporate
governance in Vietnam. Companies like Vingroup have embraced this practice to ensure
that their audit committees include independent financial experts, a move that aligns
with international standards. The inclusion of these independent directors, alongside the
LID provides enhanced monitoring and accountability, ultimately leading to better
governance outcomes. Obviously, the growing adoption of the Lead Independent
Director role in Vietnam signals a positive shift toward more transparent and
accountable corporate governance practices.
c) Outside (nonexecutive) directors
The inclusion of outside (nonexecutive) directors is a fundamental aspect of corporate
governance aimed at enhancing board independence, objectivity, and effective
oversight. In Vietnam, the Corporate Governance Code mandates that at least onethird
of board members be independent to align with international standards (Vietnam
Corporate Governance Review, 2024). This requirement is intended to promote
balanced decision-making, reduce conflicts of interest, and improve overall governance
quality. Research has shown that firms with a higher proportion of independent directors
tend to have better financial performance as measured by metrics like return on assets 14 lOMoAR cPSD| 47206071
(ROA), and exhibit reduced levels of earnings management (Vo & Nguyen, 2014).
Obviously, these findings underscore the importance of nonexecutive directors in
fostering stronger oversight and accountability, especially in larger Vietnamese firms (Larcker & Tayan, 2011).
FPT Corporation exemplifies effective implementation of board independence. As of
2023, 40% of FPT’s board members were nonexecutive directors, exceeding the
minimum regulatory requirement and reflecting the company’s commitment to diverse
perspectives and independent governance (FPT Annual Report, 2023). Apparently, the
presence of outside directors at FPT provides broader oversight and strategic guidance,
supporting the company’s international expansion and long-term growth objectives.
This composition aligns with Larcker & Tayan’s (2011) analysis, which indicates that
independent boards contribute to better decision-making, improved financial
performance, and increased investor confidence.
Despite these advances, achieving optimal board independence remains a challenge in
Vietnam, particularly in firms with concentrated ownership structures where
decisionmaking power is often centralized. However, leading companies like FPT,
Vinamilk, and Vietcombank have set a precedent by maintaining over 30% board
independence, which demonstrates the positive impact of non-executive directors on
governance outcomes and investor trust (RUSS IN VECCHI, 2024). As Vietnam’s
corporate sector continues to mature, further adoption of outside directors is expected
driven by regulatory pressures, international investor demands, and the need for more
transparent governance practices
d) Independence standards
Independence standards are a cornerstone of effective corporate governance to make
sure that directors can make impartial decisions that prioritize shareholder interests.
These standards typically require that board members be free from any material
relationships with the company, its executives, or major shareholders that could
compromise their judgment. According to Larcker and Tayan (2011), independent
directors should not have financial, familial, or employment ties to the company that 15 lOMoAR cPSD| 47206071
may influence their ability to provide objective oversight. Therefore, this formal
separation is vital for maintaining the integrity of the board, particularly in overseeing
management and mitigating conflicts of interest, thereby enhancing overall corporate accountability.
Internationally, the standards set by governance frameworks such as the Organisation
for Economic Co-operation and Development (OECD) and the Cadbury Report
emphasize the importance of board independence. These guidelines suggest that
independent directors are essential in preventing board dominance by insiders, thus
fostering transparency and accountability. Additionally, global best practices
recommend the separation of the Chairman and CEO roles to avoid potential conflicts
of interest. Companies like FPT have aligned with this principle to maintain a structure
where the Chairman and CEO roles are held by separate individuals to make sure
independent oversight of management decisions (MARKET SCREENER, 2022).
Despite these formal criteria, challenges to true independence persist. Research by
Hwang and Kim (2009) highlights the distinction between formal and social
independence, noting that even directors who meet legal standards may still be
influenced by personal or professional relationships with management. In Vietnam, this
challenge is compounded by familial ties and cross-directorships, where directors serve
on multiple boards potentially undermining their ability to provide objective oversight.
Thus, such dynamics emphasize the need for not only formal adherence to independence
criteria but also cultural and structural changes to fully realize the benefits of
independent governance (Duong & Phan, 2021).
Overall, the incorporation of independence standards in Vietnam represents a significant
step toward improving corporate governance. By adhering to both local laws and
international best practices, corporations like FPT are setting a benchmark for
governance that enhances board effectiveness, strengthens investor confidence, and
aligns corporate actions with the long-term interests of all stakeholders. However, the
ongoing challenge lies in ensuring that these standards are not only met on paper but 16 lOMoAR cPSD| 47206071
also practiced in a way that genuinely promotes independent judgment and accountability.
e) Independent committees of the board
Independent committees, such as audit, nomination, and remuneration committees, are
fundamental to effective corporate governance to provide focused oversight and
enhance transparency. In Vietnam, the establishment of these committees is increasingly
common among listed firms with about 65% of companies forming audit committees
that include at least one financial expert as of 2023 (Duong & Phan, 2021). These
committees are typically composed of independent directors that align with global
governance norms and ensure objectivity in areas like financial reporting, executive
compensation, and director nominations (Larcker & Tayan, 2011). However, challenges
remain, particularly concerning the low compensation for independent directors, which
may affect the quality and independence of their oversight because some appointments
are made primarily to meet regulatory requirements.
FPT Corporation has taken significant steps to strengthen its independent committees
to establish audit, risk, and remuneration committees chaired by independent directors.
For example, the audit committee is instrumental in reviewing financial statements and
monitoring internal controls, reducing the likelihood of financial misreporting (FPT
Annual Report, 2023). Similarly, the risk committee plays a critical role in overseeing
the company’s risk management strategies, particularly in highstakes areas like digital
transformation initiatives (BCTN, 2023). This structure not only aligns with
international best practices but also enhances transparency, accountability, and investor confidence.
On the other hand, the effectiveness of independent committees in Vietnam varies
across firms. Companies like FPT, Vingroup, and Vinamilk have demonstrated that
strong, independent committee structures can improve financial transparency and
regulatory compliance even amid increased investor scrutiny (Vietnam Corporate
Governance Review, 2024). Research by Larcker and Tayan (2020) supports the notion 17 lOMoAR cPSD| 47206071
that independent committees are essential for maintaining objectivity in corporate
governance, particularly in critical areas such as financial oversight and executive
remuneration. As Vietnam’s corporate governance landscape continues to evolve, the
role of independent committees is likely to expand further driven by regulatory
requirements and growing pressure from investors for more robust governance frameworks.
f) Representation on the board by selected constituents (bankers, financial experts,
politically connected individuals, and employees)
Representation on the board by selected constituents such as bankers, financial experts,
politically connected individuals, and employees significantly influences the
effectiveness of corporate governance. Diverse board composition, particularly with
members possessing expertise in areas like finance and regulatory navigation enhances
decision-making, risk management, and oversight capabilities. According to Larcker
and Tayan (2011), a well-rounded board that includes professionals from various
backgrounds is better positioned to manage complex governance challenges and ensure
robust oversight, particularly in areas such as financial reporting and strategic planning.
● Bankers and financial experts
The inclusion of financial experts on corporate boards is crucial for ensuring sound
financial oversight, particularly in industries characterized by complex capital
structures and financial regulations. Financial experts, especially those with accounting
backgrounds play a key role in audit committees overseeing financial reporting and
internal controls. Moreover, research has shown that boards with financial experts tend
to have higher-quality financial reporting and fewer instances of financial restatements
(Fan, Wong, & Zhang, 2007).
In Vietnam, The Vietnam Securities Law (2020) reinforces the significance of financial
expertise for publicly listed companies by mandating that their audit committees include
financial experts. Specifically, Decree 155/2020/ND-CP, which implements the
Securities Law of 2019, includes detailed provisions that require the audit committee of
a public company to have at least two members with the chairman being an independent
board member. Additionally, members must possess the necessary financial knowledge 18 lOMoAR cPSD| 47206071
to ensure they can effectively oversee financial reporting processes and ensure
compliance with audit requirements. For example, FPT Corporation, one of Vietnam’s
largest technology companies, complies with this regulation by having financial experts
on its board who help navigate the complexities of its international expansion and digital
transformation projects. As a result, these experts bring essential insights into capital
allocation and risk management, allowing FPT to maintain strong financial health while
managing its global operations.
● Politically connected individuals
Politically connected directors bring unique value to corporate boards, particularly in
countries where government relations and regulatory frameworks heavily influence
business operations. In emerging markets like Vietnam, the presence of politically
connected individuals on boards is relatively common, especially in sectors with high
levels of state involvement. These directors offer insights into navigating regulatory
challenges and securing government contracts, which can be critical for a company’s
strategic success (Fan et al., 2007).
However, while politically connected directors can enhance a company’s ability to
navigate government regulations, they also present risks. Their presence on the board
can sometimes lead to conflicts of interest, particularly if these directors prioritize state
or personal interests over those of shareholders. Studies have indicated that firms with
politically connected directors may experience lower financial returns and reduced
governance quality due to the potential for reduced accountability and higher levels of
corruption (Fan et al., 2007). Thus, it is essential for companies like FPT to balance the
benefits of political connections with the need for independent oversight to safeguard shareholder value.
● Employee representation
Employee representation on boards is less common in Vietnam than in some European
governance systems, where co-determination laws require significant employee
involvement. Nevertheless, employee representation can provide boards with valuable
insights into internal operations and workforce sentiment to help to align corporate
strategies with employee interests. Research suggests that employee involvement can 19