VIETNAM ACADEMY OF
SOCIAL SCIENCES
GRADUATE ACADEMY OF SOCIAL SCIENCES

PHAN DANG HAI

CORPORATE GOVERNANCE
FOR LISTED COMPANIES
BY VIETNAMESE LAW

Major: Economic law
Major Code: 938.01.07

ABSTRACT ON DOCTORAL THESIS
ON LAW

HANOI - 2019


The work is completed at:
GRADUATE ACADEMY OF SOCIAL SCIENCES

Supervisor:
1. Dr. Ho Ngoc Hien
2. Dr. Nguyen Van Tuyen

Opponency 1: ................................................................................................
Opponency 2: ...............................................................................................
Opponency 3: ................................................................................................

The Thesis will be protected before the Academy-level Thesis Review

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PREAMBLE
1. The urgency of title
Since the nineteenth century, when the board of directors can make
decisions without the consent of all shareholders in the company, it causes
bankruptcy of many companies, corporate governance (CG) are firstly
concerned. The collapse story of Wall Street in 1929 was the clearest evidence,
starting the endless debate about the role of shareholders and managers,
ownership and control. The development trend as well as globalization appear
large-scale companies, in which, company owners are often not managers,
causing more difficult control. Conflicts of interest occur when shareholders owners realize that managers - representatives do not maximize the interests of
shareholders but only focus on increasing profits for themselves.
For listed companies, due to the important role derived from the
characteristics of scale as well as the level of influence on the stability and
sustainability of the whole economy, then CG plays a particularly important role.
The studies have shown that CG for listed companies is much more complicated
than conventional CG due to these issues, such as: diversified ownership
structure, asymmetric information, conditions for securities listing, information
disclosure regime and other regulations on the stock market are stricter.
In recent years, many legal documents have been issued in Vietnam, to
build the legal framework for CG activities such as: Securities Law 2006
(amended and supplemented in 2010), Enterprise Law 2014, Decree
71/2017/ND-CP on CG for public companies and Circular 95/2017/TT-BTC
guiding Decree 71/2017/ND-CP. According to general assessments, the
guarantee of law enforcement on CG not only still has many shortcomings, bu
also the application of new international practices that are only at the beginning.
There are many reasons for this situation; however, an essential problem is the
lack of completeness of legal regulations.



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around the world to find out the experiences and development directions that
could be applied in Vietnam.
3. Subject and research scope of thesis
3.1. Research subject
Subject of research of the topic is the law on CG for listed companies,
specifically documents related to CG for listed companies, theoretical issues of
CG in general and CG for listed companies in particular, theoretical issues of the
law on CG for listed companies, the status of the legal regulations and situation
of enforcement of the law on CG for listed companies in Vietnam. During the
research process, laws of countries, especially the CG codes in the world are also
interested by the author. On that basis, thesis has drawn conclusions and
experiences for the process of improving the law on CG for listed companies in
Vietnam.
3.2. Research scope
About theory, thesis researches the views of corporate covernance, CG
for listed companies, and the current law on CG for listed companies in the
world, focusing on countries where CG theory and CG law has been developed.
About practice, thesis focuses on researching the status of the law on CG
for listed companies in Vietnam through the provisions of corporate law and
securities law. Besides, thesis has analyzed and commented on a number of legal
provisions of Germany, England, USA, Australia, Japan and the OECD's CG
Code to draw the necessary lessons for the process of building and improving
laws in Vietnam.
About time, thesis focuses on research on CG law for listed companies
since 2005 - the time when the concepts of CG were gradually formed in
Vietnam and the first legal documents appeared which directly adjusted the issue
of CG for listed companies.
4.1. Research methodology


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legislative thinking in promulgating legal regulations on governing this activity.
This is an important premise as a basis for building and perfecting the
regulations on CG for listed companies in Vietnam in the future.
Fourthly, thesis has analyzed and systematically assessed the status of the
law on CG for listed companies in Vietnam, showing the advantages and
disadvantages in the regulations and mechanisms for implementing those
regulations. In the process of analysis and evaluation, thesis compares
Vietnamese law with foreign laws and international practices to obtain objective
and scientific judgments.
Fifthly, thesis has identified the requirements in perfecting the law on CG
for listed companies; proposed recommendations to improve the contents of law
and solutions to improve the effectiveness of law enforcement on CG for listed
companies.
6. The theoretical and practical significance of the thesis
Until the present time, thesis is the first research project at a Doctorallevel thesis that has studied thoroughly both theoretical and practical issues of
the law on CG for listed companies.
The thesis is a reference source for university students, legal scientific
researchers, academic managers and policy-making and law issuance of
Vietnam.
7. Structure of thesis
In addition to the introduction, conclusions, appendices and lists of
references, thesis consists of 4 chapters:
Chapter 1: Overview of research situation.
Chapter 2: Theoretical issues about CG for listed companies and the law
on CG for listed companies.
Chapter 3: Actual situation of the law on CG for listed companies in
Vietnam.



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Secondly, thesis needs to continue research the issues which have not
been thoroughly solved
- About the approach: The studies which have been carried out often
approach in a single discipline in terms of economics, sociology or law.
Although there are also some studies that have access to multi-disciplinary
economic - sociological studies, a research selecting the approach of law economics - sociology has not yet been implemented.
- About theory: Currently, there has not been a comprehensive research
on theoretical aspects of CG for listed companies and the law on CG for listed
companies.
- About practice: The research works mainly focus on the current status
of CG law. Some works also refer to the current status of the law on CG for
listed companies in Vietnam, whether it is general research or small contents,
most of them are based on legal documents which have expired presently.
- About complete solutions: Due to the lack of comprehensive, direct and
updated researches related to the law on CG for listed companies, the solutions
to improve the regulatory framework for CG for listed companies has not been
performed by the research.
1.2. Basis of theoretical research
1.2.1. Agency Theory
In The Wealth of Nation, Adam Smith (1776), for the first time, poses the
fundamental challenge behind all the issues of CG, that is an Agency. Jensen and
Meckling (1976) explain as following: Agency theory relates to a contract,
whereby one or several people (shareholders) assign other people (members of
the Board of Directors) to perform some services on their behalf, including
authorization to issue decisions. If in this relationship, both parties are people
who want to maximize benefits, we have reason to believe that representatives
will not always act for the benefit of the owner.




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the responsibility of "cautious, sincere, honest ” of the Stewards; iii) With
Stakeholder theory, the law should set out requirements in the governance
structure that must include parties with interests related to the company, with the
aim of ensuring that the company operates for the benefits of these stakeholders
...
In short, when researching on CG in general and CG for listed companies
in particular, it is necessary to review under the points of view of many different
theories to ensure the most general and comprehensive aspect. Based on this
theory, the author can better understand the nature of CG, thereby creating a
premise to build the characteristics of CG for listed companies, characteristic of
the law on CG for listed companies, as well as making requirements in
completing the law on CG for listed companies in Vietnam.

Chapter 2
THEORETICAL ISSUES ABOUT CORPORATE GOVERNANCE FOR
LISTED COMPANIES AND THE LAW ON CORPORATE
GOVERNANCE FOR LISTED COMPANIES
2.1. Theoretical issues on corporate governance for listed companies
2.1.1. Concept about listed companies
A listed company is a public company whose shares are listed at the Stock
exchange or the Securities trading center. In order to recognize the listed
company, in addition to the general characteristics of a common joint stock
company, the listed company also has some specific characteristics as follows: i)
Listed company have listed shares traded on Stock exchanges or Securities
trading centers; ii) Listed company have a more complicated internal
organizational structure than joint stock company; iii) Listed company are
subject to corporate law and securities law; iv) Listed company are under the
management of the Stock exchange and the State Securities Commission.

following characteristics: i) CG for listed companies is a system of regulations,


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mechanisms that reflect relationships, determined by the structure and processes;
ii) The relationships in CG for listed companies related to the parties have
different interests, sometimes they are conflicting interests; iii) CG for listed
companies involves orientation and control of the company on the basis of
appropriately allocating rights and responsibilities - and thereby balancing
benefits.
2.1.4. Subjects participating in relations of corporate governance for
listed companies
The entities involved in CG for listed companies are individuals or
organizations that have certain positions and roles in CG for listed companies.
Within the internal affairs of joint stock company in general and the listed
company in particular, there are three most essential entities corresponding to 3
levels of control in the CG relationship, that is: Shareholders, Board of
Management and Board of Directors. Besides, due to the large number of
investors in the listed company, in addition to the multi-tier management
apparatus, some countries often stipulate that it is required to organize the
Supervisory Board to protect the interests of investors.
In addition to the entities within the company, many other entities
participate in the relationship of CG for listed companies as the parties with
interests related to the company: not only creditors, investors, but also
employees, suppliers, customers, law agencies, government authorities and local
communities where the Company operates.
2.1.5. The goals of corporate governance for listed companies
CG for listed companies is considered successful when the following
objectives are achieved:
Firstly, ensure the adaptability of the CG system. This goal aims to ensure

The law on CG for listed companies is a system of legal regulations
governing social relations arisen from the relationship between shareholders,


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the Board of Management, the Board of Directors and other stakeholders in the
process of orientation, operation and control of the company to achieve certain
goals.
We can draw some characteristics of the law on CG for listed companies
as follows:
Firstly, the law on CG for listed companies has the common
characteristics of economic law: i) Recognize the parties' self-determination
right on participating in property relations; ii) Basic rules are the ones explaining
the will of parties in relationships.
Secondly, in addition to the general characteristics, the law on CG for
listed companies has a number of specific characteristics to distinguish it from
the economic law and CG law: i) Subjects and objectives of the law on CG for
listed companies: Subjects of the law on CG for listed companies include both
internal affairs of companies and other individuals and organizations related to
the company. The law on CG for listed companies is aimed at ensuring the rights
of stakeholders; ii) Adjustment method of the law on CG for listed companies:
The law on CG for listed companies is much stricter than the regular CG law; iii)
The nature of legal regulations of CG for listed companies: The law provisions
of CG for listed companies can be divided into 3 types: the provisions with
absolutely compliance, provisions with relative compliance (compliance or
explanation), provisions with proposal nature; iv) Structure of the law on CG for
listed companies includes: general law, specialized law, regulations and other
rules of CG for listed companies.
2.2.3. The basic contents of the law on corporate governance for listed
companies

actual and traditional conditions, the legal mechanism of each country. In
Vietnam today, there are two CG models that listed companies can choose. No
matter which model exists, the problems in any country are: i) Clearly define
the authority of each agency in the CG for listed companies model; ii) Increase


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quality of the company's managers, executives and supervisors; iii) Facilitate
supervisory entities to fulfill their assigned responsibilities
Receive the CG Codes for listed companies: System of regulations related
to CG for listed company includes formal and informal regulations. In essence,
the CG Codes for listed companies of international organizations and countries
are non-legal guidelines for the purpose of supplementing laws and other
regulations of the law on CG. In the context of the current legal environment of
Vietnam, the Enterprise Law and the Securities Law only provide the basic
principles of CG for listed companies, we should strengthen the legal framework
on CG for listed companies by the development of guiding documents,
especially the CG Codes applied to listed companies in a manner in consistent
with the OECD CG Principles.

Chapter 3
ACTUAL SITUATION OF THE LAW ON CORPORATE
GOVERNANCE FOR LISTED COMPANIES
IN VIETNAM

3.1. Actual situation of the legal content on corporate governance for
listed companies in Vietnam.
The legal framework regulating CG for listed companies in Vietnam is
divided into three groups with the following major legal documents:
Firstly, general law group includes the following documents: Enterprise

guidelines for the CG model, especially for listed companies when making the
same requirements even though the two models have quite a lot of different
points.
About General Meeting of Shareholders: In general, Vietnamese law on
functions, roles and duties of the General Meeting of Shareholders is consistent
with Agency theory and has many similarities with international practices.


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Aboutthe Board of Directors: Due to play an important role in the
company, the legal regulations give much attention to the Board of Directors,
especially for listed companies. Regulations relating to membership ofthe
Boards of Directors, number and structure of members in the Boards of
Directors, meeting of the Boards of Directors, subcommittees belonged to the
Board of Directors have been fully regulated, closely to international practice.
However, some important roles of the Board of Directors such as establishing
corporate culture and business ethics have not been recognized; the standards of
the independence of the independent members of Board of Directors are still
incomplete.
About Supervisory Board: In generally legal regulations, powers and
responsibilities and activities of the Supervisory Board in listed companies are
relatively clear and reasonable. However, the current legal provisions just stop at
regulating the rights and obligations but not paying attention to the legal
mechanism to implement those rights and obligations as well as sanctions to deal
with the possible violations.
About the legal representative: A listed company may have one or more
legal representatives, subject to the provisions of the company's ruler. However,
the current legal regulations do not have a specific mechanism if the company
has more than one legal representative.
3.1.3. Situation of legal regulations on preventing interests conflict

Meanwhile, the possible consequences, including affecting investors' rights due
to inadequate access to information, may affect to stock prices , losing
confidence about the company.
Summary, Vietnam's legal framework on CG for listed companies has
been basically guaranteed. The legal regulations of the CG for listed companies
has met the rigorous requirements of CG for listed companies by setting
conditions higher than the general CG regulations. In addition, the Vietnamese
law has recently made great steps in approaching international standards on CG,


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reflected in international requirements, principles and standards of CG, which
has gradually been legalized in Vietnam's legal documents. However, the legal
framework on CG for listed companies still has many shortcomings related to
the structure and management model, functions, tasks and authority of internal
agencies, protection mechanisms rights and interests of shareholders,
mechanisms to control and prevent potential conflicts of interests, transparency
and information disclosure ...
3.2. Actual situation of law enforcement on corporate governance for
listed companies in Vietnam.
3.2.1. The achievements
In the recent years, the implementation of laws and good practices of the
CG has been significantly improved in a more open and transparent manner. To
achieve this success, a bright spot is easy to see that listed companies begin to be
aware of the responsibility and necessity of CG and have made certain efforts. In
addition, the activities of assessing the implemented regularly operations CG
have brought positive results .
3.2.2. Restrictions, shortcomings
About protecting shareholder's rights: A prominent issue in CG for listed
companies is the actual rights of shareholder are often violated. The form of

shareholders is the State and the structure of centralized ownership shares. From
the influence of history and business culture in Vietnam, the fact that the CG for
listed companies has raised the following problems: i) There is little division
between ownership and management rights; ii) Loose control mechanism; iii)
Lack of publicity and transparency in CG:
Secondly, law construction activities: The requirement of completing the
law also leading to the problem is the legal regulations are built towards
progress, approaching international practices, creating a very long distance
between legal provisions and operation ability of listed companies. In addition,
the law on CG for listed companies still exists inadequacies, which creates


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conflicts and overlaps in the system, appearing difficulties in the process of
enforcement of CG for listed companies.
Thirdly, activities of agencies and organizations related to CG for listed
companies: competent state agencies have not clearly demonstrated the role as
well as effectiveness in the supervision and enforcement of law enforcement of
listed companies; lack of existence and participation of intermediary
organizations to support CG.
Fourthly, awareness of listed companies for CG activities: general
awareness on CG for listed companies is still limited; Many cases are from the
lack of a sense of respecting for CG law for listed companies.

Chapter 4
PERFECTING THE LAW ON CORPORATE GOVERNANCE FOR
LISTED COMPANIES IN VIETNAM TODAY
4.1. The requirements of perfecting the law on corporate governance
for listed companies in Vietnam in the current period
Firstly, ensuring constitutionality, legality and consistency in the legal

in order to complete the framework of CG regulations for Vietnam's stock
market. It needs to specify which content should be legalized, what should be
specified in the CG Code for listed companies.
4.2.2. Recommendations to perfect the content of the law on Corporate
governance for listed companies in Vietnam
About

protecting

shareholder's

rights:

Modify

and

supplement

regulations: i) rate of holding common shares of shareholders to exercise the
right to nominate candidates to the Board of Directors, Supervisory Board; ii)
the share ownership ratio of shareholders to exercise the right to sue against
members of the Board of Directors, Director (General Director); iii) a