Becoming a listed company is a good choice for Vietnamese companies but not the only business strategy available for long-term growth, a recent conference in Ho Chi Minh City heard.

Listed companies, sometimes referred to as public corporates, have some advantages in business development and capital mobilization, Ho Chi Minh City University of Law lecturer Pham Tri Hung told the June 11, Corporate Governance, an Orientation for Vietnamese Businesses conference.

A holding company, either a joint-stock or privately-owned company, can sell shares in an initial public offering to list on one of Vietnam’s two stock markets.

A public corporate must have at least 100 shareholders and chartered capital of at least VND10 billion (US$602,000).

Tran Ba Duong, CEO of Truong Hai Group, said becoming a public corporate was sometimes the best way for a Vietnam business to obtain better access to overseas markets and foreign investors.

However, according to the State Securities Commission (SSC), of the 3,000 eligible companies in Vietnam, only 925 were registered public corporates, as at February 15, 2008.

The current decline of Vietnam’s stock market is also causing company managers to question whether listing is the best option for their business.

The benchmark VNIndex, the world’s worst performing stock market, has lost nearly 60 percent of its value this year.

Good corporate governance essential

The structure of a listed company ensures investors and managers – those who provide the money and those who manage it – are kept separate.

Cao Tien Vi, Chairman of Saigon Paper Corporation said the regulations governing listings in Vietnam companies were not well-understood, especially among small and medium businesses.

Therefore, becoming a public corporate was probably not the best option for them, Vi said.

“Many CEOs are here at the conference to investigate how becoming a public corporate could benefit their company.” Truong Hai’s Duong said.

The Truong Hai Group CEO said becoming a listed company was not the only way for his company to attract outside investors.

Saigon Paper’s Vi said other barriers which could discourage Vietnam businesses from seeking to become public corporates were the information disclosure and transparency regulations.

Dr. Sundar Venkatesh, a lecturer at the Asian Institute of Technology’s School of Management in Bangkok, said transforming from a holding company to a listed company was a key issue for Vietnamese businesses in the current economic context.

The three most important factors for those investing in Asian emerging markets were the enforceability of legal rights, the quality of economic management and the level of corruption, according to the 2001 McKinsey Survey.

Investors are willing to pay 20-25 percent more per share to invest in a well-governed company, especially in China and Indonesia, said Nguyen Trung Thang, CEO of Masso Group.

The Bangalore-based multinational information technology services company, Infosys Technologies Limited, said a common complaint leveled at members of boards of directors was they made decisions to benefit themselves, regardless of the cost to the company.

Board and management distinction

“A clean board must have clean hands,” Dr. Sundar said.

“And this is obviously the bottom line for board of directors responsibilities.”

The letter of the law must be strictly adhered to in order to guard against power abuse and protect minority shareholders, he said.

Dr. Sundar said, “A director is not a saint because he still has many individual interests and the company must have a clear guidance for him to fulfill his position.”

The different responsibilities of a company’s board and its senior management team remained another issue for Vietnamese businesses.

Doan Dinh Quoc, Chairman of DQ Glass Company said he had hired a foreign CEO so he could concentrate on taking care of company morale.

The World Bank recently released an overview of Vietnam’s corporate government practices, finding there was inadequate investor protection, pervasive under-the-table transactions, insufficient compliance with accounting standards and limited disclosures of material information.

The World Bank recommended the government draw up a code of corporate governance for listed firms and encourage companies to become better at informing investors.

However, Dr. Sundar said investors would not give so much weight to the World Bank rankings, instead they would focus on the corporate governance standards of specific companies when deciding whether to invest.

Thanhnien