Strengthening corporate governance at SOEs instead of focusing on state capital management Photo: Internet

Many difficulties and obstacles in corporate governance at SOEs

According to the Department of Corporate Finance (under the Ministry of Finance), the improvement of the Law on Corporate Governance in SOEs plays a key role in improving the investment and business environment, contributing to enhancing the business production efficiency of SOEs.

However, currently, the legal framework for corporate governance in SOEs in Vietnam still has some shortcomings. For example, the autonomy and self-responsibility of SOEs has not been recognized; the state management and owner representative functions have not been specified; and owners still interfere in the operation of enterprises.

The standard for appointment of business managers also shows shortcomings when the recruitment, arrangement and appointment of staff at enterprises where the state holds 100% of charter capital and enterprises that their state capital are not enough to recruit qualified staff to meet the current international competitive requirements.

Currently, there are no regulations on recruitment by exam or hiring key personnel.

According to Pham Duc Trung, Head of the Business Reform and Development Research Department, Central Institute for Economic Management (Ministry of Planning and Investment), governance innovation is one of the factors that helps SOEs improve efficiency and accomplish the task, and a key factor of the state economy and promote socio-economic development.

In many industries and fields of the economy, there are excellent examples of modern governance based on advanced technology such as economic groups and state telecommunications and technology corporations, commercial banks and SOEs listed on the stock market. The positive achievement has an important contribution of reforming and perfecting mechanisms and policies on SOE governance.

The governance framework of SOEs in the country has changed fundamentally and met the requirements of perfecting the market economy institution compared with the period before 2010.

However, corporate governance at SOEs is facing many difficulties and problems. Accordingly, the operational objectives of SOEs have not been specific, causing difficulties for governance, while the objectives are a decisive factor for the corporate governance at SOEs.

According to Pham Duc Trung, many SOEs do not have clear goals, and some large corporations still combine business tasks with socio-political tasks, leading to difficulties and confusion in the control and assessment of SOEs’ operation and governance practices.

This is also one of the factors slowing down the application of the full, modern and integrated market mechanism for some sectors. Notably, the development and operation of electricity prices under the market mechanism.

In addition, the SOE governance practice of the owner's representative agency has many obstacles and inefficiencies; the information announcement of enterprises with 100% charter capital owned by the State is still limit ed compared to the requirements of law; the management, administration, supervision and inspection in these enterprises still face obstacles.

Expediting equitization to facilitate the application of good SOE governance practices

The Corporate Finance Department said that the amendment of Law 69/2014/QH13 in the near future is an opportunity for the amendments and supplement mechanisms, policies and regulations on corporate governance; towards applying international practices on corporate governance in Vietnam, improving investor confidence; strengthen the protection of the interests of owners, investors and stakeholders, while ensuring that SOE governance is implemented in a transparent and accountable manner with a professional and efficient level high.

The goal of policy formulation is to strengthen corporate governance at SOEs instead of focusing on state capital management as at present. Accordingly, SOEs are allowed complete autonomy in their operations to achieve defined goals and limit  interference in business operations.

The assignment and decentralization of authorization to the owner's representative agency, the representative of state capital, the Members' Council or the Board of Directors, the general director of enterprises is strengthened. The responsibilities of heads and leaders of businesses are specified.

The responsibility of supervision and inspection of the owner's representative agency on the results and efficiency of production and business activities of the enterprise is also provided in accordance with market principles and the law.

In addition, the amendment aims to research and develop wage mechanisms and policies associated with labor productivity and efficiency, and allow enterprises to decide for themselves under market principles, in line with conditions on business production, business lines, and operational nature to recruit or hire high-quality human resources; consider the pilot use of foreign general directors in economic groups and corporations; appoint the independent member of the Members' Council to participate in the operation.

Widely implementing the recruitment and appointment mechanism through competitive and transparent recruitment exams for all management, executive and other positions.

Proposing a solution to this problem, Pham Duc Trung said that the model of multi-owned SOEs as joint-stock companies has more advantages than enterprises with 100% charter capital owned by the State in applying good standards and practices in corporate governance and SOE governance.

Therefore, in the long term, it is still necessary to promote equitization to facilitate the application of good practices in SOE governance, accomplishing the goal that most SOEs have a mixed ownership structure, especially joint-stock enterprises (except for enterprises operating in public interests, operating for non-profit purposes) in accordance with of Resolution 12-NQ/TW dated June 3, 2017.

Improving the operational efficiency of the management and administration apparatus of SOEs. All SOEs that are joint stock companies should apply the legal provisions on public corporate governance. Applying advanced technologies of the Fourth Industrial Revolution to the governance of owner's representative agencies and SOEs.