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Corporate Governance in Vietnam
A transformation in ESG, Cybersecurity, and Beyond
Insights from the Vietnam Independent Directors Association (VNIDA)
Corporate governance in Vietnam is evolving rapidly, driven by a combination of global trends and local regulatory developments. As Vietnam continues to integrate more deeply into the global economy, businesses are aligning themselves with international standards of corporate governance.
ESG and Suistanable Development
One of the most significant trends in corporate governance globally, including in Vietnam, is the heightened focus on Environmental, Social, and Governance (ESG) criteria. The global push for sustainability and responsible business practices has reached the Vietnamese market. Companies, especially those with international stakeholders or listed on stock exchanges, are increasingly expected to disclose their ESG practices and adopt sustainable development strategies.
In Vietnam, this trend is driven by policies such as the National Green Growth Strategy and the National Climate Change Strategy, both of which set goals for sustainable development and achieving net-zero emissions by 2050. Additionally, the Law on Environmental Protection 2020 mandates stricter environmental standards and reporting requirements for businesses.
Boardrooms must now prioritize ESG to meet regulatory demands and investor expectations, balancing growth with long-term environmental and social considerations.
Companies that align with ESG principles are better positioned to attract investment, enhance their reputation, and achieve long-term sustainability.
The global push for sustainability and responsible business practices has reached the Vietnamese market.
Digital transformation and cybersecurity
Digital transformation is reshaping businesses worldwide, and Vietnam is no exception. The adoption of digital technologies creates new opportunities, and Vietnamese boardrooms are prioritizing digital transformation initiatives, including artificial intelligence, automation, and data-driven decision-making. However, increased digitalization brings heightened risks, particularly in the area of cybersecurity.
Vietnamese regulators have responded with laws aimed at protecting cyberspace and user security. The Law on Cybersecurity 2018 and its guiding regulations, such as Decree No. 53/2022/ND-CP and Decree No. 13/2023/NDCP, impose significant responsibilities on businesses for data storage and personal data protection, especially for firms handling large volumes of data.
As cyber threats become more sophisticated, board members must ensure their organizations are well equipped to protect sensitive information. Cybersecurity strategies are now integral to corporate governance frameworks and risk management processes.
ESG and sustainable development, digital transformation, enhanced transparency, and the growing role of independent directors are driving this transformation.
Enhanced transparency and disclosure requirements
Transparency and disclosure are fundamental principles of good corporate governance. Circular No. 96/2020/TT-BTC, which provides guidelines on information disclosure in the stock market, is a key regulation that requires companies to disclose more detailed and timely information, improving transparency and investor confidence. In Vietnam, the State Securities Commission (SSC) has been proactive in enhancing disclosure requirements for listed companies. In 2019, the SSC, in cooperation with the International Finance Corporation (IFC), issued the Vietnam Corporate Governance Code of Best Practices (Vietnam CG Code), which encourages greater transparency in corporate information disclosure activities.
This move toward enhanced transparency not only protects minority shareholders but also strengthens investor confidence in Vietnam's capital markets. Transparent practices help mitigate the risk of fraud and corruption, which are significant concerns in emerging markets like Vietnam. Boardrooms are now under pressure to adopt stricter disclosure practices to meet legal and investor expectations.
Strengthening the role of independent directors
The role of independent directors is becoming increasingly prominent in Vietnamese boardrooms. Independent directors are crucial for ensuring that board decisions are made in the best interest of all shareholders, free from conflicts of interest. They bring diverse perspectives and expertise to the board, strengthening decision-making and oversight.
In Vietnam, Decree No. 155/2020/ND-CP mandates that public company boards must have between 1/5 and 1/3 of their members as independent directors. The Vietnam CG Code also emphasizes the importance of having a sufficient number of independent directors, aligning with global best practices. These developments are further supported by the Vietnam Independent Director Association (VNIDA), which promotes and facilitates the role of independent directors in Vietnam.
While the trend of empowering independent directors is still developing, companies and shareholders are becoming more aware of their importance in enhancing governance. Independent directors are now being seen as key players in safeguarding shareholder interests and providing a neutral perspective on strategic decisions.
Conclusion
Corporate governance in Vietnam is rapidly evolving, shaped by global trends and local regulatory developments. ESG and sustainable development, digital transformation, enhanced transparency, and the growing role of independent directors are driving this transformation. Vietnamese companies that embrace these trends will not only ensure compliance with legal requirements but also strengthen their competitive edge in an increasingly globalized economy.
As Vietnam continues its journey toward greater integration with international markets, boardrooms that prioritize these emerging governance trends will be best positioned to thrive in an increasingly complex and interconnected business environment.
Back to HomeAuthors
Mr. Dang The Duc
Vice President & Secretary General - Vietnam Independent Directors Association
Mr. Ngo Dang Loc
Associate - Indochine Counsel
Owned by: Institute of Directors, India
Disclaimer: The opinions expressed in the articles/ stories are the personal opinions of the author. IOD/ Editor is not responsible for the accuracy, completeness, suitability, or validity of any information in those articles. The information, facts or opinions expressed in the articles/ speeches do not reflect the views of IOD/ Editor and IOD/ Editor does not assume any responsibility or liability for the same.
