Ho Chi Minh City, Vietnam, December 8, 2015
—IFC, a member of the World Bank Group, is calling on companies in Vietnam to follow the lead of two local firms that significantly improved corporate governance, leading to stronger performance and greater investment.
IFC’s mini report, “Corporate Governance in Vietnam – Success Stories,” highlights Ho Chi Minh Securities Corporation (HSC) and Mobile World Investment Corporation (MWG) as models of improved corporate governance among portfolio companies managed by private equity investment firms in Vietnam, thanks to a series of reforms.
Coupled with the global financial crisis of 2007-2008, poor performance and reduced market share and profits led to fundamental changes in governance practices at HSC, a securities brokerage firm founded in 2003. The most significant steps helped increase board effectiveness, including board expansion with an increase in the number of independent directors and non-executive directors to ensure objectivity and independence.
“For investors, good governance is a reliable indicator of a well-managed, resilient business,” said Le Anh Minh, HSC’s nominated director from its shareholder Dragon Capital. “Companies in Vietnam tend to focus more on immediate profit rather than investing in and promoting good corporate governance. But HSC’s case has demonstrated that good governance can deliver sustainable financial performance, thereby creating long-term value for shareholders.”
Improved corporate governance has helped HSC become a leading brokerage firms on the Ho Chi Minh City and Hanoi stock exchanges, with a 10.6 percent market share in 2014, up from 3.5 percent in 2007. The firm took in $17.8 million in profit after tax, the highest since its inception.
Similarly, the mobile phone retail chain MWG enjoyed a net profit surge of more than 100 times from 2006 to 2014, when it took in $31.5 million. The firm also doubled its market value in just a year. These achievements are a direct result of the enhancement and diversification of its board of directors, which brought in three independent directors. Measures to mitigate conflict of interest and family governance have been taken seriously, including board members’ divestment from most side businesses and the introduction of a clear set of compliance regulations with respect to employment of staff relatives.
“These success stories are strong testimonials for the positive business impact of sound corporate governance,” said Chris Razook, IFC Corporate Governance Regional Lead for East Asia and the Pacific. “Undoubtedly, good corporate governance practices allow companies to mitigate risk, safeguard against mismanagement, generate higher returns for shareholders, and attract capital to fuel their growth.”
IFC has been helping Vietnam companies put in place good corporate governance practices over the past eight years by raising awareness, building capacity, developing guidelines, and providing firm-level advisory services. This report was developed in partnership with the Switzerland’s State Secretariat for Economic Affairs (SECO) and Center for Asia Private Equity Research Ltd.
About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence, to create opportunity where it’s needed most. In FY15, our long-term investments in developing countries rose to nearly $18 billion, helping the private sector play an essential role in the global effort to end extreme poverty and boost shared prosperity. For more information, visit
www.ifc.org
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