11. Stakeholder relations and responsible business conduct

A. Governments, the state ownership entities and SOEs themselves should recognise and respect stakeholders’ rights established by law or through mutual agreements

The rights and obligations of employees, representative organisations of employees, and employers are implemented in accordance with labour regulations – namely, the labour Code (2019, effective 2021) and supporting regulations (Decree No. 145/2020/ND-CP) that detail a number of articles in the Labour Code related to working conditions and labour relations. There are two supporting decrees for each wholly-owned single-member LLCs and partially-owned SOEs:

  • Decree No. 51/2016/ND-CP, providing labour management, wages and bonuses for employees of wholly state-owned one-member limited liability companies.

  • Decree No. 53/2016/ND-CP on management of employees, labour, remuneration and bonuses at JSCs where the State has a controlling interest has explicitly regulated on the wage and bonus regime for employees, leaders, representatives of State capital, and non-representatives of State capital.

The labour code enables employees to, inter alia, establish, join or participate in activities of workers’ representative organisations, and to ‘perform’ employment contracts, collective bargaining agreements or similar. These collective bargaining agreements, as well as labour regulations internal to SOEs, should also work in support of the labour code.

Trade unions appear to be common. They can be consulted on a range of matters including for instance on wage regulations, as is the case with the VNR Trade Union – a socio-political organisation established by law to protect the legitimate rights and interests of employees as its third party. Vinacomin has also entered into a collective bargaining agreement with the trade union.

Rights of employees do not appear to extend to participation on the board or in shareholder meetings in the case of partially-owned SOEs. The rights of creditors, consumers and business partners are also prescribed in various laws.

The rights of creditors are prescribed in the Civil Code and the Law on State Enterprises. They are mainly framed in terms of the responsibilities that companies – here, SOEs – have for informing creditors on relevant pieces of information, for instance regarding debt repayment obligations in case of dissolution or settlement of repurchased shares.

The rights of consumers are outlined in the Law on Protection of Consumers Rights (No.59/2020/QH12). Rights afforded to consumers include being provided accurate and complete information about organisations or individuals trading goods or services, contents of transactions; being entitled to offer suggestions to organisations or individuals trading goods and/or services on a range or related matters, being entitled to complaint, denunciation or pursuit of lawsuits.

Rights of those engaging in commercial contracts are found in the Civil Code and the Commercial Law (No. 36/2005/QH11), which establishes the basic terms of any commercial contract, including the rights and obligations of involved parties.

The OECD mission team does not have a clear understanding of the application of these laws in practice – that is, whether SOEs dutifully fulfil their responsibilities owed to employees, consumer, creditors and business partners. At minimum, the OECD team’s concerns about the disclosure of information to the broader public, which is discussed in the following Chapter on transparency and disclosure, suggests that at least certain rights concerning stakeholders’ access to information are not adhered to in full.

B. Listed or large SOEs should report on stakeholder relations, including where relevant and feasible with regard to labour, creditors and affected communities

Companies listed on either of Viet Nam’s two national stock exchanges1 are required to disclose information about “corporate environment, society and community sustainability”,2 aligned with the Guidance on Environmental, Social and Governance (ESG) Disclosure published by the Hanoi Stock Exchange market authority. Law on Securities (No. 62/2010/QH12), SOEs listed on the stock exchange are required to disclose information.

While listed SOEs in Viet Nam are aligned with this provision of the SOE Guidelines, it appears that large SOEs – whether single or multiple member LLCs or JSCs – are not. Joint-stock SOEs and those with 100% charter capital held by the State are not required to report on stakeholder relations, nor to issue social and environmental disclosures, and there are no international standards encouraged in this regard. Single-member LLCs are required to periodically report on their websites, on the “performance of public duties that are assigned or bid for (if any) and other social responsibilities”, as per the Enterprise Law (and supported by Decree No. 47). JSCs and multi-member LLCs are free from this particular disclosure requirement. It is possible that such disclosures would entail information that touches upon stakeholder relations, but none of the SOEs participating in the questionnaire or fact-finding missions could point to such disclosures even if voluntary.

As per the Law on Enterprises, the board and members of executive management of wholly-owned SOEs have a responsibility to notify the company of shares or stakes that they or their related persons own, and the company should disclose this information, as well as that about contracts and transactions between it and related persons.

C. The boards of SOEs should develop, implement, monitor and communicate internal controls, ethics and compliance programmes or measures, including those which contribute to preventing fraud and corruption. They should be based on country norms, in conformity with international commitments and apply to the SOE and its subsidiaries

Wholly-owned SOEs in Viet Nam are not required to establish specific control, ethics and compliance programmes or measures. SOEs – both joint-stock and wholly-owned – report that they have established anti-corruption and anti-waste programmes, but this is not clear in the law. It is instead understood that SOEs are referring to existence of requirements on internal audit, and the Anti-Corruption Law (ACL) rules for transparency and ethical behaviour. However, SOEs, or in certain cases the state officials therein, are subject to certain rules that acts as controls that should, when well-functioning, contribute to the prevention of corruption and fraud.

The Law on Anti-Corruption, described for its application to SOEs in Chapter 5, requires state representatives in SOEs – considered “office holders” – to abide by a public sector code of conduct (Art. 20). It subjects a wholly-owned enterprise (not just office holders) to policies on gifts and management of conflict of interest. Partially-owned SOEs to establish their own “codes of conduct and control mechanism for prevention of conflict of interest, inhibition of corrupt activities; develop a healthy and incorruptible business culture” (Art. 79, ACL). Thus, multi-member LLCs and JSCs will have a Code of Conduct that applies to the entire company, rather than limiting it to individuals in the company as is the case for wholly-owned SOEs.

Any state officials, whether in wholly or partially-owned SOEs, as well as deputy managers and above in wholly-owned companies are required to declare assets and income. Additionally, expectations for ethical behaviour of board members can also be taken from the LOE’s obligations of board members that are, inter alia, to carry out its functions in an honest, careful and best manner to ensure the legitimate interests of maximum corporate law, be loyal to the interests of the company and not abuse position nor use information, know-how, business opportunities and other assets of the company for self-interest or to serve the interests of other organisations and individuals. Annual evaluations of boards, and accompanying ratings of individuals, include criteria on political quality, ethics and lifestyle. More information on board evaluations is found in Chapter 13.

Thus, the legal and regulatory framework requires SOEs or at least SOE representatives to abide by anti-corruption related measures and controls. Together with the new requirement for all SOEs to establish internal audit, there are elements of international good practice woven throughout the legislation. However, there are substantial challenges to the effectiveness of individual internal controls in practice because they are meant to be embedded in a highly complex and confusing corporate control structure that tries to blend state controls and business practices.

There emerge three main reasons for the ineffectiveness of the overall (internal) control structure and thus of anti-corruption and anti-fraud measures. First, there are multiple bodies involved in “control” in SOEs that makes Vietnamese SOE control structures highly unique and complex. The BoC appears to provide control over the entire company and its management, the “Internal Control Board” provides control over SOE operations (internal control function) and the “Party Organisation” can do a mix of both. In addition, there are external controllers. Second, there are concerns about the implementation of existing laws because of the informal relationships and power structures at play in practice. Third, there seems to be a degree of confusion about the roles and responsibilities of the various control bodies/units regarding internal control. When asked about the requirements around the broader risk management and control structure of SOEs more generally, stakeholders at both the state and company level point first and sometimes only to internal audit.

Internal audit is discussed more in the Chapter 12, but it is worth here noting that the division of responsibilities for internal control, ethics and compliance in SOEs between SOE Boards of Members or Boards of Directors (BoD), BoCs, “Internal Control Boards” and internal auditors is unclear not only in legislation but also in practice. These challenges are elaborated upon below:

The Board of Controllers (BoC) – also known as the “Controllers of the Corporation” – is composed of officials and civil servants appointed by CMSC and under its management to supervise an SOEs’ BoM (Decree No. 10/2019/ND-CP, Art. 10, Clause 2). While legally ‘equivalent’ to the board, and with the responsibility for overseeing the board, certain stakeholders were sceptical about the BoC’s effectiveness in practice, which may be in part because the BOC’s CMSC-appointed civil servants are meant to oversee powerful member of the board which can include the CEO and Party members. According to one stakeholder, if the BoC detects mistakes or suspects irregularities “they are not the ones to blow the whistle”, instead taking their cues from BoMs, and likely the Party Organisation (see below), in practice.

Wholly-owned SOEs have an internal control body that is said to be in charge of internal control within an SOE. It goes by many names: “Audit and Inspection Committee”, “Internal Control Board or Committee”, “Internal Audit Committee” and the “Internal Audit and Financial Supervision Department” among others, (hereafter referred to as “Internal Control Board” for simplicity). Though its name may be misleading, this body is subordinate to the BoM. Members are hired and fired by the BoM. In most cases, it appears that the head of internal audit, where existing, sits on the “Internal Control Board”. Good practice would hold that the heads of internal audit units or departments have direct access to the BoM (to protect its autonomy). While the internal auditors appear to have this access through the Internal Control Board, it appears that the Internal Control Board plays more of a subservient role than would be afforded, say, by an independent Audit Committee and thus calls into question the autonomy of internal audit.

A 2019 report published by VCCI and the UK Government, Companies’ Use of Internal Control and Codes of conduct in Vietnam, found that internal control boards are often staffed based on power structures, and that some members were from a holding company and lacking knowledge of the company’s operations. It also found that inspections conducted by the body were compromised, with inspectors and those being inspected agreeing on what to report. Indeed, a stakeholder informed OECD that Internal Control Boards are often subject to instructions or special guidance from members of the BoM, leading to a destruction of standard internal control and audit procedures. They reiterated that strengthening internal audit and internal control in practice is a big challenge.

Joint-Stock Companies can opt to establish an Audit Committee instead of having a CMSC-appointed BoC (above), which some stakeholders said translated to a higher degree of assurance over the internal) control activities of the company – one of the reasons for which is that the control structure becomes simplified and allows for clearer reporting lines internally.

It appears that most if not all SOEs have a Party Organisation/Committee/Cell. It is not uncommon for a CEO or Chair of the board to be a Party member, but the “Party Organisation” can also be represented in different corporate functions and roles. The presence of Communist Party members in SOEs is said by multiple stakeholders to provide a fairly effective “check and balance” within the company, including over the board or executive management – though this is plausibly limited when Party members are filling the positions of Chair and/or CEO.

In the words of the PVN, its “the Party Committee of the Vietnam National Oil and Gas Group” sits directly under the Party Committee of the central business bloc. It regularly provides direction to prevent waste and corruption in accordance with the provisions of the Anti-Corruption Law. It documents actions on the prevention of wasteful corruption, often propagating, disseminating and educating the Party’s lines and policies and laws of the Party. It strengthens behavioural reform, regularly improving internal processes and regulations in handling work in a strict direction, complying with the provisions of the law in order to prevent wasteful corruption, especially in management and in procurement of goods, services and in supplier selection.

Putting aside the substantial concern of political interference in SOE operations, it appears that the Party function is either filling a gap in the risk and control architecture, as well as in driving ethical behaviour, or giving reason for the BoM/BoD, BoCs, Internal Control Board or internal audit to give up at least part of a typical role to internal political forces. Good practice holds that boards and management take responsibility for risk management and control and the independent audit function or unit provides oversight and assurance, reporting to independent members of the board. In Viet Nam, all measures have substantial drawbacks that likely hinder the ability for an SOE to manage (corruption and other) risks to the SOEs objectives.

There is broader accountability system in place for oversight of SOEs, including independent external audit, state audit, and the State Inspectorate. Independent external auditors do not, by virtue of their mandate, look for corruption, but could play a more prominent role in flagging issues that arise in the carryout of their function. The state auditor (SAV) has in the past raised irregularities that were further explored by appropriate authorities – for instance the State Inspectorate, which is in turn responsible for oversight of SOEs. Typically, SOEs are not subject to a same degree of scrutiny as can be found in other countries, but there are cases where media has given attention to certain cases of corruption or irregularity in SOEs.

Vietnamese SOEs, and those involved in exercise of state ownership, would benefit from an evolved understanding of the concepts of internal audit, internal control and risk management – and the relations between them. Many stakeholders spoke only of internal audit when asked about internal control more broadly and very few stakeholders could provide details on risk management – to a degree that even suggested a total absence of risk management practices.

Relatedly, the OECD was informed that corruption risks remain higher for SOEs than private firms in Viet Nam, owing in part to the lack of risk management and control and knowledge and capacity at the board level – with recent cases of corruption providing evidence for the claim. Part of the challenge stems from the lack of ability of SOE boards to manage risks in its decision-making in the best interest of the company, is because of their limited capacity to take autonomous decisions – with many decisions arbitrarily being subject to multiple layers of decision-making of (often) multiple state authorities. This is discussed in more detail in Chapter 13. Without the authority to sign off or make key decisions at the board level, discretion is left to representatives of the state, which may have competing or personal interests in decisions, and this has led in some cases to siphoning of funds from SOEs for personal or related-party illicit enrichment. Stakeholders suggested that risk management in SOEs is better in joint-stock SOEs and particularly in listed SOEs, being additionally subject to the securities law.

D. SOEs should observe high standards of responsible business conduct. Expectations established by the government in this regard should be publicly disclosed and mechanisms for their implementation be clearly established

Wholly-owned SOEs are required to periodically disclosure information about their public duties (taken to mean policy objectives) as well as ‘social responsibilities’. This does not apply to partially-owned LLCs or JSCs. The Decree on Information Disclosure of State-Owned Enterprises (No. 81/2015/ND-CP), that precedes the revised Law on Enterprises, provides details on the nature of this reporting:

  • “Enterprises must develop a report on the implementation results of public duties and social responsibilities (if any) as stipulated under provisions in Annex VI attached to this Decree.

  • Enterprises shall make a disclosure on enterprises’ electronic portal or website of the report on the implementation results of public duties and social responsibilities (if any) and send the report to representative bodies of State ownership and the Ministry of Planning and Investment for disclosure as stipulated.

  • Deadlines for disclosure and sending of the report to representative bodies of State ownership and the Ministry of Planning and Investment must be no later than 20 June of the year following the reporting year.

  • Representative bodies of State ownership shall make a disclosure of the report on the implementation results of public duties and social responsibilities (if any) on the agencies’ electronic portal or website within five working days from the date of receiving enterprises’ report.”

  • The Ministry of Planning and Investment shall make a disclosure of the report on the implementation results of public duties and social responsibilities (if any) on the Ministry’s business information portal (http://www.business. gov.vn) within five working days from the date of receiving enterprises’ report.”

Social responsibilities including SOEs’ responsibility for: environmental protection; contributions to society and towards suppliers; ensuring the benefits and safety of consumers; maintaining good relations with employees; and ensuring the benefits of their shareholders and employees. Some of these responsibilities speak to the above-mentioned legislations on the rights of consumers, employees and creditors.

The OECD understands that SOEs pursuing these objectives and owning these responsibilities are disclosing the ‘report’ either integrated into the annual report or as a separate annual “RBC report by business”. However, one stakeholder reported that the “RBC report by business was in fact voluntary. The requirement’s reference to “if any” provides a carve-out of SOEs that do not purport to have any public duties or social responsibilities.

The OECD team understands that there are no explicit expectations set by the state owner concerning responsible business conduct. That is, SOEs must report if they undertake public policy objectives or have ‘other social responsibilities’ – but it is unclear to the mission team whether those “other” responsibilities are part of the overall SOE objectives or rather voluntary pursuits. Only listed SOEs are required to make ESG-related disclosures, as was mentioned above.3

SOEs participating in the review process pointed to a longstanding and implicit expectation or ‘understanding’ that SOEs contribute to the “social welfare fund”. One interviewed stakeholder informed the OECD that, in his view SOEs do not pursue responsible business activities “because they are pressured, but because it’s just what they do”. MPI informed the OECD that SOEs have a long-term tradition of helping the vulnerable on an annual basis. For its part, the national railway company VNR has company-specific regulations to support activities in remote, border and island areas – taken to be established as public policy objectives – as well as to support those in need (for instance, flood victims). The MPI marked an evolution in the contributions of SOEs to society through the COVID-19 pandemic, which has seen SOEs make significant contributions to government functions and services.

Multiple stakeholders referred to the promise of the restructuring ‘Master Plan’ and the opportunity for the seven SOEs involved to play a role as a leader and inspire other economic actors, thereby contributing to a stronger economy. The OECD was informed that this could involve, as one example, working with SMEs to become partners for innovation, which is seen as a ‘social responsibility’.

Viet Nam stands to benefit from the formalisation of and greater consistency in SOE contributions to RBC, as a means for attracting investment. At the time of writing, there are limitations owing to the lack of explicit requirements from the state owner and loopholes in the disclosure requirements. The disclosure requirements (i) provide carve-outs for SOEs that do not identify as having public objectives or “other social responsibilities” and (ii) do not apply to multi-member LLCs or JSCs. Thus, the mission team deduces that SOE applicable of responsible business conduct is well intentioned where existing but piecemeal at best. There is room for greater consistency across SOEs, which might send positive signals to investors.

E. SOEs should not be used as vehicles for financing political activities. SOEs themselves should not make political campaign contributions

There is no reference in legislation regarding the financing of political activities as the Communist Party is funded directly by the state budget (as are activities of its officials). There are virtually no political campaigns or fundraising activities. As funding comes from the state budget, the law does not recognise contributions of individuals or organisations. Despite this, SOEs reported that in practice they are not used as vehicles for financing political activities. However, the presence of the “Party Organisation” in SOEs represents an intertwined relationship between SOEs and the Party that goes well beyond the limits that political party financing regulations usually aim to establish between the political arena and SOEs. The formulation of the enterprise’s strategy and governance is usually based on the orientations of the Party, the State and the government.


← 1. The Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX). The Unlisted Public Company Market (UPCoM) is folded into the HNX and is the preferred and primarily listing segment for SOEs that have been recently equitised in order to participate in the securities market, with the common intention of preparing to later transfer to the HOSE or HNSX.

← 2. Circular 155/2015/TT-BTC (dated 06 October 2015) on guidelines for information disclosure on securities market.

← 3. Listed SOEs are required to disclose information about “corporate environment, society and community sustainability” in line with the Hanoi Stock Exchange’s guidance on Environment, Social and Governance (ESG) disclosure.

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