Governance innovation - an important factor for effective restructuring of state-owned enterprises

Strengthening corporate governance at SOEs instead of focusing on state capital management as at present Photo: ST

Many difficulties and obstacles in governance at SOEs

According to the Department of Corporate Finance (Ministry of Finance), the improvement of the law on corporate governance in SOEs plays a significant role in improving the investment and business environment, contributing to improving production efficiency - business of SOEs.

However, the legal basis for corporate governance in SOEs in Vietnam still has some shortcomings such as not recognizing the autonomy and self-responsibility of SOEs, not separating state management functions and owner representative functions; State owners still interfere in the operation of enterprises.

The standard for appointment of business managers also shows inadequacies when the recruitment, planning, and appointment of staff at enterprises where the state holds 100% of charter capital and enterprises with state capital are not open enough to select talented people to meet international competitive requirements. Currently, there are no regulations on recruitment by exam or hiring key personnel.

According to Mr. 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 help the SOE sector improve efficiency, fulfill the task of being an important material force of the state economy, playing the role of promoting socio-economic development in the direction of socialism. In many industries and fields of the economy, there have been typical examples of modern governance based on advanced technology, first of all, economic groups and state-owned telecommunications industry corporations, technology, state-owned commercial banks and SOEs listed on the stock market. These encouraging results have an important contribution to reforming and perfecting mechanisms and policies on SOE governance. Compared with the period before 2010, the governance framework of SOEs in our country has changed fundamentally and is more suitable to the requirements of perfecting the market economy.

However, governance issues at SOEs are facing many difficulties and problems. Accordingly, the operational objectives of many SOEs are not clear in practice, making governance difficult while operational objectives are a decisive factor for the organization of SOE governance.

According to Th.S Pham Duc Trung, in our country, there are still many SOEs that do not have clear goals and tasks, some large corporations still intertwine business tasks with socio-political tasks, leading to difficulties and confusion in the implementation of monitoring and evaluation of SOEs' activities as well as in SOE governance practices according to common practices.

This is also one of the factors slowing down the process of applying the full, modern and integrated market mechanism to a number of industries and fields. Typically, the construction and operation of electricity prices are based on the market mechanism.

In addition, the SOE governance practice of the owner's representative agency has many limitations, obstacles, and inefficiencies; disclosing information about enterprises with 100% state capital is still limited compared to the requirements of the law; management, administration, supervision and inspection activities in enterprises with 100% state capital still have many problems.

Promote equitization to facilitate the application of good SOE governance practices

Proposing solutions related to perfecting the legal framework on corporate governance in SOEs, the Corporate Finance Department said that the amendment of Law No. 69/2014/QH13 in the near future is an opportunity for amending and supplementing mechanisms, policies and legal regulations on corporate governance; towards applying international practices on corporate governance in real terms in Vietnam, improving investor confidence; strengthen the protection of the interests of owners, investors and stakeholders, while ensuring that SOE governance is carried out in a transparent and accountable manner.

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

At the same time, strengthen the assignment and decentralization of authorization to the agency representing the owner, the representative of state capital, the Members' Council (BOD) or the Board of Directors (BOD), the general director of the attached enterprise with clearly defined responsibilities of heads and business leaders.

Besides, stipulate the responsibility of supervision of the owner's representative agency on the results and efficiency of production and business activities of the enterprise in accordance with market principles under the law. In addition, research and develop wage mechanisms and policies associated with labor productivity and production and business efficiency and allow enterprises to decide on their own according to market principles, in accordance with production conditions, business, industry, nature of the operation to recruit or hire high-quality human resources; consider piloting the use of foreign general directors in a number of economic groups and corporations; appoint an independent member of the Board of Directors to participate in the operation. Widely deploying the recruitment and appointment mechanism through competitive, open and transparent recruitment exams for all management, executives and other positions.

Mr. Pham Duc Trung said that the model of multi-owned SOEs as joint-stock companies has more advantages than 100% state-owned enterprises in applying good standards and practices at corporate 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, mainly joint-stock enterprises (except for enterprises operating in public interests, operating for non-profit purposes) in the spirit of Resolution No. 12-NQ/TW.

At the same time, to improve the operational efficiency of the management and administration apparatus of SOEs, all SOEs that are joint-stock companies shall apply the legal provisions on public corporate governance. The technology of the Fourth Industrial Revolution must be applied to the governance of owner's representative agencies and SOEs.