An analysis of the role of supervisory boards in syate owned joint stock companies

An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du An analysis of the role of supervisory boards in syate owned joint stock companies dinh hoang thang nguoi huong dan huynh the du

FULBRIGHT ECONOCMICS TEACHING PROGRAM

DINH HOANG THANG

AN ANALYSIS OF THE ROLE OF SUPERVISORY BOARDS IN

STATE-OWNED JOINT-STOCK COMPANIES

THE CASE OF VIETNAM CONSTRUCTION AND IMPORT-EXPORT JOINT-STOCK CORPORATION

MASTER OF PUBLIC POLICY THESIS

HO CHI MINH CITY, 2014

AN ANALYSIS OF THE ROLE OF SUPERVISORY BOARDS IN

STATE-OWNED JOINT-STOCK COMPANIES THE CASE OF VIETNAM CONSTRUCTION AND IMPORT-EXPORT JOINT-STOCK CORPORATION

Public policy Code: 60340402

Supervisor: Dr Huynh The Du

ACKNOWLEDGEMENTS

I would like to express my deep gratitude to my parents who always encourage me in my life

I would like to express my sincere appreciation to my supervisor, Dr Huynh The Du, who has helped me in performing the thesis With rich knowledge, experience and enthusiasm, he has effectively contributed to my thesis

I am graceful to Dr Tran Thi Que Giang, Mr Do Thien Anh Tuan, Ms Dinh Vu Trang Ngan,

Mr Vo Duy Minh for thoughtful and valuable comments on the very beginning of my thesis

I would like to thank all my teachers in Fulbright Economics Teaching Program, who have retransmitted their deep knowledge and experience to me as well as my classmates

Last but not least, I express my thanks to all of my friends, especially Ms Nguyen Thi Nhung and Ms Do Trieu Anh, Ms Tran Thi Loc, who help and motivate me in pursuing the study

Ho Chi Minh City - May, 2014

Dinh Hoang Thang

(iii)

ABSTRACT

The role of the Supervisory Board (SB), in accordance with Vietnam’s legal regulations, is to protect shareholders’ interests by monitoring the duties of the Board of Management (BOM) and the CEO, examining the reasonableness, legitimacy, honesty and caution of management; appraising the business operation report of the CEO, management report of the BOM and financial reports of the company However, hardly has the SB been considered as successfully fulfilling their designated jobs, especially in State-owned enterperises This study was done

in its case study paradigm to explore the actual role of the SB in Vietnam Construction and Import-Export Joint-stock Corporation (Vinaconex), as the typical company for research purpose Data used to perform the purposes of the thesis are widespread official information of the company, working papers, and other kinds of information related to the study Upon applying Agency theory and experience of other countries, this study identifies that the Vinaconex’s SB does not have real power to protect shareholders’ interests, including the State and minority shareholders’ interests due to conflicts of interest and information asymmetry between the SB and shareholders, the SB and the BOM/CEO; lack of independence of the BOM/CEO in terms of personnel, finance and duty and low competency of the SB members Thesis’s policy recommendations focus on the enhancement of those areas including: improvement in the independence of the SB’s members in term personnel, finance and duty; standardization of the framework of information provided to the SB and higher frequency of the SB’s meetings and reports; higher technical competency of the SB members Further, it

is needed to decrease control of the Party and the Government over the company, privatize and reduce the State ownership /./

Keywords: Supervisory board, agency theory, shareholders, interest.

ABBREVIATIONS

(in two-tier model)

(in two-tier model) Hội đồng quản trị (in Vietnam)

Corporation

Tổng công ty Kinh doanh Vốn Nhà nước

Import-Export Joint-stock Corporation

Tổng công ty Xuất nhập khẩu và Xây dựng Việt Nam

CERTIFICATION (i)

ACKNOWLEDGEMENTS (ii)

ABSTRACT (iii)

ABBREVIATIONS (iv)

TABLE OF CONTENTS (v)

LIST OF GRAPHS (vi)

LIST OF TABLES (vi)

LIST OF BOXES (vi)

CHAPTER 1: INTRODUCTION 1

1.1 Introduction 1

1.2 Research Objective 3

1.3 Research Questions 3

1.4 Research Methods, Sources of Information and Research Scope 4

1.5 Thesis structure 4

CHAPTER 2: THEORETICAL FRAMEWORK AND LITERATURE REVIEW 5

2.1 CORPORATE GOVERNANCE AND SUPERVISORY BOARD IN VIETNAM 5

2.1.1 Corporate governance 5

2.1.2 Supervisory board in joint-stock company 6

2.2 THEORETICAL FRAMEWORK AND LITERATURE REVIEW 7

2.2.1 Agency theory 7

2.2.2 Design a contractual relationship 8

2.2.3 Literature review 11

2.3 EXPERIENCE OF OTHER COUNTRIES 15

CHAPTER 3: VINACONEX CASE 20

3.1 VINACONEX 20

3.2 Supervisory Board of the Company 21

3.3 The flow of work related to the SB in Vinaconex 24

3.4 Principal-Agent problem between Supervisory Board vs the BOM/CEO 26

3.4.3 Current Interest alignment instruments and Information system 31

3.5 Principal-Agent problem between Supervisory Board vs Shareholders 32

3.5.1 Goals/given tasks 32

3.5.2 Agency cost 33

3.5.3 Current Interest alignment instruments and Information system 36

3.6 The technical competence of the Supervisory Board members 37

3.7 The dependence of Supervisory Board 37

3.7.1 The dependence in term of personnel, finance and duty 37

3.7.2 The real incentives of the SB, BOM members 39

CHAPTER 4: CONCLUSION, POLICY RECOMMENDATIONS AND LIMITATIONS 42

4.1 Conclusion 42

4.2 Policy recommendations 42

4.3 Limitation of the study 44

REFERENCES 45

APPENDIX I REGULATION ON SB IN THE ENTERPRISES LAW 2005 57

APPENDIX II REGULATION ON SB IN THE CORPORATE CHARTER 60

APPENDIX III REGULATION ON SB IN THE ORGANIZATION AND OPERATION REGULATION OF THE SB 62

LIST OF GRAPHS

Graph 1.1: One-tier board structure and Two-tier board structure 1

Graph 2.1: Agency relationship related to the SB 8

Graph 2.2: External and Internal Categories of Interest Alignment Instruments 9

Graph 3.1: The company structure 21

Graph 3.2: The Structure of Supervisory Board in Vinaconex 22

Graph 3.3: Flow of monitoring function of the SB 24

Graph 3.4: Flow of periodical/unusual inspection function of the SB 25

Graph 3.5: Flow of creating the SB’s report 26

Graph 3.6: The mixing role of the SB members in Vinaconex and in block holders 28

Graph 3.7: The mixing role of the SB in Parent company and Subsidiaries 29

Graph 3.8: Conflict of interest between Inside and Outside members 34

Graph 3.9: Dual participating mechanism in Vinaconex 41

LIST OF TABLES Table 3.1: Share structures of Vinaconex 20

Table 3.2: Number of shares owned (share of parent company) 23

LIST OF BOXES Box 1: The Responsibilities of the boards of SOEs as OECD guidelines 18

Box 2: Member of the Supervisory Board in Vinaconex Jsc 23

CHAPTER 1: INTRODUCTION

1.1 Introduction

There are two common models of corporate governance around the world: one-tier and two-tier board structure (Jungmann, 2006) The difference between them is that in two-tier board structure, there is an additional board called Supervisory Board (SB) who supervises the Executive Board in managing and running the company The one-tier board structure is more popular in the world, especially in Anglo-Saxon countries such as the UK, the US while the two-tier board is common in continental European regions such as Germany and the Netherlands… (Kruijs, 2012; Maassen, 2002) The following outline summarizes the differences between the two corporate governance structures

Graph 1.1: One-tier board structure and Two-tier board structure

Source: Author’s illustration based on Peij (2010)

In Vietnamese corporate governance, there is also a board called Supervisory Board in joint-stock company However, even with the same name, Vietnamese SB is different with the one in two-tier model According to the current regulations, each joint-stock company with over

11 individual shareholders or has an organizational shareholder who owns over 50 percent of

shares, must establish a SB who is independent of both the BOM and the CEO (Enterprises Law

2005) See Graph 3.1 in page 21 for visualization

As regulated in the Enterprises Law 2005, the SB’s role is to protect shareholders’

interests by monitoring the duties of the BOM/CEO; examining the reasonableness, legitimacy, honesty and caution of management; appraising the Business Operation Report of the CEO, the Management Report of the BOM and financial reports of the company; giving opinions and

petitions to the BOM/CEO or even Annual General Meeting (AGM – Dai hoi dong co dong)

about the violation of the BOM/CEO if needed However, hardly has the SB been considered as successfully fulfilling their designated jobs, especially in state-owned joint-stock companies (Nguyen Viet Thinh & Nguyen My Hanh, 2012; Nguyen Dinh Cung, 2008) In reality, the SB has to face many difficulties in order to get the equal position compared to the BOM/CEO (Tran Minh Son, 2010) As the result of a survey conducted in Vietnam, 36 percent of the respondents

believe that the SB just “exists on paper” (ton tai tren giay) and it is established to satisfy the

requirement of law only (Lan, 2004 as cited in Hai & Nunoi, 2008) There might be a lot of reasons for the ineffectiveness of the SB, namely conflict of interest, information asymmetry and dependence of the SB on other boards (Tran Minh Son, 2010) The SB seems lack of actual power to act upon interests of shareholders and the operations of the SB are formalistic only (Le Minh Toan, 2013; Tran Thanh Tung, 2009)

In state-owned joint-stock company, the SB might have more responsibilities due to it has

to represent and protect the interest of not only minority shareholders but also the State Minority shareholders’ interest is that “shareholders unanimously want firms and managers to maximize share value” (Gordon, 1990, p 1) Besides maximizing the share price as minority shareholders, the State prioritizes to preserve and increase the state properties’ value, including broader social interests (Voss & Xia, 2012) Additional complexities are added to the corporate governance since the state has different interests other than individual shareholders (Pande, 2012) It might pursue political or policy goals instead of maximizing shareholders’ benefit In this case, protecting minority shareholders’ interest and determining whether an action serves policy or political goals will be more challenging (Pande, 2012) This thesis aims to deeply understand the causes of the SB’s lack of actual power in SOEs, and give policy recommendations for this issue through the case of Vietnam Construction and Import-Export joint-stock Corporation (Vinaconex hereafter)

The thesis chooses Vinaconex as the typical company for the research purpose because this corporation was one of the first SOEs privatized from the corporation 901 to take advantage

of capital market potentials for its competitiveness and economies of scales The Corporation went public on 1st Dec 2006, listed as VCG on Hanoi Stock Exchange, which marked a milestone in its history and a step towards the leading position in Vietnam (Vinaconex, 2012a) The state ownership in Vinaconex is quite large, around 79 percent, that adds more responsibilities for both the SB, the BOM and the CEO in managing and using the State resources

1.2 Research Objective

The objective of the thesis is to identify whether the SB of SOEs in general and Vinaconex in particular, have power to protect shareholders’ interests (including the State and minority shareholders) in reality or not And then, the thesis proposes policy recommendations to increase the actual power of the SB in SOEs

1.3 Research Questions

In the thesis, the research objectives were formulated as research questions The central theme of this research is to analyze the functions and characteristics of the SB in SOEs through the case of Vinaconex and answer these three following questions:

(ii) What are the factors which affect the function of the Supervisory Board in Vinaconex? (iii) Does the Supervisory Board in Vinaconex have power to protect the interests of

shareholders including the State and minority ones in reality?

Due to Vinaconex is still a state-owned joint-stock company with up to 79% of shares belong to the State, the public policy meaning of those above questions is to identify the problems of the Vietnamses SB, find the way to improve its actual role and protect the State's resources and interest

1 Corporation 90 was regulated in the Prime Minister Decision No 90 on 7th Mar 1994 to continue on the arrangement of state enterprises in which corporation 90 is the state enterprise of at least 500 billion VND legal capital

1.4 Research Methods, Sources of Information and Research Scope

The thesis employs a case study for research purpose The collected data are mainly publicly official information of the company and its subsidiaries Working papers and other useful information related to this study are also included The thesis chooses Vinaconex as the typical company because it was one of the first SOEs privatized from state corporations Moreover, its chartered capital is quite large, up to VND 4,417 billion (as at 29th Mar 2012) and although it went public in 2006, the company still remains 79% of the State ownership

The research period is from 2006 to present Subjects to be studied are both members of the SB/BOM/CEO of the parent company (Vinaconex) and its subsidiaries (Vinaconex 1, Vinaconex 2, Vinaconex Xuan Mai…) The scope of the research is the power of the SB of Vinaconex in both theory and reality

1.5 Thesis structure

The rest of the thesis is organized as follows:

Chapter 2 is about theoretical framework, literature review and experiences of other countries

Chapter 3 analyses the case of Vinaconex, each agency relationship and its characteristics

as well as the independence of the SB

Chapter 4 suggests policy recommendations and conclusions Besides, limitation of the study will be mentioned at the end of this chapter

CHAPTER 2: THEORETICAL FRAMEWORK AND LITERATURE REVIEW

2.1 CORPORATE GOVERNANCE AND SUPERVISORY BOARD IN VIETNAM

2.1.1 Corporate governance

Corporate governance has always been discussed as a hot topic in both literature and practice, and it plays an important role in economics, business and society (Meer, 2009) As defined by the OECD (1999):

"Corporate governance is the system by which business corporations are directed

and controlled The corporate governance structure specifies the distribution of

rights and responsibilities among different participants in the corporation, such

as, the board, managers, shareholders and other stakeholders, and spells out the

rules and procedures for making decisions on corporate affairs By doing this, it

also provides the structure through which the company objectives are set and the

means of attaining those objectives and monitoring performance"

The main concern of corporate governance is the separation of ownership and control in a company, which is first introduced by Berle & Means in 1932 (Meer, 2009) This was then developed by Jensen & Meckling in 1976, that the separation of ownership and control in a company might create agency cost because of the conflict of interest between owners and managers who are hired to operate the company on behalf of the owners The most focused point

on corporate governance is to reduce agency cost by aligning the interests of those above stakeholders (Meer, 2009)

In Vietnam, the BOM (Hoi dong quan tri) are nominated and appointed in AGM (Dai hoi dong co dong) to determine and execute the company policies to maximize the shareholders’s interest The CEO (Giam doc, Tong Giam doc) are nominated and hired by the BOM to run the

company following the defined policies The SB is established by the shareholders through AGM

to protect the interests of shareholders by monitoring the actions of the BOM/CEO (Enterprises Law 2005)

2.1.2 Supervisory Board in joint-stock company in Vietnam

In Article 95 and 121 of the Enterprises Law 2005, a Vietnamese company with over 11

individual shareholders or has an organizational shareholder who owns over 50 percent of shares, must establish a SB All the SB members internally elect one of them to be the Head of the SB More than half of the SB members must be permanent residence in Vietnam At least one SB member must have knowledge of accounting or auditing In a joint-stock company, the SB has the role to examine, supervise and be the counterweight to the BOM/CEO to increase the transparency and protect shareholders’ interests (Tran Minh Son, 2010) With 79 percent of the State ownership, the SB of Vinaconex has more responsibilities than other companies The SB has to supervise the BOM/CEO not only to protect minority shareholders but also to preserve and increase the State’s asset

As a joint-stock company, Vinaconex also issues the Organization and Operation Regulation of the SB (Quy che to chuc va hoat dong cua Ban Kiem soat) that officially regulates

the organization and operation of the SB The regulation details all the rights and obligations of

the SB, the Head of the SB and each of its members, as being stated in the Enterprises Law and the Corporate Charter (Dieu le to chuc va hoat dong cua Tong cong ty) According to those

regulations, theoretically, the SB and its members play highly important roles in the corporate structure (Nguyen Viet Thinh & Nguyen My Hanh, 2012) See Appendix I, II and III for the

regulations related to the SB (the Enterprises Law 2005, the Corporate Charter and the Organization and Operation Regulation of the SB of Vinaconex)

2.2 THEORETICAL FRAMEWORK AND LITERATURE REVIEW

2.2.1 Agency theory

Principal - Agent problem

Agency problems or the principal agent theory was introduced by Jensen & Meckling in

1976, and it has become very popular in many fields of study, especially corporate governance

(Hájek, 2006) Agency relationship was defined as “a contract under which one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent ” (Jensen & Meckling,

1976, p 5)

Agency cost

According to Jensen & Meckling (1976), agency costs appear due to the separation of ownership and control They defined that agency costs are the sum of (i) the monitoring expenditures by the principal; (ii) the bonding expenditures by the agent and (iii) the residual loss Bundala (2012) summarizes that monitoring expenditures are the expense to monitor the agents which are not only observing but also controlling the agent’s behavior by budget limitations, compensation policies and operating rules Bonding expenditures appear when the principal pays the agent to expend resources to ensure that the interests of the principal will not

be harmed and this cost may be a substitute for monitoring expenditures and vice versa, the increase of bonding costs may reduce the need for additional resources in monitoring (Bundala, 2012) The residual loss is the loss of principal’s welfare due to the divergence of the principal’s and agent’s interests, and it mainly accounts for the agency cost.(Bundala, 2012; Suzuk, 2006)

Two inherent features of agency problem

The first inherence of an agency problem is the conflict of interest (Wright et al., 2001)

It happens since each party is perceived to maximize his own profit (Waterman & Meier, 1998) For example, managers (as agents) may use a large amount of perquisites, which favors their own welfare (Shleifer & Vishny, 1989)

The second inherence of an agency problem is information asymmetry (Shapiro, 2005) It can easily occur when different persons understand different things” (Stiglitz, 2002) Information

asymmetry contains “hidden characteristics”, “hidden action”, “hidden information” and “hidden intentions” (Schölermann, 2003 as cited in Mitzkus, 2013)

Agency relationship related to the SB

Incorporation with the two-tier system, there are some types of principal-agent relationship According to discussions in previous sections, each agency relationship related to the SB, is identified as the diagram below

Graph 2.1: Agency relationship related to the SB

Source: Author’s illustration as described in Pirchegger and Schöndube (2006), Onetto (2007)

2.2.2 Design a contractual relationship

The main purpose of agency theory is to generate the optimal design of a contractual relationship between principal(s) and agent(s) in the presence of conflicts of interest and information asymmetries (Spremann, 1987)

Goals or given tasks

Goals can be simply determined by how the agent performs given tasks under the agreement with the principal (Rungfamai, 2008) The goals/given tasks of the Vietnamese SB are

stated in the Enterprises Law 2005 They are also supplemented in the Corporate Charter and the Organization and Operation Regulation of the SB

Agency cost

As discussed above, two inherent features of agency costs are the conflict of goals (interests) and the information asymmetry between the agent and the principal These issues related to the SB can be found in many forms (See Graph 2.1 above) and will be discussed in detail in Chapter 3

Strategy to tackle agency problems

The main topics in the literature on corporate governance are instruments to protect and

maximize shareholders’ interests in the presence of principal and agent problem (Becht et al.,

2003 as cited in Drescher, 2014)

Mechanism to reduce information asymmetries

Financial reporting and disclosure practice: OECD states the role of transparency in

financial reporting and disclosure practice, as the main corporate governance solution to decrease the information asymmetry (Leung & Ilsever, 2013)

Mechanism to reduce conflicts of interest

According to Drescher (2014), mechanisms to align interests in agency theory can be classified as external or internal categories He summarizes the most important ones in the literature as follows:

Graph 2.2: External and Internal Categories of Interest Alignment Instruments

Source: Drescher (2014), Insolvency Timing and Managerial Decision-Making, (2002)

Laws and regulations are one of the most important interest alignment instruments

between owners and managers and they are used to determine the optimal contractual

relationship to protect each party's interests (La Porta et al, 1997 and 1998 as cited in Drescher, 2014) (Financial) disclosures and auditing align managers’ behavior by constraining them to disclose the company performance (Eng & Mak, 2003 as cited in Drescher, 2014) Product market competition implies the requirement for company performance to achieve or retain its

competitiveness This forces managers to spend resources on company performance rather than

pursuing their own interests (Allen & Gale, 2000 as cited in Drescher, 2014) The market for corporate control puts managers on the presure of replacement when the company is poorly managed (Holmström & Kaplan, 2001 as cited in Drescher, 2014) The managerial labor market

implies the future career chances of managements outside their current position Since their past performances will be the main criterion to measure their management capacity, managers will have the incentive to build their reputation by contributing to current jobs (Gibbons, 1998 as

cited in Drescher, 2014) Capital markets have the effect on behavior of the management, which

relate to the provision of capital For instance, share price valuations refer to the expectations of future development of shareholder value and can therefore be considered as the feedback for

actions of managers (Warner et al., 1988 as cited in Drescher, 2014) The public and media

continuously inquire about business performance taken by managers Therefore, managerial

incentive value may increase (Deephouse, 2000 as cited in Drescher, 2014) Control systems

describe that shareholders must be informed about management actions in case their interests are

neglected (Jensen, 1993 as cited in Drescher, 2014) Balance of power and decision rights reflect

regimes to limit the discretion of managers Managerial authority is divided and allocated to different individuals within the company in order to reduce individual decision-making

(Westphal & Zajac, 1995; Finkelstein 1992 as cited in Drescher, 2014) Compensation helps

increase the incentives of the managers by remunerating money or other benefits for their

performance (Bebchuk & Fried, 2003; Core et al., 2003; Murphy, 1999 as cited in Drescher, 2014) Ownership structure implies that the higher ownership concentration allows controlling

shareholders to supervise the managers closely (Yermack, 1995 as cited in Drescher, 2014)

Capital structure refers to the proportion of debt in total capital It can be considered that the free

cash flow will be reduced to finance for associated interest payments, and therefore, reduce the

incentive of the manager to spend resources on their own interests (Bebchuk & Grinstein, 2005;

Core et al., 2003 as cited in Drescher, 2014)

2.2.3 Literature review

Although the SB in two-tier board structure is different with the Vietnamese SB, it is still useful to review the world literature about the SB in two-tier board structure, identify some similar types of problem and experiences to enhance the role of Vietnamese SB Many studies have examined the unitary board, however few papers have analyzed the SB in two-tier board structure (Wang, 2013) Some studies find out the effectiveness of the SB, nevertheless, the real value of this board is ranging from providing an actual contribution to being an injurious organ

(Van Hamel et al, 1998, as cited in Wang, 2013)

In Germany, when analyzing the facts that may influence the independence and the control over the BOD of the SB in the mid to late 1990s, Tüngler (2000) summarized many

factors which could affect the SB First of all, there is a conflict of interest, including strong

position of bank, problem of interlocking directorships, and other personal links For strong position of bank, the SB in German is often dominated by large banks or some individuals, whose have close business relationships with the company, so the SB members are not independent (Andre, 1995) Relating to the interlocking directorships, the SB members of a company can be members of the SB or management board of other companies that would lead to the conflict of interests (Raiser, 1996 as cited in Tüngler, 2000) To solve this problem, one solution is that the SB candidates should disclose their mandates and employers before the election (Tüngler, 2000) For other personal links, the close relationship between the SB members and the management board prevent them from following their statutory requirements (Tüngler, 2000) A solution for this is the establishment of judge to regulate the conflict of

interests (Hopt, 2000 as cited in Tüngler, 2000) Second, co-determination which means that

employees have representatives in the SB, is also a problem since they are not considered as the

substantial collaborators for supervising (Tüngler, 2000); Third, auditing process is also not

independent since de facto, the company’s auditor is selected by the BOD, not by the SB (Prigge,

1997 as cited in Tüngler, 2000) The solution is that the auditor should be hired directly by the

SB Fourth, nomination process of new members is neither independent because CEO and head

of the SB strongly influence on the selection of the new SB members as well as the BOD

members, after their retirement, can be selected as the SB members (Prigge, 1997 as cited in

Tüngler, 2000) Fifth, the size of the SB may affect the function of the SB, it means that the

maximum number of the SB members is twenty in large companies, which seems very high and

should be reduced (Tüngler, 2000) Sixth, current frequency of meetings of the SB is really low Therefore, more SB meetings should be provided (Tüngler, 2000) Seventh, communication and flow of information from management to the SB is not enough and there is not any standard of

information provided to the SB A solution might be that the BOD should send monthly reports

to the SB as a standard requirement (Scheffler, 1995 as cited in Tüngler, 2000) Eighth, formation of special committees within the SB is weak and the appearance of the SB committee

is rare, so the introduction of the audit committee to support the SB is needed (Tüngler, 2000)

Ninth, the Enterprises Law does not have any limitation of tenure so that the SB members can be re-elected for many times (Prigge, 1997 as cited in Tüngler, 2000) Tenth, contribution to the efficiency of the SB is limited because the corporate structure of German may not provide

sufficient control that the SB has to rely on information provided by the BOD (Tüngler, 2000) According to Tüngler (2000), in the late 1990s, some suggestions to improve the efficiency of German SB had been made, one of the most potential one is the Law on Control and

Transparency in Enterprises 1998 (Das Gesetz zur Kontrolle und Transparenz im Unternehmensbereich 1998) The contribution of this new law to the improvement of German

SB in reality, will be discussed in the next section of this thesis (Section 2.4 – Experience of other countries)

In China, both in practical and academic literatures, it is commonly seen that the SB does

not have a strong role (Allen et al, 2002; Teven et al, 2002 as cited in Zhaoxia, 2008) Xiao et al

(2004) also states that the actual power of the Chinese SB is weak and depends on many factors

First, there is a differentiation between insider supervisors who work full-time for the company

or parent company (so they are not independent) and outsider supervisors who do not stay at the

company (so they are not provided with enough information) (Xiao et al., 2004) Second,

technical competence of the SB is low since some supervisors are not technical disciplines

(Dahya et al., 2002) Tenev et al (2002) also indicate that the SB is unable to supervise the BOD because of less professional experience and lower capacity Unlike developed countries, lacking audit committees and finance are the two other problems of the SB in China (Tenev et al., 2002) Third, the SB has lower status than the BOD (political position and salary) and is a

supplementary organ in the structure of the corporation (Allen et al.,2002; Dahya et al., 2002; Li,

2010) In corporation, the largest stakeholders control and dominate both shareholders and the BOD meetings And the role of the SB is even smaller since it seems not really to report to

shareholders, but the BOD, whom they are supervising (Xiao et al., 2004) Fourth, there is the effect of the Party/Government in listed companies privatized from SOEs (Dahya et al., 2002)

In these companies, a dual participating mechanism is maintained through which the Chief of the Party Committee can enter the BOD/SB and the BOD/SB members can also join the Party

committee (Xiao et al., 2004) The representation of the Party in SOEs weakens the role of the

SB because both of them follow political goals rather than interests of shareholders (Dahya et al., 2002) Besides, Allen et al (2002) also point out that the SB members are often chosen from

various government office levels and from parent companies Most BOD were secretly appointed without the participation of shareholders, so it was not easy for the SB to supervise the BOD

effectively (Allen et al., 2002) Fifth, unlike the German SB, the Chinese SB is not handed the authority to appoint and dismiss the CEO (Dahya et al., 2003 as cited in Wang, 2013) Tenev et

al (2002) also indicate that the SB is not involved in the selection process of the BOD, and it has

no method to discipline them The BOD was chosen by the AGM, not by the SB, and they are

responsible to shareholders only, not the SB (Xi, 2006 as cited in Wang, 2013) Sixth, the SB

could not take the real role because of the weaknesses of the law (Tian, 2009) It does not regulate specifically about the delivery of financial and business information about the company

to the SB Seventh, the weaknesses of the Chinese SB also come from its horizontal position in

corporate governance Different from the vertical two-tier model of Germany, Li (2010) identifies that the Chinese SB is in horizontal position compared with the BOD which decreases the original supervising power of the SB

In order to enhance the function of the SB, Xiao et al (2004) suggested that: first,

Chinese firms should actually operate as companies without the influence by the Party/Government; It is needed to reduce the control of the Party/Government to enhance the

independence of the SB (Dahya et al., 2002) Second, enterprises law of China should be

improved to allow the SB to recommend the dismissal of directors and senior executives (Dahya

et al., 2002) Third, enterprises law should require the BOD to timely provide the SB sufficient information so that the SB performs its role effectively (Xiao et al., 2004; Dahya et al., 2002) Forth, Li (2010) suggests the betterment of independent director system as a solution for the

issue of horizontal position Besides, to remain the real functions of the SB, there are three things

to do: to improve legislation on the SB; to enhance the construction of the SB and to increase supporting systems and mechanism of supervisory (Tian, 2009) To reform, the SB needs more power to improve monitoring function (Xi, 2006 as cited in Wang, 2013) The SB needs to participate in the appointment and determination of the management’s benefits and should have the power to question, petition, and prevent action if needed when joining the BOD’s meetings (Wang, 2013)

The other important issue related to the current board structure of SOEs is the existence of principal According to Mi & Wang (2000), the principals of SOEs are the State or all citizens The agents are the central government, the local government, the local officials, the managements, and the employees All of them, including the SB, are the agents and have the obligation to act upon the interests of the State However, no one has the incentives to pursue profit maximization for the real principal, the State (Mi & Wang, 2000) In China, the most suitable resolution is to give the SOE manager higher benefit (thus reduce their embezzlement) and reform the state-owned organizational system (Mi & Wang, 2000) In order to achieve that, privatization of Chinese SOEs is an important solution (Gan, 2009)

non-In Vietnam, the type and characteristics of the SB is different with the ones of other

countries who apply the two-tier model According to the Enterprises Law 2005, its role is lower

than the power of SB in two-tier model and just similar to internal audit and internal control When analyzing the corporate governance, a few researchers point out some problems of the Vietnamese SB Even the SB members are appointed by shareholders in AGM, they seem to be chosen by the BOM in reality due to the influence of controlling shareholders, this negatively affect the operation of the SB members (Cung, 2008) Besides, the SB members not only have lower expertise and skills compared with the BOM/CEO but also act as part-time job since they are concurrently the company’s employees that prevent them from independently supervise (Cung, 2008) The result of a survey conducted in Vietnam show that 36 percent of the

respondents believe that the SB just “exists on paper” (ton tai tren giay) and it is established to

satisfy the requirement of law only (Lan, 2004 as cited in Hai & Nunoi, 2008) In order to enhance the activities of the SB, Minh & Walker (2008) indicate that the role of the SB should

be strengthened Besides, the SB members should have adequate qualifications to perform their works (Minh and Walker, 2008)

Summarizing all experiences above, in order for the SB to have actual power to protect the interests of shareholders (including the State and minority shareholders) as required by the

Corporate Law 2005 and the Corporate Charter, the SB must have some following important

Third, there is not any conflict of interest related to the SB The thesis will concentrate on

those above requirement as the framework for analyzing the SB in Vietnam

2.3 EXPERIENCE OF OTHER COUNTRIES

This part will review the experience in enhancing the function of the SB in other countries These practical experiences will help to identify the best solutions to improve the effectiveness of the SB in Vietnam in general and in Vinaconex in particular Again, although comparing the SB in two-tier model and the SB in Vietnam is not completely reasonable, it still provides some useful experiences to enhance the Vietnamese style SB system in some particular point

In European countries, according to Lieder (2010), there is a major enhancement of the

German SB in the last decade First, the SB is now appreciably involved in the decision‐making process of the company and fundamental important management decisions (Lieder, 2010) The

enactment of the Law on Control and Transparency of Enterprises (already mentioned in section 2.3 - Literature Review while reviewing the German SB) as at 27th Apr 1998 requires the SB to observe the risk-management system established by the BOD The new provision emphasizes the future‐oriented monitoring duty of the SB which importantly gained during the decade (Seibert,

1997 as cited in Lieder, 2010) Second, new provisions increased the flow of information from

the BOD to the SB, and then they facilitated the monitoring effectiveness of each individual supervisor (Lieder, 2010) The law in 1998 requires the BOD to inform the SB about every important issue relating to corporate planning It provides the SB with an insight into the company’s business policy that enables the SB to quickly detect and prevent malfeasance It also

reinforces the advisory function of the SB (Lieder, 2010) The new law compelled the SB to meet more often (twice times in a period of half year) and set up an appropriate number of

committees to make the supervisory role of the SB more transparent (Lieder, 2010) Third, some

significant changes enhanced the collaboration of the SB and auditors (Lieder, 2010) According

to the law in 1998, the SB is accountable for the audit assignment and directly receives the audit report Each SB member must receive a copy of the audit report The auditor is required to take part in the SB’s deliberations on the financial statements and reports on the essential results of the audit Besides, the Law on Transparency and Disclosure 2002 has changed the individual right of the SB members All supervisors are responsible for having all necessary information to supervise the BOD appropriately (Lutter, 2009; Vetter, 2004 as cited in Lieder, 2010) Each of them is now allowed to call for SB’s meeting (Lieder, 2010) The latest changes strengthened the SB’s responsibility related to internal control and risk management The 2002 amendment of law reinforced the authority of the SB by requiring a checklist to approve for the BOM (Lieder, 2010) The 2005 amendment of the German Corporate Governance Code highlighted a requirement for the SB to have an appropriate number of independent members (Lieder, 2010) This regulation did not allow the former BOD to become chairman of the SB or its committees (Lieder, 2010) A large proportion of German listed companies have followed this regulation (Werder & Talaulicar, 2009 as cited in Lieder, 2010) The SB has the right to set up an Audit Committee, Nomination Committee, Compensation Committee to support its work (Lieder, 2010)

In Czech Republic, the Commercial Code 1991 regulates that the SB may have the authority to appoint and remove the BOD members (Hájek, 2006) The director of the company may not be the SB member and vice versa (Allen & Overy LLP.,2010) Although the Commercial Code 1991 did not work with the term minority shareholders, it allowed shareholders who hold 10% of shares the right to request the SB to check the work of the BOD The Commercial Code 1996 increased the power of minority shareholders They could request the SB to claim the compensation for damage of the company caused by the BOD (Hájek, 2006)

In Poland, the SB has the right to inquire all documents of the company, request reports and clarifications from the BOD, and review the company’s assets (Allen & Overy LLP., 2010) The SB has the right to appoint and replace the BOD members (Allen & Overy LLP., 2010) The independence of the SB is guaranteed because members of the BOD, chief accountants, legal

advisers, branch managers, directors, or employees subordinated directly to one of the BOD, are banned from becoming the SB members (Allen & Overy LLP., 2010)

In Hungary, one-third of the SB members are selected from employees of the company when the company has over 200 full-time employees The BOD members may not serve as the

SB members and vice versa and the SB’s additional powers include the requirement for certain transactions to be approved or the right to appoint and replace the BOD and determine their compensation (Allen & Overy LLP., 2010)

In Brazil, AGM may set up another third governing body called the fiscal board whose roles are the combination of an external auditor, an ombudsman and a SB Fiscal board acts as an independent body and it is not compulsory but can be decided with 5% of common shares, or 10% of voting right shares This board must have three to five members (Stiftung, 2010)

In China, besides some weaknesses listed in the Literature Review section above, there is the enhancement in comparison with the SB in Vietnam The China Securities Regulatory Commission regulated that listed firms must have independent directors and establish auditing,

nomination and remuneration committees under the BOD which is effective from 2002 (Xiao et

al 2004) On 27th October 2005, the amended Company Law improved the system of the SB This new regulations state the number of staff representatives in the SB (Tian, 2009)

In Indonesia, no regulation limits the number of boards upon that an individual supervisor can take part in (Indreswari, 2006) Ministerial Decree No 11 issued in 07/2002 regulates that 20 percent of SB members in SOEs are not from the government The state also requires SOEs, which is a limited liability company, have more than Rp 1 trillion of assets or operate in banking industry to establish Nomination Committee, Remuneration Committee or Risk Management Committee to assist the SB Besides, the chairman of each committee above should be an independent supervisor (Indreswari, 2006)

Like Indonesia, Taiwanese listed companies must have at least one independent supervisor since February 2002 (Yau, 2013) Furthermore, at least one of the independent supervisors should have background in accounting or finance (Yau, 2013)

The OECD guidelines on Corporate Governance of State-owned Enterprises (2005) is an

international standard to help governments analyze and improve the competitiveness, efficiency

and transparency of state-owned enterprises (IFC, 2010) In order to develop the infrastructure of the Vietnamese economy, adopting the OECD guidelines will be very important (Minh & Walker, 2008) According to the guideline, the German-style Supervisory Board (in the two-tier

structure), the BOM (Hoi dong quan tri) of the SOEs has the following responsibilities as stated

in Box 1 Although, the boards in OECD guidelines are different with the SB in Vietnam and it has far higher power in corporate governance than Vietnamese SB, it is still helpful to appropriately use experiences in this guideline to complement for the suggestions to enhance the role of the SB in Vietnam

Box 1: The Responsibilities of the boards of State-Owned Enterprises as OECD guidelines

“The boards of state-owned enterprises should have the necessary authority, competencies and objectivity to carry out their function of strategic guidance and monitoring of management They should act with integrity and be held accountable for their actions

A The boards of SOEs should be assigned a clear mandate and ultimate responsibility for the company’s performance The board should be fully accountable to the owners, act in the best interest of the company and treat all shareholders equitably

B SOE boards should carry out their functions of monitoring of management and strategic guidance, subject to the objectives set by the government and the ownership entity They should have the power to appoint and remove the CEO

C The boards of SOEs should be composed so that they can exercise objective and independent judgment Good practice calls for the Chair to be separate from the CEO

D If employee representation on the board is mandated, mechanisms should be developed to guarantee that this representation is exercised effectively and contributes to the enhancement

of the board skills, information and independence

E When necessary, SOE boards should set up specialized committees to support the full board

in performing its functions, particularly in respect to audit, risk management and remuneration

F SOE boards should carry out an annual evaluation to appraise their performance.”

In summary, there are some experiences that the Vietnamese SB can apply in order to enhance its actual power and protect the State and minority shareholders’ interests:

First, the SB should be independent with the BOM/CEO

Second, the SB should have appropriate technical competence to supervise the

BOM/CEO

Third, the SB should not have any conflict of interest to ensure its capacity

CHAPTER 3: VINACONEX CASE

3.1 VINACONEX

Vietnam Construction and Import-Export joint-stock Corporation (Vinaconex Jsc) is located in Vinaconex Tower, 34 Lang Ha street, Dong Da District, Hanoi city, Vietnam Its chartered capital is up to VND 4,417 billion The State shareholder (represented by SCIC and

Viettel) owns 79.07 percent of the company’s shares According to the Enterprises Law 2005,

even being privatized, Vinaconex is still a state company since it has over 51% of the State ownership

Table 3.1: Share structures of Vinaconex

Source: “Bao cao thuong nien nam 2012” (as at 29 th Mar 2012), Vinaconex (2012a)

The forming and development 2

The predecessor of Vinaconex was Service and Foreign Construction Company, founded

on 27th Sep 1988 following the Decision No 1118 BXD/TCLD of Ministry of Construction Afterwards, on 20th Nov 1995, Ministry of Construction issued Decision 992/BXD-TCLD on establishing Vinaconex following the model of 90 corporations The corporation was merged with some other construction companies, which were belonged to the Ministry of Construction at that time

According to Decision No 84/2004/QD-TTg dated 13th May 2004 issued by the Prime Minister, Vinaconex was selected as one of the first state corporations to be privatized On 27thNov 2006, Vinaconex officially operated in the legal form of joint-stock company As of 30th Jun

2 Source: “Ban cao bach chao ban co phieu ra cong chung nam 2011”, Vinaconex

2011, the corporation has 39 subsidiaries located in many provinces with thousands of workers, engineers, professionals and workers Up to now, Vinaconex has built its credibility and brand

on the market Vinaconex is appreciated by the domestic and foreign customers and trusted to establish business partnerships (Vinaconex, 2011)

3.2 Supervisory Board of the Company

The diagram below describes the position of SB in corporate structure of a joint-stock company:

Graph 3.1: The company structure

Source: Vinaconex website (www.vinaconex.com.vn/?menuid=21)

The next diagram describes the position of each SB members and SB assistants in the structure of the SB

Graph 3.2: The Structure of Supervisory Board in Vinaconex

Source: Author’s illustration

Member of the Supervisory Board

After going public on 1st Dec 2006 and being regulated by the Enterprises Law and the Corporate Charter, the Company set up the SB with designated rights and obligations The

Company has five SB members and three SB assistants (see Graph 3.2 above) One of the five members is internally voted as Head of the SB A quick review about each member of the Board

is as follow:

Box 2: Member of the Supervisory Board in Vinaconex Jsc

Member 1 (SB_Mem1_Head): The Head of the SB has joined the SB since December 2006

This person has over 15 years working experience in the field of audit and finance Before acting as the Head of the SB, he was the Deputy Chief Accountant of the company

Member 2 (SB_Mem2): Member Two has been in the SB since December 2006 This person

has joined in Vinaconex since 2002, and concurrently acts as Head of External and Legal Department

Member 3 (SB_Mem3): Member Three has joined in the SB of Vinaconex since December

2011 This person is currently the Deputy Head of Risk Management at the SCIC Corporation, the block holder of Vianconex

Member 4 (SB_Mem4): Member Four has joined in the SB of Vinaconex since December

2011 This person is currently employed in the Board of Investment 2 of SCIC Corporation

Member 5 (SB_Mem5): Member Five has joined in the SB of Vinaconex since December

2011 This person is currently the Project Manager of Property Company of Military Telecommunication Group (Viettel), another block holder of Vinaconex

Source: “Bao cao thuong nien nam 2012”, Vinaconex (2012a)

In Vinaconex, the percentage of shares that SB members own is not remarkable (refer to Table 3.2 for the summary)

Table 3.2: Number of shares owned (share of parent company)

3.3 The flow of work related to the SB in Vinaconex

According to the Corporate Law 2005, the main duty of the SB is to supervise the

BOM/CEO in managing and running the business Supervising is the method to prevent, detect and timely deal with the violations of the BOM/CEO There are two kinds of work the SB performs in Vinaconex: monitoring and inspecting

Monitoring

During the year, the BOM/CEO sends important documents, reports and drafts to the SB for reviewing or requesting opinions (1) Sometimes, the SB has to collect itself supporting documents from many other sources such as financial statements of the company, the regulations

of the State… to have enough information to make their judgment After receiving those documents, the SB reviews, checks and analyzes them to ensure compliance with law, the

Corporate Charter and internal regulations of the company (2) If there is any violation, the SB

will write an official document signed off by the Head of the SB and sends to the BOM/CEO for consideration and adjustment (3)

Graph 3.3: Flow of monitoring function of the SB

Source: Author’s illustration

Inspecting

There are two kinds of inspection: periodical inspection and unusual inspection

Graph 3.4: Flow of periodical/unusual inspection function of the SB

Source: Author’s illustration

Regarding to periodical inspections, as the requirement of the Enterprises Law 2005, the

SB has to publish a report to shareholders at AGM Thus, the SB quarterly or annually organizes

teams to inspect parent and subsidiaries Firstly, the SB sends work schedule to the BOM/CEO

of the parent company or subsidiaries (mostly accounting department) to confirm the content as well as information needed to test (1 & 2) Then, the SB performs checking those supporting documents After several days of working, the SB issues the reports of identified problems and sends them to the BOM/CEO for further consideration (4)

About unusual inspection, the progress performs the activities in way almost similar to periodical inspection Whenever the SB wants to know about the activities of parent company or any subsidiary, the Head of the SB establishes a council to perform the inspecting activities He also sends work schedule of the council to the suspected subsidiaries (1) Then, the council performs the inspecting activities similar to normal inspections

In order to perform the inspection effectively and unbiasly, the SB has right to invite more people to join the inspecting council (3) Those members can come from function departments of parent company, subsidiaries, or from controlling shareholders

Making SB’s report

According to the Enterprises Law, the SB’s reports have to be published each year in

AGM These documents report the result of all activities of the SB during the year In Vinaconex, the SB’s report is prepared by the SB assistant, not by any the SB member as it has

to be (1) The reports will be reviewed by the Head of the SB and sent to other the SB members for consensus (2) In AGM, the reports will be published in the community of the corporation (3

& 4) Graph 3.5 displays the process of making the SB’s report in order to publish in AGM

Graph 3.5: Flow of creating the SB’s report

Source: Author’s illustration

3.4 Principal-Agent problem between Supervisory Board vs the BOM/CEO

In this section, the thesis is going to analyze the effectiveness of this contractual

relationship through three aspects: the Goals/given tasks of the agent; Agency costs and the Current Interest alignment instruments/Information system

3.4.1 Goals/given tasks

According to Pirchegger and Schöndube (2006), the SB is the principal and the BOM/CEO

are the agents in this principal-agent relationship As required by the Corporate Law 2005, the

SB has to supervise, prevent the BOM/CEO from harming interests of shareholders The goals/given tasks here is that the BOM/CEO have to run the company for the best interest of the shareholders As the principal, the SB also represents the shareholders and protects the shareholders’ interests

3.4.2 Agency cost

There are many reasons that can create agency cost in the relationship between the SB and the BOM/CEO The thesis categorizes them into two common types of factor in agency theory: conflict of interest and information asymmetry

Conflict of interest

Conflict of interest can diminish the actual power of the SB over the BOM/CEO In many cases, the SB is inferior to the BOM/CEO in reality (Nguyen Tan, 2008) So the principal does not exist in this principal-agent relationship, and the supervision task of the SB is not performed, which could harm interest of shareholders If so, the conflict of interest between the SB and the shareholders occurs that also creates agency cost in this agency relationship

The first major conflict of interest is a mixed of role of the SB members in Vinaconex and in its block holders3 (see Graph 3.6 in the next page), among which, the two biggest ones are SCIC (owning 57.79%) and Viettel (owning 21.28%) The percentage of ownership shall decide the number of representatives at both the BOM and the SB of the block holder (Vinaconex, 2013) The problem is that, almost representatives in the BOM appear to have far higher position

than the ones in the SB In detail, BOM_Mem4 is the Deputy General Director of SCIC, BOM_Mem7 is General Director of Viettel…) Meanwhile, the SB representatives are lower ranked persons, even staffs from the block holder In detail, SB_Mem1_Head was promoted from Deputy Chief Accountant, the position of an employee, to the Head of the SB; SB_Mem5 is the Head of Project Department of a subsidiary of Viettel or even SB_Mem4 is a staff from SCIC

only…) As the result, the SB members are concurrently the principals (as in Vinaconex) and the agents (as in block holders) that they do not have actual power as expectation In this kind of situation, the SB not only does not act upon shareholders’ interest but also gives the BOM/CEO

a hand to harm benefit of shareholders (Nguyen Ly, 2010b; Tran Minh Son, 2010)

3 Block holder: The owner of a large amount of a company's shares and/or bonds, or block In terms of shares, these owners are often able to influence the company with the voting rights awarded with their holding (Oxford/Merriam Webster, …)

Graph 3.6: The mixing role of the SB members in Vinaconex and in block holders

Source: Author’s combination from “Bao cao thuong nien nam 2012”, Vinaconex (2012a)

In terms of benefits, there is a big gap between in Vinaconex and the block holders In Vinaconex, the SB members receive a small amount of remuneration approved each year by shareholders in AGM while in the block holders, they receive higher salaries as well as promotion opportunities In this kind of situation, it is noticeable that the SB members follow their own interests by satisfying their block holders rather than shareholders’ interest (Tran Minh Son, 2010)