Corporate Governance

CORPORATE
GOVERNANCE
Le Tien Trung, Doctor of Business Administration
Faculty of Business Administration
Banking Academy of Vietnam
CORPORATE GOVERNANCE
 Lecturer: Le Tien Trung, Doctor of Business

Administration
Email address: letrung31584@gmail.com
 Tel. 0902558755
 Office hours: Wednesday, 14.00 – 16.30
Room 401, building A2
Ice breaker
Johari Window
WHY DO WE NEED TO
STUDY THIS SUBJECT?
1. The emergence of firms with more complex structure
2. People work for large corporations
3. People invest in stocks
4. People set up business with other stakeholders
5. People require transparency
We need to know about corporate governance to

-Fit in complex organisations
-Work for companies of similar structure
-Make right investment decisions
-Set up and run business
-Comply with regulations
 Learning outcomes
Upon completion of this course, students are expected to be
able to:
• Distinguish the difference between management and
governance and understand the principles of corporate
governance
• Identify the roles and responsibilities of stakeholders in a
company
• Understand the risks governance of a company
• Practicing corporate governance in companies.
 Course assessment
- Classroom attendance & participation 10%
- 01 midterm test 20%

- 01 presentation and report 20%
- Final examination 50%
 Text book
- Bob Tricker, Corporate Governance Principles,
Policies and Practices, 4th Edition, Oxford, 2019.
 Supplementary
Rao Vallabhaneni, Corporate Management Governance,
And Ethics Best Practices, 1st Edition, Wiley
Publisher, 2008.
Group establishment
• Class divided into 6 groups
• Purpose: Group Discussion, Group Presentation
• Bonus points to be awarded to active groups
• Being a member of a group is a MUST
• Leaders send the group info to my email:
letrung31584@gmail.com
• Deadline: 20th September
• Test 1: Week 7th
• Test 2: Group presentation from week 8th
CONTENT
Part 1: Principles and policies

 Chapter 1: Introduction of Corporate Governance
 Chapter 2: Legal framework of Corporate Governance
 Chapter 3: The governance of corporate risks
CONTENT
Part 2: Practices
 Chapter 4: The Board membership
 Chapter 5: The Board leadership
 Chapter 6: The Board activities
 Chapter 7: Board assessment
Contents
 Chapter 1: Introduction of Corporate Governance
 Chapter 2: Legal framework of corporate governance
 Chapter 3: The Governance of Corporate Risks
Part 2: Practices
 Chapter 5: The Board Leadership
 Chapter 6: The Board Activities
 Chapter 7: Board Assessment
Chapter 1. Introduction of corporate governance
1.1. Definition of Corporate Governance
1.2. CG vs. Management
1.3. Roles and Objectives of CG
1.4. Evolution of Corporate Governance

Chapter 1. Introduction of CG
New terms
A. Corporate entity B. Strategy formulation C. Policies

D. Accountability E. Performance F. Conformance
1.
Chapter 1. Introduction to CG
the action or process of carrying out or accomplishing an action, task, or
function.
2. is the process of generating and reviewing alternative longer-term
directions for the company that lead towards the achievement of its
purposes.
3. Certification or confirmation that a good, service, or conduct meets the
requirements of legislation, accepted practices, prescribed rules and
regulations, specified standards, or terms of a contract.
4. Director's obligation to inform about their (past or future) actions and
decisions, to justify them, and to suffer punishment in the case of
eventual misconduct.
5. the rules, systems, and procedures that are laid down by the board to
guide and constrain executive management.
6. is formed whenever a group of members organizes a company, institution,
society, association, or other entity to serve their purpose
 Background of the subject
• Emergence of large corporations
• Corporations run and owned by

different people
• Conflict between managers and

owners
• Corporate Governance to resolve

the conflict and protect the well-
being of companies
Corporate Governance
• Corporate Governance is the system by which companies are directed and
controlled.
Cadbury's Report, UK, 1992
• Corporate governance is the manner in which organisations, particularly

limited companies, are managed and the nature of accountability of the
managers to the owners.
Oxford University Press, 1999
• Corporate Governance is about the procedures and processes

according to which an organization is directed and controlled.
Organization for economic co-operation and development, 2001
• Corporate governance is concerned with the exercise of power

over corporate entities.
Tom Clarke 2004
1.1. Definition of corporate governance
• 5 perspectives of CG
1. An operation 2. A relationship 3. A stakeholder

perspective perspective perspective
4. A financial
5. A societal
economics
perspective
perspective
1. Operation
perspective
Corporate Governance is
- "the system by which companies are directed and controlled" (1)
- "about the procedures and processes according to which
an organization is directed and controlled" (2)
Focus on: shareholders, the board, the management
(1) Sir Adrian Cadbury's Report on the financial aspects of corporate governance (1992)
(2) Organization for economic co-operation and development (2001)
2. Relationship
perspective
"The corporate governance structure specifies the distribution

of rights and responsibilities among participants in the
organization - such as the board, managers, shareholders, and
other stakeholders - and lay down the rules and procedures for
decision - making"
3. Stakeholder
perspective
"Corporate governance is about the activities of the board and

its relationship with the shareholders or members, and with
those managing the enterprise, as well as with the external
auditors, regulators, and other legitimate stakeholders".
4. Financial (economic)
perspective
"Corporate governance deals with the way suppliers of

finance assure themselves of getting a return on their
investment" - Shleifer and Wishny (1997).
5. Societal perspective
"Corporate governance is concerned with holding the balance

between economic and social goals and between individual
and communal goals" - Sir Adrian Cadbury (2000).
• Fundamental components of a CG framework
Group Discussion
• Use the diagram to create a corporate
governance framework for a company.
1.2. Corporate Governance vs. Management
GOVERNANCE
vs.
MANAGEMENT?
Discussion
• Who does the governing job?
• Who does the managing job?
Example: The board of directors Vietcombank 
The board ensures Governance:

that it is being well the work
run and run in the The board of the board of
right direction directors or other
governing body
Management:
Managers run the work
the business of the executive
Management management team
Comparison between
Business Management and Corporate Governance
Perspective Business Management Corporate Governance
Aim Improve business Ensure company going into the right

performance, profitability direction
Scope Small, medium (department, Large (all activities of the whole
subsidiary) corporation)
People Executive directors, managers Board of director
(all levels)
Functions Planning, Organizing, Leading, Strategy Formulation, Supervision,
Controlling Accountability, Policy Making
Impact on Small, medium Large

companies
Focus Peformance Conformance
Example VNM, FPT, HPG,VCB VNM, FPT, HPG,VCB

Who are managers?
President, managing director, chief

operating officer or chief executive
officer
Regional manager, project manager or

division manager
Supervisor, shift manager, department

managers or office managers
Level of management
What do executive directors/managers do?
Gather all the
resources needed
to be successful Hire, train and
Develop plans for reward people
every aspect of
the business
Supervise
Monitor progress effectively and
and make changes become a leader
if needed
What do the board do?
Outward
-looking
Accountability Strategy formulation
Supervising executive Policymaking

Inward activities
-looking
Past and present - Future - focused
focused
What do the board do?
Ensure the business Ensure the business

is well run is run in the right
direction
Outward
-looking
Conformance Performance
Inward
-looking
focused
Board delegation
Outward
-looking Accountability Strategy formulation
Approve and work

with and through the
CEO
Supervising executive Policymaking
Inward activities
-looking
focused
1.2. Corporate Governance vs Management
 FUNCTIONS OF CORPORATE GOVERNANCE
 Strategy formulation: provide strategic guidance

 Vision Creation: create long term objectives
 Policy making: make and impose internal policy
 Supervision: supervise directors/ managers/subordinates
 Accountability: take responsibilities.
CG is on the Macro Level

• FUNCTIONS OF CORPORATE GOVERNANCE
 Strategy formulation:
- Strategy formulation is the process of generating and reviewing alternative
longer-term directions for the company that lead towards the achievement of its
purposes.
- Boards main’s job is involved with strategy formulation.
• CORPORATE GOVERNANCE
 CREATE VISION
BOARDS CREATE VISION FOR COMPANIES
WHAT IS VISION?
EXAMPLES
McDonald’s vision is to be the world’s best quick service

restaurant experience. Being the best means providing
outstanding quality, service, cleanliness, and value, so that
we make every customer in every restaurant smile.
EXAMPLES
Guided by its pioneering aspirations as well as a

sustainable investment - development strategy,
VINGROUP has been striving to become Vietnam’s and
the regions’ leading multi-sectoral business group,
which aims to become a Group of international stature
and standards.
VINGROUP aspires to establish its Vietnamese brand,
demonstrating Vietnamese intellectual prominence and
pride in the international arena.
Question
Provide an example of Vision Creation of two technological
giants:
Vision of Apple Vision of Samsung

Case study
 Function of Corporate Governance
 Policymaking
- Policies can be thought of as the rules, systems, and procedures that are laid down by
the board to guide and constrain executive management.
- To make strategies operational, companies need policies, procedures, plans, projects...
- Delegate to management or not?
Function of Corporate Governance
 Supervising executive activities
- Primary means: financial measures and accounting systems
- Regular reports from a budgetary control system
- Criteria beyond financial measures: customer satisfaction, employee
attitudes…
Function of Corporate Governance
 Accountability
- Determined by the constitution of the organization, the laws and
demands of any regulating authority.
- Director's obligation to inform about their (past or future) actions
and decisions, to justify them, and to suffer punishment in the case
of eventual misconduct.
- To whom is a board accountable?
- What information to disclose?

Function of Management
• Planning: in operational level
• Organizing: implement strategy, use resources
• Directing: in operational level
• Controlling: in operational level
Management: Day-to-day affairs

• CG includes Conformance and Performance dimension
Conformance vs Performance?
Conformance vs Performance?
How do the boards should do?
How boards should do How boards actually do

Discussion
• Compare CG with management.
• Specify the commonality and the difference
between CG and management.
 Hints: aim, scope, people, functions, impact.

1.3. Roles and Objectives of Corporate Governance
 Roles of Corporate Governance: is to create an effective organization with harmonized interests:
a. Recommend best practices for companies
b. Ensure fair returns on investment
c. Ensure transparency in business operation
d. Clarify the roles of directors.
e. Achieve socio-economic goals

a. Best Practices
• Protect the rights of shareholders
• Clarify roles and rights of individuals
• Optimal board structure

Discussion
• Q: What are the basic rights of shareholders?
• Q: What factors should be taken into account to

establish an optimal board structure?
b. Ensure fair return on investment
• CG ensures fair return on investment for shareholders.

• Neutralize the conflict of interests between stakeholders
Discussion
• Q: How can shareholders get their returns
for their investments?
• Q: What is the most prominent conflict in

a large corporation ?
c. Ensure transparency
• Financial and non financial disclosure
• Financial prepared according to IFRS
• High-quality annual report published
• Web-based disclosure
IFRS: international financial reporting standards

Discussion
• Q: How can shareholders be assured that the

financial report of the company is correct?
d. Clarify the roles of directors
• The boards provide strategic guidance for company

• The boards make strategic decision on corporate affairs
• The boards are responsible for the their decision
• The boards must work for the best interest of company,
not for personal interests
• The board must have sufficient relevant skills and
understanding to review and challenge management
performance
e. Achieve socio-economic goals
• Helps achieve economic goal: revenue, profit, market

share
• Promote social responsibilities:

 Objectives of Corporate Governance:
- Protect and promote the interests of shareholders
- Create a transparent working environment
- Develop effective organizational culture
- Achieve social and economic goals

 Pillars of good CG:
Q1. WHY DO PEOPLE NEED TO CO-OPERATE IN BUSINESS?
Q2. COOPERATIVE BUSINESS:
PROS AND CONS ??

Corporate entities always need governing
Corporate governance is necessary (whenever ownership

or membership is separated from management control)
-Old Chinese trade with the India
-16th century sailing ship ventures
-17/18th century trading company
- East India Company
- Hudson Bay Company

History of business
Chinese trade with the West
The arrival of joint stock, limited liability company
19th century
Business run by sole traders and partners
If business failed- debtors prison
Problems of raising new investment

Owners
(Shareholders)
(Members)
Board of Directors
Managers
Employees
Limited liability company

The underlying concept of the company
Ownership is the basic of power
Directors appointed by shareholders
- Stewards of shareholders’ interests
- Fiduciary duty to act on their behalf
- Responsibility to be accountable
From 1855- early 20th century
- Many companies formed: all public
Then family firms/sole traders incorporated
- To benefit from limited liability
Some companies merged
- New company formed original wound up
Then seen that companies could own others
- Beginnings of complex group

1980s corporate collapses
Maxwell (UK)
Bond (Australia)
Nomura (Japan)
Burnham Drexall/ Boesky (USA)
Carrian Investments (Hong Kong)
Lehman brothers UK/US

ROBERT MAXWELL
Pergamon Press
Mirror Group Newspapers

&MCC
- Member of Parliament, CEO of publishing house

- Many loans -- debts
- Take money from the pension funds
- Failed to pay the debts
- Suicide
Group discussion
• Provide an example of corporate scandal
concerning bad corporate governance.
Developments early in the 21st century:

reaction to more corporate collapses
Enron (USA)
HIH Insurance (Australia)
Independent Insurance (UK)
Tyco (USA)
Tomkins (UK)
Developments in the 1990s: Corporate governance codes
arrive
UK codes: Cadbury (1992), Greenbury (1995),

Tyson (2003), UK combined Code (1998 and 2003))
CG Code of Australia (1993), Canada(1994),

Holland (1997), Russia (2001)…
Code for international agency: OECD, World bank

(1999), Vietnam 2019
Some key questions remain:
1.Should the CEO also be chairman of the board?
2.Should a retiring CEO also be chairman of the board?
3.Can outside directors be genuinely independent?
4.How should directors’ remuneration be determined?
5.Should shareholders be able to nominate directors?
6.Should institutional investors exercise more power?
7.Are external auditors really independent?
8.How should complex, dynamic and often global corporate entities be governed?
9.Are governance practices around the world converging?
10.Are rules for governance of listed companies appropriate to family companies, small
firms, partnerships, or non- for- profit entities?
Contents
 Chapter 1: Introduction to corporate governance
Part 2: Practices
Chapter 2. Legal framework of CG
2.1. Legal framework of corporate governance
2.2. OECD's corporate governance principles
2.3. Corporate Governance Code of Vietnam

Questions
1. Why do we need a framework of Corporate
Governance?
2. What does framework of Corporate Governance

mean?
3. What are the basic elements of a Corporate

Governance framework?
2.1. Legal framework of CG
2.2. OECD's Corporate Governance principles
Brief about OECD
• OECD = Organization for Economic Co-operation and
Development
• Established in 1948 as OEEC (Organization for European
Economic Co-operation ) by Robert Marjolin to revive EU
economy after WW II.
• 1961, changed name to OECD, headquartered in Paris with
30 members.
• 1999, OECD set up Principles of Corporate Governance - an
international benchmark for policy makers, investors,
corporations, and other stakeholders
PRINCIPLE I: ENSURING THE BASIS FOR AN EFFECTIVE

CORPORATE GOVERNANCE FRAMEWORK
The corporate governance framework should promote

transparent and efficient markets, be consistent with the
rule of law and clearly articulate the division of
responsibilities among different supervisory, regulatory
and enforcement authorities.

A. Framework should be developed with a view to its impact on

overall economic performance, market integrity, promotion of
transparent and efficient markets.
B. The legal and regulatory should be consistent with the rule of
law, transparent, and enforceable.
C. Responsibilities of different authorities must be clearly
articulated .
D. Supervisory, regulatory, and enforcement authorities should
have the authority, integrity, and resources to fulfill their duties in a
professional and objective manner.

• Conclusion: Companies must establish/adopt a suitable corporate

governance framework which is considered as the basis/foundation
for all activities of the companies.
PRINCIPLE II: THE RIGHTS OF SHAREHOLDERS

AND KEY OWNERSHIP FUNCTIONS
The corporate governance framework should protect and

facilitate the exercise of shareholders' rights
PRINCIPLE II: THE RIGHTS OF SHAREHOLDERS AND KEY
OWNERSHIP FUNCTIONS
What are the basic rights of shareholders?
What are the key ownership functions of shareholders?

PRINCIPLE II: THE RIGHTS OF SHAREHOLDERS AND KEY
OWNERSHIP FUNCTIONS
A. Basic shareholder rights
B. Shareholders should have the right to be sufficiently informed on,
decisions concerning fundamental corporate changes
C. Shareholders should have the opportunity to participate in general
shareholder meetings
D. Capital structures that enable certain shareholders to obtain a degree of
control disproportionate to their equity ownership should be disclosed.
E. Markets for corporate control should be allowed to function in an efficient
and transparent manner.
F. The exercise of ownership rights by all shareholders should be facilitated.
G. Shareholders should be allowed to consult with each other on issues
concerning their basic shareholder rights.
•Conclusion: companies must protect the rights of shareholders

PRINCIPLE III: THE EQUITABLE TREATMENT OF

SHAREHOLDERS
The corporate governance framework should

ensure the equitable treatment of all shareholders,
including minority and foreign shareholders. All
shareholders should have the opportunity to obtain
effective redress for violation of their rights.
PRINCIPLE III: THE EQUITABLE TREATMENT OF

SHAREHOLDERS
A. All shareholders of the same series of a class should be
treated equally
B. Insider trading and abusive self-dealing should be prohibited.
C. Related-party transaction should be prohibited. Members of
the board and key executives should be required to disclose to
the board whether they, directly, indirectly or on behalf of the
third parties, have a material interest in any transaction or matter
directly affecting the corporation.
•Conclusion: companies must treat shareholders of the same
class fairly.
Discussion
• What is insider trading?
• What is self-dealing?
• What is a Related-party transaction?
Provide an example for your answer

Discussion
• Insider trading: a person (director) has access to non-public
information and makes use of it to pursue personal interests to the
detriment of other shareholders.
• Self dealing (a common type of insider trading): a person (director)

has a close relationship with key figures of the companies and
exploits that relationship to gain confidential information and pursue
personal profits.
• Related-party transaction: a corporate deal is agreed by two or

more parties who have already established a special relationship
before the deal. This type of transaction is prevalent because
businesspeople tend to select business partners based on experience
from prior transactions.
PRINCIPLE IV: ROLES OF STAKEHOLDERS IN

Questions
1.Who are the stakeholders of a company?
2.What are their concerns/interests?


The corporate governance framework should

recognize the right of stakeholders established by
law or through mutual agreements and encourage
active co-operation between corporations and
stakeholders in creating wealth, jobs, and the
sustainability of financially sound enterprises.
.

A. The rights of stakeholders are to be respected.
B. Performance-enhancing mechanisms for employee participation should be
permitted to develop.
C. Stakeholders should have access to relevant, sufficient, and reliable
information on a timely and regular basis.
D. Stakeholders should be able to freely communicate their concerns about
illegal or unethical practices to the board
E. The corporate governance framework should be complemented by an
effective, efficient insolvency framework and effective enforcement of
creditor rights.
Conclusion: companies should care about stakeholders’
concerns
PRINCIPLE V: DISCLOSURE AND TRANSPARENCY
The corporate governance framework should ensure that

timely and accurate disclosure is made on all material
matters regarding the corporation, including the financial
situation, performance, ownership and governance of the
company.
Question
•What information that companies must disclose to
the shareholders?
•What information that companies should disclose to

the shareholders?
•What information that companies shouldn’t

disclose to the shareholders?
PRINCIPLE V: DISCLOSURE AND TRANSPARENCY

A. Disclosure should include, but not be limited to, material
aspect.
B. Information should be prepared and disclosed in accordance
with high quality standards of accounting and financial and non-
financial disclosure.
C. An annual audit should be conducted by an independent
auditor
D. External auditors should be accountable to the shareholders
E. Channels for disseminating information should be timely and
cost-efficient.
Conclusion: Companies must disclose financial info and

should disclose other non-material info.
PRINCIPLE VI: RESPONSIBILITES OF THE BOARD
The corporate governance framework should ensure the

strategic guidance of the company, the effective
monitoring of management by the board, and the
board's accountability to the company and the
shareholders.
• PRINCIPLE VI: RESPONSIBILITES OF THE BOARD

What are the key functions of the board?
PRINCIPLE VI: RESPONSIBILITES OF THE BOARD
A. Board members should act on a fully informed basis, in

good faith, with due diligence and care, and in the best
interest of the company and the shareholders.
B. The board should treat all shareholders fairly.
C. The board should apply high ethical standards
D. The board should fulfill certain key functions
E. The board should be able to exercise objective independent
judgment on corporate affairs
Conclusion: the board must fulfil the key functions
.
Discussion
• Review and summarise the OECD

principles in your own words.
• What principle(s) in the OECD framework

that you like the most?
Homework:
Homework: Read the BRT principles in the US and
compare with OECD in EU
2.3. CG framework in Vietnam
• CG framework in Vietnam (Vietnam Code) published in

August 2019.
• Vietnam Codes relies on OECD principles
• Purpose of establishing VN code:
 Raise standard of CG in Vietnam

 Assist SSC in dealing with governance issues
 Recommend best practices for firms
 Vietnam Code
Vietnam Code includes 5 sections with 10 principles.
1.The Responsibility of the Board of

Directors
2. Control Environment
3. Disclosure and Transparency
4. Shareholder rights
5. Stakeholder relations
 Vietnam Code
1.The Responsibility of the Board of Directors:
Principle 1: Establishing clear Roles, Responsibilities and Commitment
of the Board
Principle 2: Establishing a Competent and Professional Board
Principle 3: Ensuring Effective Board Leadership and Independence
Principle 4: Establishing Board Committees
Principle 5: Ensuring Effective Performance for Board
Principle 6: Establishing and Maintaining an Ethical Corporate Culture
 Vietnam Code
2. Control Environment:
Principle 7: Establishing a Sound Risk Management and Control
Environment
3. Disclosure and Transparency:
Principle 8: Strengthening Company Disclosure Practices
4. Shareholder rights:
Principle 9: Establishing a Framework for Effective exercise of
Shareholder Rights
5. Stakeholder relations:
Principle 10: Building Effective Stakeholder Engagement
Discussion
• Please compare VN Code and the OECD
principles. (difference and similarity)
Legal framework of CG
Case study: Vinamilk document on corporate

governance
Enron: Failure in corporate governance
Video: Enron scandal

2.4. ORGANIZATIONAL STAKEHOLDERS
DEFINITION OF STAKEHOLDERS
A stakeholder is anybody who has interests in a company.
Stakeholders may refer to individuals, groups or
organizations that can affect or are affected by activities
of the company.
( Business Dictionary – Cambrigde University, 2012)
Question 1 :
Who are stakeholders of a company?

BOD
Question 2 :
What are their interests and concerns?

Investors, shareholders: Return on investment,

income, profitability, transparency, full disclosure
Directors, managers : remuneration, power, respect

Employees: Rates of pay, job security, equality,

(prestige, recognition...)
Suppliers: Price, date of payment, packaging, equitable

business opportunities
Customers : Price, quality, customer care, ethical

products.
Community: Jobs, environmental protection, CSR

Government: Taxation, VAT, regulation and law compliance,

employment, truthful reporting
Creditor’s concerns are: …………….…..?

Discussion
Question 3:
Why do company need to identify stakeholders'

concerns and interests?
Activity 3
Choose the correct answer:
1. Basic shareholder rights should NOT include the right to:
A. Participate and vote in general shareholder meetings
B. Elect and remove members of the boards
C. Assume responsibility for managing corporate activities
D. Share in the profits of the corporation

Activity 3
Choose the correct answer:
1. Basic shareholder rights should NOT include the right to:
A. Participate and vote in general shareholder meetings
B. Elect and remove members of the boards
C. Assume responsibility for managing corporate activities
D. Share in the profits of the corporation

Activity 3
2. Minority shareholders should be protected from abusive
actions by:
A. Information disclosure
B. A clearly articulated duty of loyalty by board members to the

company and to all shareholders.
C. Pre – emptive rights to share issues
D. Use cumulative voting in electing members of the board.
E. A, B, C and D
Activity 3
2. Minority shareholders should be protected from abusive
actions by:
A. Information disclosure
B. A clearly articulated duty of loyalty by board members to the

company and to all shareholders.
C. Pre – emptive rights to share issues
D. Use cumulative voting in electing members of the board.
E. A, B, C and D
Activity 3
3. Stakeholders of a company have the right to:
a. Participate in managing the company
b.Obtain effective redress for violation of their rights
c. Have access to relevant, sufficient and reliable
d.A and B
e. B and C
Activity 3
3. Stakeholders of a company have the right to:
a. Participate in managing the company
b.Obtain effective redress for violation of their rights
c. Have access to relevant, sufficient and reliable
d.A and B
e. B and C
Activity 3
4. Board’s main functions are:
a. Reviewing and guiding corporate strategy
b.Selecting, compensating, monitoring key executives
c. Ensuring the integrity of the corporation’s accounting
and financial reporting systems
d.All of the answers are right
Activity 3
4. Board’s main functions are:
a. Reviewing and guiding corporate strategy
b.Selecting, compensating, monitoring key executives
c. Ensuring the integrity of the corporation’s accounting
and financial reporting systems
d.All of the answers are right
Activity 3
5. The equitable treatment of shareholders include:
a. Impediments to cross-border voting should be eliminated
b.Capital structures and arrangements that enable certain
shareholders to obtain a degree of control
disproportionate to their equity ownership should be
disclosed
c. The exercise of ownership rights by all shareholders,
including institutional investors, should be facilitated
Activity 3
5. The equitable treatment of shareholders include:
a.Impediments to cross border voting should be
eliminated
b.Capital structures and arrangements that enable certain
shareholders to obtain a degree of control
disproportionate to their equity ownership should be
disclosed
c. The exercise of ownership rights by all shareholders,
including institutional investors, should be facilitated
Activity 3
6. The rights of stakeholders of a company are
established:
a. By law
b.Through mutual agreements
c. None of these
d.Both A and B
Activity 3
6. The rights of stakeholders of a company are
established:
a. By law
b.Through mutual agreements
c. None of these
d.Both A and B
Activity 3
7.“An annual audit should be conducted by an
independent, competent and qualified auditor” is
the provision of:
a. Principle 2
b.Principle 3
c. Principle 4
d.Principle 5
Activity 3
7.“An annual audit should be conducted by an
independent, competent and qualified auditor” is
the provision of:
a. Principle 2
b.Principle 3
c. Principle 4
d.Principle 5
Activity 3
8. Disclosure should include:
a. The financial and operating results of the company
b. The margin of profits of the company
c. Company objectives
d. Major share ownership and voting rights
e. The producing technology
f. A, C, D
g. A, B, C
h. All of the answers are right
Activity 3
8. Disclosure should include:
a. The financial and operating results of the company
b. The margin of profits of the company
c. Company objectives
d. Major share ownership and voting rights
e. The producing technology
f. A, C, D
g. A, B, C
h. All of the answers are right
Activity 3
9. What are not main responsibilities of the board
of directors:
a. Act on a fully informed basis, in good faith, with due
diligence and care
b.Treat all shareholders fairly
c. Implement strategies
d.Apply high ethical standards
Activity 3
9. What are not main responsibilities of the board
of directors:
a. Act on a fully informed basis, in good faith, with due
diligence and care
b.Treat all shareholders fairly
c. Implement strategies
d.Apply high ethical standards
Activity 3
10.“All shareholders of the same series of a class
should be treated equally” does not mean:
a. Within any series of a class, all shares should carry the
same rights.
b. Investors should be able to obtain information about the
rights attached to all series and classes of shares after they
purchase
c. Any changes in voting right should be subject to approval
by those classes of share which are negatively affected.
Activity 3
10.“All shareholders of the same series of a class
should be treated equally” does not mean:
a. Within any series of a class, all shares should carry the
same rights.
b. Investors should be able to obtain information about
the rights attached to all series and classes of shares
after they purchase
c. Any changes in voting right should be subject to approval
by those classes of share which are negatively affected.
Activity 3
11.An annual audit of the company should be
conducted by an auditor that is:
a. dependent
b.incompetent and unqualified
c. a person who can exercise due professional care
d. on behalf of managers
Activity 3
11.An annual audit of the company should be
conducted by an auditor that is:
a. dependent
b.incompetent and unqualified
c. a person who can exercise due professional care
d. on behalf of managers
Activity 3
12.Board members should act on the best interest of:
a. The management board
b.The shareholders
c. The competitors
d.The company
e. A and B
f. B and D
g.B and C
Activity 3
12.Board members should act on the best interest of:
a. The management board
b.The shareholders
c. The competitors
d.The company
e. A and B
f. B and D
g.B and C
Activity 3
13.“The corporate governance framework should promote
rule of laws and clearly articulate the division of
and enforcement authorities” are regulated in:
a. Principle 1
b.Principle 2
c. Principle 3
d.Principle 4
Activity 3
13.“The corporate governance framework should promote
rule of laws and clearly articulate the division of
and enforcement authorities” are regulated in:
a.Principle 1
b.Principle 2
c. Principle 3
d.Principle 4
Activity 3
14. Which statement is not true
Anti – take – over measure:
a. Gives the existing leadership of a company a way to
defend their control from hostile bids
b. Includes some methods such as Poison Pills, Staggered
Board of Directors.
c. Protect the board of directors of the acquiring company.
d.Protect the board of directors of the target company.
Activity 3
14. Which statement is not true
Anti – take – over measure:
a. Gives the existing leadership of a company a way to
defend their control from hostile bids
b. Includes some methods such as Poison Pills, Staggered
Board of Directors.
c. Protect the board of directors of the acquiring
company.
d.Protect the board of directors of the target company.
Activity 3
15. Shareholders should have the right to be
sufficiently informed on EXCEPT:
a. Amendments to the statuses, articles of incorporation
b.Confidential documents
c. The authorization of additional shares
d.Extraordinary transactions
Activity 3
15. Shareholders should have the right to be
sufficiently informed on EXCEPT:
a. Amendments to the statuses, articles of incorporation
b.Confidential documents
c. The authorization of additional shares
d.Extraordinary transactions
Activity 3
16.The legal and regulatory requirements that affect
corporate governance practices in a jurisdiction
should be:
a.Consistent with the rule of law
b.Transparent
c.Enforceable
d.All of the answers are correct
Activity 3
16.The legal and regulatory requirements that affect
corporate governance practices in a jurisdiction
should be:
a.Consistent with the rule of law
b.Transparent
c.Enforceable
d.All of the answers are correct
Activity 3
17.Employees can participate in corporate
governance through:
a. Employee representation on board
b.Employee demonstrations
c. Governance processes such as works councils that
consider employee viewpoints in certain key decisions
d.A and C
Activity 3
17.Employees can participate in corporate
governance through:
a. Employee representation on board
b.Employee demonstrations
c. Governance processes such as works councils that
consider employee viewpoints in certain key decisions
d.A and C
Activity 3
18. Ensuring the basis for an effective corporate
governance framework includes:
a. The exercise of ownership rights by all shareholders
should be facilitated
b.The division of responsibilities among different
authorities in a jurisdiction should be clearly articulated.
c. The corporate governance framework should be
complemented by an effective, efficient insolvency
framework and by effective enforcement of creditor
rights.
Activity 3
18. Ensuring the basis for an effective corporate
governance framework includes:
a. The exercise of ownership rights by all shareholders
should be facilitated
b.The division of responsibilities among different
authorities in a jurisdiction should be clearly
articulated.
c. The corporate governance framework should be
complemented by an effective, efficient insolvency
framework and by effective enforcement of credit rights
Contents
Part 2: Practices
3. GOVERNANCE OF CORPORATE RISK
3.1. Definition of risk
3.2. Levels of risk
3.3. Risk management
3.4. Governance of corporate risk

VIDEO
Risk in life
RISKS ALWAYS EXIST AROUND YOU, YOUR
ORGANIZATION!
Please give an example of a risk and

explain how to deal with the risk?
In life, study, traffic, relationship, business, health….etc.
3.2. Levels of risk

3.1. Risk - Definition
RISK:
- An uncertain future event or condition which if
happens affects the mission objective.
- It could have a positive or negative effect.
Scope
Quality
Cost Time
Types of Risk
 Some basic terms

• Hiểm họa (hazard)
• Rủi ro (risk)
• Người mạo hiểm (risk-taker)
• Người ngại rủi ro (risk-averse)
• Giá của rủi ro (risk premium)
• Phí bảo hiểm (insurance premium)
• Tổn thất (loss)
• Tần suất (frequency)
• Khả năng (probability)
Q: Is COVID -19 a risk or a hazard?

Specify and explain about some risks a
company may face.
3.2. Levels of risk

3.2. Levels of risk
Risk arises at various levels:

- Corporate strategic risks: Exposure to threats from
outside the organization
- Management - level risks: Exposure to risk arising from
the firm's activities
- Operational risks: Exposure to hazard within the
enterprise
3.2. Levels of risk
Operational risks:
- Fire, explosion, flood
- Loss of power (e.g. inability to carry out trades)
- IT systems malfunction
- Shortages of staff (e.g. staff turnover, illness, strike...)
- Errors in trades (unintentional mistakes)
- Fraud
- Theft
-Misuse of company information, equipment, systems or software
3.2. Levels of risk
Managerial risks:
- Product liability
- Third - party risk
- Local pollution
- Management weaknesses, inability
- Shortages of skilled, experienced staff
3.2. Levels of risk
 Enron (fraud in accounting)
 BP oil rig disaster (leak of oil into the sea)
 Toyota supply chain failure (lack of strategic guidance)
 Northern Rock (The bank borrows/lends too much)
=> Strategic risks:
To cope with risks, directors should ask a question:

What should they do if…….. ?
3.3. Levels of risk
 What if competitors:
- Launched new product or service
- Changed manufacturing technology
- New pricing or distribution strategy
- Changed ownership
- Expanded into new markets
- New entrants into significant products or markets
3.2. Levels of risk
 What if customers:
- Adopted substitute product or service
- Major customer became bankrupt and collapsed
- Changed ownership
- Legal actions for damages
- Catastrophic failure of our product in use
- Alleged patent, trademark or copyright infringement
3.2. Levels of risk
 What if major suppliers:

- Could not deliver because of a physical disaster
- Failed to deliver through bankruptcy or takeover
- Corruptly lowered product specifications
- Used trade secrets to their advantage
- Manufactured for your competitors
3.2. Levels of risk
 What if government introduced:
- New regulation of our industry

- Tariff barriers, protectionism, border controls
- New environmental or hazard limitation laws
- Monopoly, anti-trust or pricing inquiries
- Cost-cutting by government
- Political threats in overseas countries
3.2. Levels of risk
 What if, in the information technology area:
- Failure of overall IT system

- Hacking of our systems for fraud, spying, or
mischief
- Loss of e-links with customers, suppliers
or shareholders
- Effect of terrorism, criminal activity, political
activity
3.2. Levels of risk
 What if in financial field:

- Currency or interest rates shifted dramatically
- Low liquidity
- Sources of finance recalled debt
- Share price collapse following media revelations
- Reputational loss following an adverse law case
- Errors in trades (unintentional or deliberate)
Discussion
• Please provide examples of 3 levels of risk
to a company:
- Strategic risk
- Managerial risk
- Operational risk
3.2. Levels of risk

3.3.1. Definition of Risk management:
"Risk management is the process whereby an
organization anticipates the potential for adverse
events that may lead to injury or loss and acts to
avoid those events before they occur and/or to
ameliorate them (make them better) after they
occur"
Discussion
• Where do risks come from?
Risk vs Hazard
3.3.Risk management
3.3.2. Role of risk management
Sound governance and risk management brings:
- Greater likelihood of achieving objectives
- Higher share price in the long-term
- Greater likelihood of successful change initiatives
- Lower cost of capital
- Early movement into new business areas
- Improved use of insurance
- Reduction in the cost of remedial work and "firefighting"
- Achievement of competitive advantage
- Less business interruption
- Achievement of compliance/regulatory targets
3.3.3. Risk management framework
• Framework of enterprise risk management – created by COSO in 1985.
• COSO is short for the Committee of Sponsoring Organizations of the Treadway
Commission
According to COSO ERM:
Enterprise risk management is a process affected by the entity's

board of directors, management and other personnel, applied in
strategy setting and across the enterprise, designed to identify
potential events that may affect the entity, and manage risk so that it
is within the risk appetite, to provide reasonable assurance regarding
the achievement of objectives.
The challenge facing Boards is a way that balance managing risks

while adding value to the organization. An entity's board of
directors plays a critical role in overseeing an enterprise - wide
approach to risk management.
• COSO Framework of enterprise risk management
• 8 actions , 4 areas, 4 levels
 COSO Framework of
enterprise risk management
• Internal environment: look at

the core values of the
company
• Objective setting: look at the

visions, missions, objectives
• Event identification: identify

SWOT.
• Risk Assessment: evaluate the
risk and its impacts
• Risk Response: take action
avoid, accept, reduce, share
• Control activities: set up new

policies, adopt procedures to
improve performance.
• Information & Communication:
inform everyone about new
decisions
• Monitoring: supervise the new
actions and performance
Discussion
 Choose to answer 1 out of 2 question below
• Use COSO framework to provide a risk management plan for yourself !
• Use COSO framework to provide a risk management plan for a company:

Vietcombank, VpBank, Vinhomes, Bamboo Airways, Viettel, Vinamilk………..(any
companies)!
3.3.4.Risk management
 Risk analysis and management process
Risk recognition Risk monitoring

and reporting
Identify risks, threats and hazards
Review ongoing
insurance
Risk assessment coverage and
claims
Likely effects on business. Consider
value, sensitivity and criticality Routine board
supervision to
ensure policies
Risk evaluation
applied
Decide the risk management policy Revision of policies

as situations
Board policy approval change
3.3.4.Risk management
• Risk recognition and assessment: A list of

probable risks, source, reasons, types,
estimated loss.
3.3.4. Risk recognition and assessment
Q: How do we identify (recognize) risks?

A:The most common method is analysing business
environment.
 Macro level analysis: use PESTLE

 Micro level analysis: use Porter's five forces
 Internal business environment analysis
 Use SWOT to identify risks
3.3.4. Risk recognition
 Tools to identify risks

• A simple tabular approach
• Mind mapping
• A questionnaire designed to identify risks and hazards
• Software programs developed to provide on-line identification and
reporting of risks
ST RISK
T  A simple tabularSource Reason
approach Probability,
Frequency
Loss
1 Disruption in logistics External Lockdown Average, 1-3 Moderate

m
2 Production discontinuation Internal Overloaded Average, 3-6 Small

due to power loss capacity m
3 Fail to get license Internal Do not meet Low,1-3 y Big

requirements
of regulators
4 Customers do not like the Internal inconvenient Average, 1 y Big

new products product
5 Unfavourable change in the External World currency High, Small-

currency rate market everday average
6 Packaging errors internal New workers High, 1 week Small

 A simple tabular approach
- Pros: risk analysis conducted in each part of the

organization and at every level. Trigger further ideas and
insights, which improve the subsequent risk assessment.
- Cons: A managerial focus might fail to identify strategic

risks.
3.4. Risk recognition and assessment
 A questionnaire designed to identify risks and
hazards
- Include multiple - choice responses and invite a narrative
description
- Used throughout the organization, insights into risk can
be generated in every part of an organization and at
every level.
- Standardization of responses throughout the organization
 Questionnaire to identify risks and hazards
- Example:
Use Likert scale: 1- very bad ………3- neutral………….5 -very good.
1. Please choose number (1-5) to describe your job satisfaction at work,
regarding working condition and facilities.
regarding relationship with peers.
regarding relationship with managers.
regarding salary and income.
regarding promotion opportunities.
6. What are your other concerns at the workplace? Please specify……
 Mind mapping
- Visual approach to recognizing risk factors, their
interrelationships, deriving possible implications
- Users require some training and skills in the
methodology
- Benefit: appreciation of the relationships btw risks and
identification of different risk element from those
generated by tabulation or questionnaire
Software programs and systems

- Provide online access to the identification and reporting
of risks
- Link risk recognition and assessment, risk evaluation,
and enterprise risk management policies
- Built in-house or by consulting firms
 Critical success factors
- Sponsorship and oversight at board level
- Top management commitment
- Involvement throughout management and in all parts of the
enterprise
- Company-wide definition of procedures, documentation and
reporting
- Definition of responsibilities for identifying and recommending
risk responses
 Critical success factors (cont.)
- Risk management centres are given appropriate responsibility
- Areas of risk are carefully defined and bounded, each one limited in
scope
- Involvement of experts with relevant risk assessment experience
- Ensuring participation by identifying ‘risk 'ownership' throughout the
organization
3.5. Risk evaluation
Quantitative method of risk evaluation
The extent of any risk (R) is a function of the magnitude

of the potential cost or loss (L) and the probability (p)
that the uncertain future event will occur
Specific risk Ri = Li x p(L)i

Total risk exposure R(total) = L i p(L i)
 Example
Total risk exposure R(total) = 2.08

Discussion
• Please identify the risks of Vinfast/Vinamilk/Viettel/FPT/Vinmart/Big C……
or other companies of your choice and evaluate the risks using the
quantitative method. (6 risks)
• What policy would you adopt to cope with the risk? (avoid,
mitigate(reduce), transfer, retain)
Example:
3.6. Risk management and policy
High
II I (Transfer)
Mitigate the impact,
Share risk through financial
assume the risk, or insure
instruments, external
Loss insurance
IV (Avoid) III
- Staff training to mitigate
adverse effects -Take defensive action (Accept)
- Control systems to reflect to limit the impact
the situation -Carry any further costs itself
Low
High
Probability
3.6. Risk management and policy
• Both extent of loss and probability of occurrence can
be difficult to assess
• A risk with high loss but low chance of occurring,
should be treated differently than one with a lower cost
but greater probability
• Need to identify the risk or hazard and face up to the
reality of the situation.
3.6. Risk management policy
4 possible responses to risks:
Eisenhower model
Dwight David Eisenhower US president 53- 61

Eisenhower model
Benefits of Eisenhower model

 Prioritize your work/risks/concerns/interests
 Take appropriate actions
Discussion
Provide an example for each quadrant!
3.2. Levels of risk

Risk governance
Discussion
• Who is responsible for risk governance?
3.4. Roles of board of directors
in risk governance
in risk governance
 Risk Management Committee
• Standing Committee of main board or sub-committee of
Audit Committee
 Risk Management Committee
• Responsible for risk management policies, procedures

and plans
• Produces risk management plan for main board
approval
• Meets 3 or 4 times a year or when facing exceptional
risks
• Linked with internal and external audit
 Risk Management Officer or Chief Risk Officer
• A senior executive
• Reporting to CEO or CFO
• Responsible for working with the board Risk Management
Committee or Audit Committee
• Develops risk management policies, assessment
methodologies, and infrastructure
• Oversees risk assessment and management procedures
• Produces risk management reports
• Liaises with insurers
• Keeps in touch with external risk management
developments
COSO Framework highlights 04 areas for directors:
• BOD must:
in risk governance
- Understand the entity’s risk philosophy and concur with the entity’s risk appetite
- Know the extent to which management has established effective enterprise risk management of the organization
- Review the entity’s portfolio of risk and consider it against the

entity’s risk appetite
- Be apprised of the most significant risks and whether management
is responding appropriately.
Presentation
• Topics: Choose only 1 topic
1. Evaluate the CG practice in a company
(FPT, Vietcombank, Vinamilk, FLC, VinGroup….)
2. Comparison between Management and Corporate Governance
3.The nature of principle 5 in the OECD framework
4.The nature of section 1 in the Vietnam code
5. Describe the process of risk management
6. Compare OECD framework with Vietnam code
7.Describe and analyse the types of directors within a listed company.
Provide example.
8.Specify the basic functions of the board of directors in a listed company.
Provide examples where relevant
Presentation
• Max 10-12 slides each group.
• Duration: 15 mins of presentation.
• 2 mins for answering questions
• At least 2 speakers each group.
Contents
Part 2: Practices
4. The board memberships: director
appointment and remuneration
4.1. Director's appointment
 The appointment of directors
 Types of directors
 Desirable attributes in a director
 Core competencies of a director
4.2. Director's remuneration
 Remuneration committee
 How to determine the reward
Types of directors
Remuneration committee
Discussion
Under which circumstances that companies need

to appoint directors?
When does the appointment of directors arise?
4.1. The appointment of directors
When does the appointment of directors arise?

- on the initial incorporation of a company
- on reappointment at the expire of a director's term
of office
- to fill a vacancy
- on the creation of an additional directorship
 The size of boards
- An ideal number?
- Corporate or real person?
- Single or multiple?
 The rotation of directors

- A staggered board: fixed proportion retired and could be
elected each year
+ preserves experience
+ provides stability
+ produces a longer term strategic horizon
- Calls for annual re-election of entire board
 Retirement, disqualification , removal of directors
 Retirement
- Some company law provides age limit
Often 70 unless shareholders agree
- Some company law provides lower limit
Frequently 18
 Disqualification
Company law has provisions for director disqualification
– bankruptcy
– mental illness
– disqualification by courts
• offences against companies law
• failure to file official returns
• corrupt business behaviour
 Removal
- In principle, the shareholders of a company have
the right to appoint and to remove their directors.
- In practice, this can prove to be difficult.
The board ensures Governance:

that it is being well the work
run and run in the The board of the board of
right direction directors or other
governing body
Management:
Managers run the work
the business Management of the executive
management team
 What are types of directors in a company?
- Executive director / Managing director
- Non - executive director (NED)
+ Independent non - executive director (INED)
+ Affiliated / connected non - executive directors
(CNED) (Case study 3.3 pg.98)
- Outside director (US)
- Alternate director
- Nominee director
- Employee/worker director (Europe)
- Associate director
FPT: Board of director
Bộ môn quản trị doanh nghiệp - Khoa QTKD - Học viện ngân hàng 244
FPT: Board of management
Bộ môn quản trị doanh nghiệp - Khoa QTKD - Học viện ngân hàng 245
Integrity
Intellectual
Character traits
– Independently minded, objective, impartial, task
oriented…
Desirable personality
– Interact positive with other: openness, flexibility,
sensitiveness, persuasive…
– Sound listener, good communicators, politically
sensitive
Every board needs to have a mix of capabilities that provide

a balanced and well-qualified team relevant to that board
and that company
Types of directors
Remuneration committee
• Notes:
– No one should determine their own reward
– Top management pay escalation
• 1979 top earned 20 times lowest paid
employees
• today many hundred times more
Remuneration committee
- Subcommittee of the main board
- Wholly or mainly independent outside directors
- Recommends the remuneration packages of executive

directors and members of top management.
• How to determine the reward for:
– Executive directors
• Remuneration consultants
• Comparative information
• Justify high board-level rewards
– Non-executive directors
• Share options
251
4.2. Directors’ remuneration
• In the United States
– SEC rules since 2007 have required full
disclosure of pay packages of top
management.
• In the UK
– shareholders vote on directors’ pay since 2002
– principles of a company’s remuneration
policy, the link between performance and
reward
252
Revision for mid-term test
1. Comparison between Management and Corporate
Governance
2. Compare OECD framework with Vietnam code
3.Describe and analyse the types of directors within a
listed company. Provide example.
4.Specify the basic functions of the board of directors in
a listed company. Provide examples where relevant
Contents
 Chapter 2: The roles and responsibilities of stakeholders
Part 2: Practices
5. Board Leadership: The Reality of the
Boardroom
1. What is leadership?
2. The chairman’s leadership role
3. Sources of governance power
4. Games that directors play
5. Board styles and the culture of the board

• Why the company needs leadership?
"Outside directors never know enough about the

business to be useful and inside directors always know
too much to be independent"
5.1.
5.1. What
What Is
Is Leadership?
Leadership?
Leadership
is the process of influencing other to work willingly towards goals, to

the best, of their capabilities, perhaps in a manner different to that
which they would otherwise have chosen
What is leadership style?

•Leadership style is the way in which the functions of leadership are
carried out, and the way that managers behave towards members of the
group
5.1. Leadership style
• Leaders can be:
– abdictatorial,
– benevolent (kind-hearted),
– dictatorial,
– bureaucratic,
– consultative,
– inspirational,
– participative,
– servant
258
• Style of managerial leadership
• 3 main styles:
• Authoritarian (Autocratic)
• Democratic
• Laissez - faire
259

 Authoritarian (Autocratic):
• Power is with the manager only, decision is made by manager only
• Control almost everything
• Determine policies, procedures, rewards, punishments.
• The interaction within members is very limited, the interactions of members
move only towards the manager.
260
Authoritarian (Autocratic)
261
Discussion
• Is autocratic style of leadership GOOD or BAD?

• under what circumstances that we need the autocratic style of leadership?
262
Style of managerial leadership
Democratic:
•Power is with the group as a whole only, decision is made by the group.
•Members have chances to voice their opinions over various issues: tasks,
goals, policies, procedures, rewards, punishments.
•The interaction within members is encouraged.
263
Democratic
264
Discussion
• List some pros and cons of democratic style? Explain why?
265
Democratic
266
 Laissez – faire: “let them do it”
• Very little guidance from leaders
• Power moves towards the members
• Leaders Members can make decision on their own.
• allow the freedom of action, not interfere, but ready to help.
•
267
• Laissez - faire
268
Approaches to leadership
2 main approaches to leadership
• The Qualities or Traits approach
• The Functional or Group approach
26
9
 The Qualities or Traits approach:
27
0
The Qualities or Traits approach:
• Leaders are born, not made.
• Leaders must have certain inherited personality traits or

qualities.
27
1
 The Functional or Group approach
• Leadership can be learned and developed.

• Focuses on the accountabilities, responsibilities and functions of the
leader and the nature of the group.
• Examines how the leader’s behaviour affects and is affected by the
group of followers.
27
2
Discussion
List 5 characteristics/personalities/ traits of a good leader
27
3
Characteristics
Characteristics of
of Leaders
Leaders
Make people believe in him  Are accountable
Motivate people Can cope with failure
Criticize when necessary  Are determined to succeed
Take criticism Can cope with pressure
Share the organization’s vision Are approachable

Can make quick decision Can prioritize work
Can take risk Can delegate and empower…

Difference
Difference between
between leader
leader and
and manager
manager
• Management
– Planning, organizing, coordinating ,controlling
– Logic, structure, control
– Producing predictable results, on time
– Authority by virtue of position
• Leadership
– Create a vision – something different from the status quo
– Communicate the vision – credibly, meeting needs of the people
– Energize, inspire, and motivate others to fulfill the vision
– Create the culture to support fulfillment
• Shared language, myths, rituals, beliefs, etc.
– Inspiration and motivation. 275
Difference
Difference between
between leader
leader and
and manager
manager (con’t)
(con’t)
LEADERS: MANAGERS:
 Elected by people  Promoted by the company.
 innovate  administrate
 focus on people  focus on systems and
structures
 challenge status quo  accept status quo
 inspire trust  rely on control
 have a long-range view  have a short-range view
 ask what and why  ask how and when
 have eyes on horizon  have eyes on bottom line
 do the right thing  do things right
You
Youcan
canbe beappointed
appointedas
as aamanager,
manager,but
but you
youaren’t
aren’taa
leader
leader till
tillpeople
peoplechose
chose to
tofollow
followyou”
you”
Benefit
Benefit of
of effective
effective leadership
leadership
 Energise and support change
 Secure commitment, mobilise the ideas, experience

and motivation employee
 Set direction, helping teams and organizations to

understand their purpose, goals and value to
organization
 Support, challenge and developing people,

maximize their contribution to organization
 Creating company culture
5.2. The chairmans’ leadership role
• The significance of the chairman

– The chairman of the board of directors
• not of the company
– Subject to the constitution, chairman is
chosen by directors from among the board
members
5.2. The chairman’s leadership role
• The chairman
– In many companies: The chairman is an
independent non-executive directors serving
on a part-time basis
– In many cases: the chairman is not a member
of management
• The chairman’s role

– Leadership of the board
– Management of meetings
– Strategic leadership
– Linking the board with management
– Arbitration between board members and others
– Being the public image of the company
• Chairman and Chief Executive

– Should they ever be the same person?
• the arguments for and against
• what the codes say
• the practice in the USA
5.3. Source of governance power
• The fundamental legal power of the board derives from the
shareholder members who have delegated the running of
the company to their directors.
 Can be influenced by:
 Pressure from a dominant or group of shareholders
 The threat of potential takeover
 Prospect of litigation
 Auditor
 The effect of legislation and regulation
 Media pressure
 The risk of damage to personal reputation
 A dominant or charismatic leader
 Changing business circumstances
In addition to external source of power over a company
and the decisions of its boards, individual directors can
have power from various sources:
• Personal power  Organizational power

• Knowledge power  Net working power
• Sanction power  Societal power
• Political power  Ownership power
• Interpersonal power  Representative power
5.4. Games that directors play
• Alliances  Lobbying
• Coalitions and cabals  Log rolling
• Conspiracy of silence  Personal agendas
• Cronyism  Propaganda
• Deal- making  Rival camps
• Dereliction of duty  Scaremongering
• Divide and rule  Snowing
• Empire building  Spinning
• Group- think  Sponsorship
• Half- truths  Sub optimization
• Hidden agendas  Window dressing
5.5. Board style and culture
Discussion question:
What factor determines board style?

Board style can be affected by:
• Board tradition  Adaptability

• Corporate vision  Collaboration
• Innovation  Conflict
• Control  Relationship
• Decision making  Communication
• Leadership  Status
• Commitment  Conformity
 Trust
Contents
 Chapter 2: The legal framework of corporate governance
 Chapter 3: The governance of corporate risks
Part 2: Practices
6. Board activities: CG in practice
1. Committees within the board
2. The audit committee
3. Board effectiveness - building a better board

6.1. Committees of the board
Why unitary boards create subcommittees?
– To enable independent directors to meet separately
from the board as a whole, in order to fulfill their
oversight roles
– To delegate board activities to reduce the burden on
the board as a whole
6.1. Committees within the board
 What is a committee within the board?
– Established for specific purposes
– Has a charter or former terms of reference
– Composed of entirely or mainly of outside, non - executive

directors
– Provides independent and objective corporate governance
supervision, avoiding executive domination of board deliberations
 Standing committees of the main board
– The three committees required in the codes
• Audit committee
• Remuneration Committee
• Nomination Committee
– Other board committees
• Finance committee
• Employee issues committee
• Risk governance committee
 Remuneration committee
- Subcommittee of the main board
- Wholly or mainly independent outside directors
- Recommend the remuneration packages of executive directors

and members of top management.
 Nomination committee
- Made up by wholly or mainly of independent outside
directors
- Make recommendations on replacement or additional

members of the board
- Offer a check - and - balance mechanism to reduce

nepotism
Discussion
• What are the difficulties that the audit/
remuneration/nomination/committee may
encounter?
 Audit committee
– is a fundamental component of CG
– With members drawn from shareholders, non-
management directors, at least one is current financial
expertise.
– Supervise the auditing activities and provide a bridge
between
 the external auditor
 and the main board
Case study: Box 13.1 Microsoft Cop. Audit
Committee Charter (pg. 361)
6.2. The audit committee
 Roles and responsibilities of the audit committee
- Nominate, Recruit and work with external auditors
- Report to the board on the audit process and on any audit
issues
- Oversee the activities of the internal audit
-Review financial information provided to shareholders and
others
 The role of INTERNAL AUDIT in corporate governance
Internal auditors are expected to
● Analyse, monitor the financial issues of the company
● Assess the effectiveness of thecontrol systems
● Make sure company complies with state law.
● Evaluate the company’s assets
● Carry out inquiries into possible irregularities and frauds
● Fix wrongdoings and help company achieve corporate mission,
policies, and objectives
● Evaluate risks at all levels in the organization
 The role of internal audit in corporate governance
To whom is internal audit responsible
Question:
and where does it fit into an organization?
 The role of EXTERNAL AUDIT in corporate
governance
- Have access to all of the books and records of the company,
and report to the shareholders that the financial statements
provided to it by the directors gave true and fair view of the
state of the company's financial affairs
- Make sure that internal auditors perform properly
- Assess the financial risks
Discussion
• Name the Big4 in audit? Why are the
considered Big4?
 Questions:
- How are external auditors appointed, remunerated or

removed?
- To whom does the external auditor report?
- Compare internal and external audit?
- Case study 13.2. The collapse of Arthur Andersen pg.

384
5.2. The audit committee
Question: - What is the main reason for the failure of AA?
- Solutions?
Revision
• Please compare internal auditor with
external auditor.
• What are the commonalities and

differences between them?
6.3. Board effectiveness- building better boards
HOW TO MAKE A BETTER BOARD?

 Board effectiveness- building better boards
• Need to provide training to improve the board

competencies
Director training and development
Director training and development
• Reasons for training
– Changing global business:……….
– New regulations, codes and legal requirements: ……….
– Litigious society: tend to go to court to settle issues……

 Director training and development
 Formal external training courses
– In-house board development programmes
– Updating and briefing sessions for the board, or
individual directors
– Relevant higher degree courses
– Experiential sponsorship programmes
– Mentoring
– Self directed learning and continuous self-
development
– Board experience
 Directors' liabilities and indemnity (salary)
• Unlike shareholders, directors’ liability is not limited

• Suits against directors can come from shareholders, employees,
creditors, customers, suppliers, regulatory bodies, or liquidators
• In listed companies, investor-led proceedings are most likely
• In private companies customers, clients, or, employees are more
likely to sue
• Directors can be held legally accountable in their personal
capacity
• Statute law may impose duties on directors under company,
health and safety, environment, anti-corruption, consumer
protection, employment or creditor protection laws
 Directors' liabilities and indemnity
Directors' liabilities and indemnity
 Directors and officers insurance
Need insurance because
• Legal actions can be brought against the company, the
board, and/or individual directors
• Directors' personal assets can be at risk
• Directors can be held legally accountable in their personal
capacity, but also for the actions of other members of the
board or top management
• Claims can be for unlimited amounts
• Some investors, such as venture capitalists, insist on D&O
insurance before providing funds to a company
• Directors cannot be indemnified for acts which are contrary
to companies' legislation
Revision
• Please specify the sources of governance
power of directors.
Revision
• Please specify the sources of governance
power of directors.
1. Legal Power delegated by shareholder
2. Knowledge power
3. Interpersonal power
4. Sanction power
Contents
 Chapter 2: The legal framework of corporate governance
Part 2: Practices
7. Board assessment
7.1. Assessing board and board committees
7.2. Assessing individual director's performance
7.3. Corporate governance rating system for companies
7.4. Corporate governance assessment system for

countries
Assessing board and board
committees
• Question:
Why do companies need to evaluate the

board of directors and its committees?
Reasons for board assessment:

• It is a compulsory practice in every business
• Shareholders have the right to know the
performance of the board in various perspectives
(audit, strategic guidance, strategy
implementation, remuneration, utilisation of
assets, decision making…..)
• Link performance with compensations and rewards
How the boards are assessed in the US:

New York Stock Exchange rules require boards of
listed companies to conduct a self-evaluation at
least annually to determine whether the board and
its committees are functioning effectively
UK CG Code requires boards to:

• Undertake a formal and rigorous annual
evaluation of its own performance and that of its
committees and individual directors
• State in the annual report how the performance
evaluation of the board, its committees, and its
individual directors has been conducted
• Have the review conducted independently at
least every third year
Board assessment should:

• Check directors' knowledge of the business and its strategic
situation
• Assess balance of the board’s skills & knowledge
• Identify director’s weaknesses
• Review current board and board committee practices
• Review the effectiveness of the board's strategic thinking
and decision making
• Examine attitudes of long-serving directors
Sir Bryan Nicholson, chairman of the UK's,

Financial Reporting Council:
• "...the evaluation process provides the opportunity for
companies to create a circle of sustained
improvement in board based on regular objective
assessment of past performance and the current
needs. It introduces a new dynamic which companies
can use to improve the quality of their corporate
governance and secure competitive advantage."
• What are the criteria for board

assessment?
• Assess the board in what area or aspect

of the company?
People involved in board assessment

– The board as a whole
– The board chairman
– The company secretary
– The expert
• Who should carry out the board assessment?

– The chairman: checks the independence and
objectivity
– Independent director, past chairman
– Special board committee: audit committee
– Self-evaluation by boards
– External consultants: to resolve the arguments
Benefits of an external review:

– objectivity and a fresh viewpoint
– sensitive issues can be addressed
– root causes of board-level problems diagnosed
– independent review of board decisions
– objective interviews with key players
– questionnaires based on industry experience
• What are the difficulties in board

assessment?
• Key area of Board assessment
– Review the overall governance issues
– Review the board structure
– Profile of board members
– Review board style, efficiency, and effectiveness
=> Determining a strategy for board development

• Review the overall governance issues
– Election
– Compesation
– Risk control
– Strategic planning
– Compliance with laws
o Review the board structure

– The balance between
• executive directors - independent directors -
connected non-executive directors
– The size of the board
– The relationship between the chairman and the CEO
 Profile of board members

• The terms of appointment, the age, education;
• Professional background, relevant experience and
skills,
• The roles played and contributions made to the board
and board committees,
• Personality characteristics
• Identify gaps and develop succession
 Review board style, efficiency, and effectiveness
– Use of directors’ time
– Consider the four functions of the board
– Use of board committee
– Quality of board information
Questions for assessment:
- Is the company’s corporate governance compliant with state law,
industry regulation, company’s codes, and listing rules?
- How does the company’s corporate governance performance
compare with the industry average and the industry leaders? Are
benchmarks available?
- Did the appraisal identify critical issues? Has anything been done
about them?
- Did the appraisal deal with ‘elephants in the room’ -that is, things
that everyone knows, but about which no one will speak?
– Have the objectives of the assessment been met?
– Has the assessment led to improved board effectiveness?
– Was the assessment well done, did it conform with best practice,
and how might it be improved?
• Outcome of board review

– Identify accomplishments, good results
– Identify poor performance, missed opportunities
– Identify current challenges
– Recommend solutions to overcome challenges
– Improve effectiveness of the board
The outcome of the evaluation should be disclosed
o Method of assessment
- Analysis of board committee agenda, papers and
minutes
- Group discussion
- Director workshop
- Interviews
- Questionnaires
Thinking board
7.2 Assessing individual director's
performance
• Governance codes and listing rules demand
performance assessment of individual directors
• Most directors now accept director-level appraisal
– just like management appraisal
performance
• Process of assessment:
performance
• Who is in charge of carring out the assessment?
– The chairman
– Independent director
– Company secretary organizations
– Consultancies
– Independent consultant
– A firm specializing in board appraisal
performance
• Subject of director assessment
– The director attributes and core competencies
– The experience, skills, and knowledge expected
– Contributions to the company
– Awareness of critical success factors in the
business
– The business's exposure to risk
performance
• Approach to the appraisal
– Data collection,
– Interview,
– Peer review 360 degree
performance
• What data should we collect for

performance appraisal?
• What content should be included in the
interview?
• What is the method of peer review 360
degree ?
7.3 CG rating systems for companies
To measure the CG practices, governments and
regulators must use a rating system.
• Why do regulators need to use a rating
system for companies?
– Interest in corporate governance post Enron and
SOX
– Corporate governance now recognised as vital
– Need for comparison
– The risk evaluation of a company
• Notes:
– Various systems have been developed
G-index created by Gompers (2003)
Governance Ratings in Germany (2004)
Dominor-Ratings in EU (2006)
– they use different criteria
– the scores are not necessarily compatible
– their conclusions sometimes differ
• Popular Rating system:
– Standard and Poor’s (S&P): credit rating S&P’s
GAMMA
Vietnam: BB (stable)
– Fitch Ratings and Moody’s
– Institutional Shareholder Services (ISS)
– Governance Metrics International (GMI)
– The Thai Rating and Information Service (TRIS)
• Rating system:
– The Investor Responsibility Research Center
(IRRC)
– The International Finance Corporation (IFC)
– Core Ratings
• S&P's GAMMA – Assessment on:
– ownership structure and external influences
– shareholder rights and relations
– transparency, disclosure and audit
– board structure and effectiveness
TRIS - Thai Rating and Information Service
Process of review:
– company supplies information
– information analysis
– site visit
– rating committee consider and decide rating
– company accepts or rejects rating
– company considers disclosure TRIS publicises
– monitoring and review
Contents:
- Shareholders' rights
- Composition and roles of the board of directors
- Information disclosure
- Corporate governance culture
TRIS - Thai Rating and Information Service
TRIS ratings:
– 9 – 10 excellent
– 8 very good
– 7 good
– 5 - 6 moderate
– Less than 5 improvement recommended
Corporate Governance Assessment for Listed Companies in China
An evaluation tool, involving Y/N answers to 194 questions. Based on

model of significant attributes of good corporate governance
©Ho and Chan 2006 HKBU
1. CG commitment and policy 10%

2. Ownership structure 5%
3. Shareholders’ rights and participation 15%
4. Controlling shareholders’ behaviour and activities 10%
5. Board of directors and supervisors 25%
6. Top mangers and pay 10%
7. Internal controls, risk management and audit 10%
8. Disclosure and transparency 15%
CoreRatings is a European based rating agency, providing

independent investment analysis of corporate
responsibility risks
– governance policy and business ethics
– risk management processes
– ownership structure and control
– financial reporting, audit, and verification
– board structure and management
– board executive compensation
– investor rights and relations
7.4. CG rating systems for countries
• The World Bank and International Monetary
Fund joint initiative
– Reports on the Observance of Standards and
Codes (ROSC) program
• The European Bank for Reconstruction and
Development (EBRD)
– EBRD tries to help governments, policy-
makers and all those promoting new legislation
for the development of corporate governance -
related legal reform
7.4 CG assessment systems for countries
The International Finance Corporation (IFC) works with

countries which have an important potential for growth but
weak corporate governance practices.
They engage at various levels:
– Firm : corporate governance assessments and advice
– Sector : capacity building of local consulting firms,
institutes of directors, educational institutions and stock
exchanges
– Market : alignment of standards and practices,
development of corporate governance codes and listing
requirements
– Public policy and awareness:
7.4 CG assessment systems for countries
• Group A - very high compliance
– no countries qualified
• Group B - high compliance
– e.g. Hungary, Poland, and Russia
• Group C - medium compliance
– e.g. Bulgaria, the Czech Republic, and Slovenia
• Group D - low compliance
– e.g. Georgia, Romania, and Turkmenistan
• Group E - very low compliance
– e.g. Azerbaijan, Belarus, and Ukraine
Revision
• Chapter 1:
• Definition of CG in various perspectives: Operational,
relationship, societal, stakeholder.
• Roles and Objectives of CG
• Management vs Corporate Governance:
• What do the board do?
• Chaper 2: CG framework (OECD)
• Role of CEO & executive directors, independent directors
according to OECD and IFC
• Responsibility/accountability of directors
• The nature of Disclosure:
Revision (cont)
• Chapter 3: Risk Policy
• ERM according to COSO
• Strategic risk: Risk from customers, goverments, suppliers,competitors
• Risk transferring
• Chapter 4: The Board membership

• Source sof power of directors
• Types of Directors and Appointments
• Chapter 5: The Board membership

• Leadership
• Games played by directors: Alliance , Croynism, Log-rolling, Lobbying….
Revision (cont)
Chapter 6: The Board Activities

•Committees within the Board
•External auditors vs Internal Auditors
Chapter 7 : Board Assessment

•Process of Assessment
•Subject of Assessment
•CG assessment for countries
Revision (cont)
If you are a shareholder of a company. What principle(s) of

corporate governance that you like the most.
Revision (cont)
Specify the types of directors that a company can appoint.
Why are companies required to appoint independent directors?

Revision (cont)
• Compare Business Management with

Corporate Governance
Revision For Online Exam
PART 1: MULTIPLE CHOICE (5 points for 20 questions, 0,25/question)
1. Definition of CG (5 perspectives)
2. Director’s function, obligation.
3. Main concerns of shareholders, suppliers, customers, employees.
4. Committees (function, composition) in the board
5. Fiduciary duty of the board
6. The role and objective of corporate governance
7. OECD principles (the nature of each principle)
8. Risk governance (level of risk, purpose of COSO framework)
9. Insider trading, self-dealing, related-party transaction
10. Board assessment, area for individual assessment, director’s liability
1. In corporate governance context, transparency and disclosure refer to the disclosure of financial information including
balance sheets, financial report and important financial indicators.
2. Companies can decide to pay dividends to shareholders randomly in the form of cash or discounted shares.
3. In the context of running a business entity, corporate governance and business management have the same meaning.
PART 2: Decide TRUE or FALSE and EXPLAIN (2 points for 4 question,
0.5/question)
1. Committees are established within the board to help companies deal

with financial problems.
2. Transparency and disclosure refer to the disclosure of financial

information including balance sheets, financial report and important
financial indicators.
3. When paying out dividend, companies can freely decide which type
of shareholders will get dividend in cash and which type will get the
discounted shares.
4. Corporate governance and business management have the same

purpose when it comes to performance improvement.
PART 2: Decide TRUE or FALSE and EXPLAIN (cont)
5. “Professional” board is a type of board of director that is concerned

about both work effectiveness and board relationship.
6.Internal audit and external audit should work together directly to

improve the quality of the financial report.
7.“Country club” board is a type of board of director that is concerned

about both work effectiveness and board relationship.
8.The directors do not have the responsibility to protect the rights of

shareholders and investors.
PART 3: Essay (3 points)
1. Please make a comparison between the OECD framework and the

Vietnam Code of Corporate Governance. What are the similarities and
differences between them?
2. Assume that you are a shareholder of a listed company. What principle(s)

of corporate governance that you like the most. Justify your answer and
provide example.
3. Describe and analyse the types of directors that a company can appoint
within the board.
Why are companies required to appoint independent directors?
Provide an example in your answer.

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CORPORATE

 Lecturer: Le Tien Trung, Doctor of Business

We need to know about corporate governance to

- Classroom attendance & participation 10%

- 01 midterm test 20%

Part 1: Principles and policies

1.1. Definition of Corporate Governance

1.2. CG vs. Management

1.3. Roles and Objectives of CG

1.4. Evolution of Corporate Governance

A. Corporate entity B. Strategy formulation C. Policies

• Emergence of large corporations

• Corporations run and owned by

• Conflict between managers and

• Corporate Governance to resolve

• Corporate governance is the manner in which organisations, particularly

• Corporate Governance is about the procedures and processes

• Corporate governance is concerned with the exercise of power

1. An operation 2. A relationship 3. A stakeholder

- "the system by which companies are directed and controlled" (1)

- "about the procedures and processes according to which

an organization is directed and controlled" (2)

Focus on: shareholders, the board, the management

"The corporate governance structure specifies the distribution

"Corporate governance is about the activities of the board and

"Corporate governance deals with the way suppliers of

"Corporate governance is concerned with holding the balance

The board ensures Governance:

Aim Improve business Ensure company going into the right

Impact on Small, medium Large

Example VNM, FPT, HPG,VCB VNM, FPT, HPG,VCB

President, managing director, chief

Regional manager, project manager or

Supervisor, shift manager, department

Supervising executive Policymaking

Ensure the business Ensure the business

Approve and work

 FUNCTIONS OF CORPORATE GOVERNANCE

 Strategy formulation: provide strategic guidance

CG is on the Macro Level

McDonald’s vision is to be the world’s best quick service

Guided by its pioneering aspirations as well as a

Vision of Apple Vision of Samsung

- What information to disclose?

Management: Day-to-day affairs

• CG includes Conformance and Performance dimension

How boards should do How boards actually do

 Hints: aim, scope, people, functions, impact.

a. Recommend best practices for companies

b. Ensure fair returns on investment

c. Ensure transparency in business operation

d. Clarify the roles of directors.

e. Achieve socio-economic goals

• Protect the rights of shareholders

• Clarify roles and rights of individuals

• Optimal board structure

• Q: What factors should be taken into account to

• CG ensures fair return on investment for shareholders.

• Q: What is the most prominent conflict in

• Financial and non financial disclosure

• Financial prepared according to IFRS

• High-quality annual report published

IFRS: international financial reporting standards

• Q: How can shareholders be assured that the