UEH UNIVERSITY

SCHOOL OF FINANCE

FINAL TERM PROJECT

CORPORATE GOVERNANCE & ETHICS IN FINANCE
RESEARCH ON EXIMBANK IN 2022

Lecturer: : Vũ Việt Quảng

Student name : Bùi Tuấn Anh
Student ID : 31211023068
Class : DH47FNC06
Phone number : 085 913 4169
Email : anhbui.31211023068@st.ueh.edu.vn
 ABSTRACT
This research is conducted delving into the assessment of corporate governance of
Eximbank, also known as the Vietnam Export Import Commercial Joint-Stock Bank, in
the year 2022. The research begins with an evaluation of market efficiency, the legal
system for shareholder protection, enforcement of regulations, and the societal and
cultural values prevalent in Vietnam, which is Eximbank’s local market. The aim is to
provide a comprehensive overview of the environmental factors that influence
Eximbank’s corporate governance. The research aims to analyze the governance structure
of Eximbank, focusing on the structure, roles, and responsibilities of the board of
directors. It also assesses the effectiveness of management decisions and company
operation policies. Additionally, the research examines how the board of directors
interacts with senior leadership, regulatory agencies, shareholders, and investors. The
essay will present a deep understanding of how the board of directors performs its
monitoring and support tasks in the strategic decision-making process. It also addresses
promoting transparency, responsibility, and ethics in corporate governance. The
conclusion of the essay proposes solutions to improve the quality of management
supervision for the company, including strengthening the independence of the board of
directors, ensuring diversity of opinions and disputes, establishing effective monitoring
mechanisms, and enhancing training for members of the board of directors to improve
their management and supervision skills.

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PART I. OVERVIEW OF EXIMBANK ........................................................................4
PART II. CORPORATE GOVERNANCE ANALYSIS ...............................................6
1. Analysis of factors that shape the quality of governance system in Vietnam ...6
1.1. The efficiency of local capital markets ..............................................................6
1.2. Extent to which the legal system provides protection to all shareholders .........8
1.3. Enforcement of regulations ................................................................................9
1.4. Societal and cultural values .............................................................................10
2. Board of Directors: Duties and Liabilities .........................................................12
2.1. The operation of the Board ..............................................................................12
2.1.1. The Board of Directors .............................................................................12
2.1.2. Chairman of the Board of Directors ..........................................................13
2.1.3. Members of the Board of Directors.......................................................... 14
2.2. Board Committees ...........................................................................................14
3. Board of Directors: Selection, Compensation, and Removal ...........................17
3.1. Market for Directors........................................................................................ 17
3.2. Director for Compensation ..............................................................................19
4. Board of Directors: Structure and Consequences............................................. 21
4.1. Board Independence........................................................................................ 21
4.1.1. Independence of Chairman .......................................................................21
4.1.2. Lead independent director .........................................................................23
4.1.3. Outside (non-executive) directors .............................................................24
4.1.4. Independence standards ............................................................................26
4.1.5. Independent committees of the board....................................................... 27
4.1.6. Representation on the board by selected constituents ...............................29
4.2. The size and structure of a board of directors.................................................. 30
4.2.1. Board size ..................................................................................................30
4.2.2. Diverse Board ...........................................................................................32
4.2.3. Board with female directors ......................................................................33
4.2.4. Companies whose directors sit on multiple boards (busy boards) ............34
4.2.5. Companies whose senior executives sit reciprocally on each other's boards
(interlocked boards) ................................................................................................36

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 4.3. Consequences ...................................................................................................37
4.3.1. Independence............................................................................................ 37
4.3.2. Balance of Power ......................................................................................38
4.3.3. Managerial performance ...........................................................................39
4.3.4. Firm performance ......................................................................................40
4.3.5. Stockholder reaction/Stock prices............................................................. 41
PART III. Executive compensation and Ownership structures .................................43
1. Analysis of the firm’s Executive compensation................................................. 43
2. Analysis of the firm’s Executive Equity Ownership ..........................................45
3. Analysis of the firm’s ownership structures....................................................... 47
3.1. Major and minor shareholders ............................................................................47
3.2. Institutional and individual shareholders ............................................................48
3.3. Foreign and domestic shareholders .....................................................................49
3.4. State shareholders ...............................................................................................50
3.5. Founding shareholders ........................................................................................51
PART IV. CONCLUSION AND DISCUSSION ..........................................................52
APPENDIX……………...................................................................................................54
Authority and responsibilities of the Board of Directors ........................................54
Authority and responsibilities of the Chairman of the Board of Directors ...........55
Authority and responsibilities of the Members of the Board of Directors............. 57
References ....................................................................................................................58

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PART I. OVERVIEW OF EXIMBANK

With a current owner's equity of VND13,317 billion and a charter capital of

12,335 billion VND, Eximbank is among the biggest commercial joint-stock banks in
Vietnam. With 207 branches and transaction offices nationwide in addition to its
headquarters in Ho Chi Minh City, the bank has grown its network. Additionally, it has
correspondent financial connections with more than 869 banks and their branches
throughout more than 84 nations globally.

Eximbank is now one of the biggest commercial joint-stock banks in Vietnam in

terms of owner's equity, with a charter capital of 12,335 billion VND and owner's equity
of VND13,317 billion. With its headquarters located in Ho Chi Minh City and 207
branches and transaction offices, the bank has grown its network throughout the nation.
Furthermore, it continues to have correspondent banking agreements with more than 869
banks and their branches throughout more than 84 nations globally.

To fulfill the various demands of its clients, Eximbank provides a broad array of
goods and services. These include of demand deposits and savings deposits collected
from people and organizations in gold, foreign currencies, and Vietnamese Dong. In
addition, they provide consumer loans, overdraft protection, syndicated loans, VND,
foreign currency, and gold credit limits, as well as short-, medium-, and long-term loans.
Through documentation discounting, SWIFT-based transfers under different types of
L/C, D/A, D/P, T/T, P/O, and check, as well as settlement services and financing for
export-import activities, the bank guarantees efficient, rapid, and secure transactions.
Additionally provided are cash services including payroll, collection, on-site collection
and payment, foreign exchange trading (via Spot, Swap, Forward, and Currency Option),
payment for international remittances, and remittances from both local and foreign
sources. Furthermore, they issue and settle credit cards, both local and foreign, such as
the Eximbank MasterCard, Eximbank Visa, and Eximbank Card. In addition, they offer
financial services for studying abroad, guarantees both domestically and internationally,
and financial advising services for investors.

In its 34 years of existence, EXIMBANK has made several noteworthy

contributions to the banking and finance industries. These accomplishments are a
testament to the bank's dedication to excellence and its important position in the sector. In
addition, EXIMBANK Vietnam, the Vietnam Export Import Commercial Joint-Stock
Bank, strives to be a premier commercial bank in Vietnam, led by professionalism and
honesty. Its primary purpose is to help customers achieve their objectives by providing
them with services and solutions that put their needs first. The bank is committed to
providing a wide range of superior goods and services by utilizing cutting-edge
technologies. It aims to foster an environment at work where motivated and industrious
staff members are rewarded. Furthermore, by steadily expanding its business,
EXIMBANK Vietnam is dedicated to generating value for all of its stakeholders,

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including customers, shareholders, staff members, and communities. The bank's basic
principles include putting the needs of the client first and providing dependable service,
maintaining morality and openness in all of its dealings, and encouraging innovation and
improvement. The bank's operations and relationships with its stakeholders are guided by
these principles, which guarantee the preservation of the bank's dedication to excellence
and honesty.

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PART II. CORPORATE GOVERNANCE ANALYSIS
1. Analysis of factors that shape the quality of governance system in Vietnam
1.1. The efficiency of local capital markets
Capital markets, according to David Larcker and Brian Tayan (2011), play a critical role
in setting labor, natural resource, and capital pricing. Prices are deemed accurate when
these markets work effectively, reflecting all of the information accessible to all parties
involved in the transaction. This precision is critical for firms to make sound judgments
regarding capital allocation, directing it to the most productive applications. As a result of
intelligent decision-making, the company's shareholders profit from increased
shareholder value. However, inefficiencies in the capital market can cause pricing
distortions, which can have a detrimental influence on company decision-making.
Furthermore, effective capital markets act as a regulatory tool for businesses.
They set a "market standard" for performance, and firms that fail to fulfill these
requirements see their share price fall. Companies that continually underperform over
time risk going out of business or becoming a target for takeover. If the market is
inefficient, shareholders cannot rely on the market's control mechanism to discipline
management for poor capital allocation decisions, which reduces shareholder value.
Furthermore, through pay contracts, efficient capital markets may govern
management conduct. Stock options, for example, match the interests of management and
shareholders, avoiding acts that reduce the firm's value. These incentives become
inefficient in the absence of an efficient market. In such cases, agency problems may be
resolved by requiring managers to hold considerable equity, active regulation, or other
forms of governance.
In conducting research on Vietnam, where Eximbank is located, it is found that
according to the market classification by MSCI, this country is indeed categorized as a
frontier market. MSCI’s classification is based on a market’s economic development, size
and liquidity requirements, and market accessibility. However, based on the Ministry of
Finance, Vietnam’s market has shown significant growth and potential, leading to
discussions that it might be upgraded to emerging market in 2022.
An article posted on CFA Institute Research & Policy Center by Luc Can and
Dung Nguyen (2021) indicated that the Vietnamese stock market has grown significantly
over the past 20 years, transforming from a small market with limited products and
capitalization at 1% of GDP in 2000 into a market with a wide range of stock, bond, and
derivative products worth 104% of GDP in June 2020. This growth has attracted more
participants both locally and internationally, drawing a large amount of capital into
Vietnam’s economy and contributing significantly to the nation’s growth.

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 Despite this, Vietnam fell short in terms of qualitative measures despite meeting
all quantitative criteria, which led to MSCI keeping Vietnam at frontier status. However,
Worldbank forecasted Vietnam’s economy to grow by 6.3% in 2023. Additionally, it has
been ranked 10th out of the world’s top emerging markets in 2023, by the Investor Vafie
Magazine, with regards to overall competitiveness. These factors indicate that Vietnam is
indeed a bright spot in the APAC region and is on the verge of being considered an
emerging market.
Rajan and Zingales (1998) examined the relationship between capital market
efficiency and economic development in a number of different nations, highlighting the
importance of capital markets. According to their results, sectors that need outside
funding often expand more quickly in nations with well-functioning capital markets.
They concluded that companies that rely on outside funding for growth have an edge over
rivals thanks to a well-functioning financial system.
Vietnam, being a frontier market, does not have efficient capital markets. As a
result, its businesses must rely on alternate finance sources for expansion, such as
influential rich families, significant banking institutions, other firms, or governments. As
money suppliers, these parties also govern business conduct by continuously monitoring
their investments. Their aims, however, may not be aligned with the simply financial
returns desired by the investing public, and so their capacity to operate as a discipline
mechanism may not be aligned with the interests of shareholders or stakeholders. A rich
family, for example, may be comfortable with lower-than-market profits if it permits
them to reap additional benefits from a dominating position inside the firm, such as
corporate perks, social status, or political power.
In conclusion, Vietnam is currently classified as a frontier market by MSCI.
Despite this, the nation’s market has shown substantial growth and potential, sparking
discussions about a possible upgrade to an emerging market status in 2022. Over the past
two decades, the Vietnamese stock market has transformed significantly, attracting both
local and international participants and contributing greatly to the nation’s growth.
However, due to qualitative measures, Vietnam remains a frontier market despite meeting
all quantitative criteria. With a forecasted economic growth and a high ranking among the
world’s top emerging markets in terms of overall competitiveness, Vietnam is a
promising spot in the APAC region and is on the brink of being considered an emerging
market. However, for Vietnam to achieve its objective of becoming a high-income
economy by 2045, it should more effectively leverage its diversified services sector to
secure more sustained productivity growth. This would entail undertaking reforms to
enhance services sector productivity and its cross-sectoral contributions to manufacturing
and agriculture productivity growth.

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 1.2. Extent to which the legal system provides protection to all shareholders
A nation's legal traditions have a big impact on small shareholders' and company owners'
rights. The key concerns of business owners include preventing the seizure of their assets,
guaranteeing the predictable resolution of legal disputes, upholding contracts, and
preserving the integrity and efficacy of the legal system. On the other hand, small
shareholders are worried about how the legal system protects their ownership rights and
stops powerful owners from abusing them. Because a strong protective structure
penalizes self-serving managers or insiders, it can lessen the frequency and effect of
agency troubles.
La Porta, Lopez-de-Silanes, Shleifer, and Vishny (1998) found that common law
legal systems provide stronger protection for shareholder rights than civil law (or code
law) systems. They also discovered that in nations with common law, creditors are better
protected. In a follow-up study, La Porta, Lopez-de-Silanes, Shleifer, and Vishny (2002)
discovered that the stock market values of businesses in nations with stronger legislative
frameworks protecting minority shareholder interests are greater than those of nations
with weaker frameworks.
Joint Stock Companies are gaining popularity in Vietnam due to their ability to
rapidly amass substantial capital and the flexibility they offer in capital transfer. These
companies, which operate across various industries and on a large scale, are becoming
increasingly attractive to investors. Joint Stock Companies are legal entities formed by
individuals who contribute capital and those who possess business acumen. However,
shareholders may not have the opportunity to directly manage or operate the company.
This could potentially allow managers or major shareholders to exploit their positions for
personal gain, which could be detrimental to the company.
The necessity of protecting the rights of minority shareholders in Joint Stock
Companies is crucial for sustainable development and attracting investors. Vietnam’s
legal system has a set of detailed rules designed to protect shareholders in businesses.
The Enterprise Law outlines the duties and rights of shareholders, providing a framework
for General Shareholder Meetings, voting rights, and limitations on minority
shareholders. There has been a notable shift in Vietnam’s legal system over the years,
moving from a focus on protecting majority shareholders to strengthening the rights of
minority shareholders. The 2020 Law on Enterprises (LOE) and the 2019 Law on
Securities (LOS), along with their related guidelines, have brought forth stronger
measures to stimulate shareholder activities, including those of risk-taking fund investors.
These investors can utilize these new tools and mechanisms to advance their individual or
corporate interests. The LOE (2020) and LOS (2019) aim to give shareholders more
control in supervising the board and balancing the board’s power. The Ministry of
Industry and Trade and the State Securities Commission oversee the company’s
operations and ensure legal compliance.
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 1.3. Enforcement of regulations
The safeguarding of minority shareholder interests is not limited to the application
of laws and regulations. It is imperative that government officials implement these
regulations in a fair and uniform manner. By making executives aware of the actual
danger of fines, regulatory enforcement can reduce agency issues by deterring them from
engaging in actions like insider trading, false disclosures, self-dealing, and fraud.
According to a research conducted in 2006 by Hail and Leuz, countries that possess
strong securities laws and legal enforcement agencies have lower capital costs than those
that do not.
Up to date, the legal system in Vietnam has been undergoing significant
adjustments to optimize the corporate governance structure, including ownership and
board management, merger processes, dissolution, and protection of shareholder rights.
According to some sources, while the corporate governance environment in Vietnam is
still in the developmental stage, there are positive signs of improving the quality of
governance and promoting transparency in business operations. On January 1st, 2021,
Vietnam introduced the New Law which is expected to act as a catalyst for advancing
corporate governance practices, granting greater autonomy to enterprises, and creating a
more welcoming environment for foreign-invested companies operating in Vietnam. The
principal sources governing corporate governance requirements for companies in
Vietnam include:
 The Law on Enterprises 2020 (LOE), which governs the establishment,
management, restructuring, dissolution, and related activities of enterprises.
 The "Vietnam Corporate Governance Code of Best Practice for Public Companies
2019 (CG Code)," developed by the State Securities Commission (SSC) with 12
substantial technical support from the International Finance Corporation, plays a
pivotal role.
 The Law on Securities 2019 (LOS) is instrumental in regulating public companies'
activities, encompassing public offerings, listings, trading, and securities
investment.
 Circular 116/2020/TT-BTC, dated December 31st, 2020, by the Minister of
Finance, offers specific instructions regarding corporate governance as applied to
listed companies per "Decree No. 155/2020/ND-CP.
 Circular 96/2020/TT-BTC complements the regulatory landscape. These legal
documents are supplemented by companies' constitutional documents and internal
regulations governing corporate governance.
The enforcement of these current laws and regulations significantly contributes to
enhancing the quality of financial products and the standards of enterprises listed on the
stock market. Moreover, these regulations are designed to meet the demands of in-depth

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international economic integration. To underscore its commitment, the Vietnamese
government officials are dedicated to enforcing policies and procedures in an equitable
and consistent manner. This commitment aims to ensure that the securities market
operates securely, professionally, and in tune with modern standards, further solidifying
the foundation of corporate governance in Vietnam. According to the National Corporate
Governance Assessment Report conducted by the Vietnam Corporate Governance
Forum, the adoption of the Best Corporate Governance Code is increasingly receiving
attention and strict implementation by businesses in Vietnam. This has contributed to
creating a fairer, more transparent, and competitive business environment, thus attracting
the interest of investors both within and outside the country.
Hail and Leuz (2006) also indicated that when a nation’s economy becomes a
part of global capital markets, the effectiveness of these markets can compensate, to some
extent, for shortcomings in the country’s specific securities regulation and legal
framework. In recent years, International economic integration is a major, important, and
continuous orientation in Vietnam's comprehensive renewal process. Vietnam has
actively and wholeheartedly participated in multilateral and regional economic
frameworks, with significant milestones such as joining the Association of Southeast
Asian Nations (ASEAN) in 1995, being a founding member of the Asia-Europe Meeting
(ASEM) in 1998, and becoming a member of the Asia-Pacific Economic Cooperation
(APEC) forum in 1998. The most notable achievement was Vietnam's accession to the
World Trade Organization (WTO) in 2007, marking comprehensive integration into the
global economy. To date, Vietnam has become one of the world's top 20 economies in
terms of international trade and has implemented about 100 bilateral and multilateral
trade agreements, along with more than 60 investment promotion and protection
agreements.
1.4. Societal and cultural values
The social enviroment in which a business functions has a substantial impact on the
decisions made by its management. Some communities may see some behaviors as
inappropriate, such as overt personal consumption, while others may find them
acceptable. The kinds of activities that CEOs are willing to engage in and their propensity
for self-interest are determined by this social influence. The way a corporation interacts
with its stakeholders and shareholders is also influenced by cultural norms. These factors
have a big impact on how governance systems are shaped, while being complicated and
hard to measure. Cultural values may be categorized using a variety of models, one of
which being the well-known Geert Hofstede model. This model generates five commonly
used indices to characterize cultural traits based on employee value survey data from
more than 70 countries:
• Power distance: The degree to which members of society tolerate uneven power
allocation.
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 • Individualism: The extent to which people of society feel bound to care for only
themselves and their immediate family rather than society as a whole.
• Masculinity: The degree to which people of society are forceful or competitive.
• Uncertainty avoidance: The extent to which members of society are uneasy in
unstructured conditions.
• Long-term orientation: The degree to which people of society value thrift and
tenacity.

In Vietnam, societal and cultural values play a significant role in managerial behavior.
The Confucian principles of respect for authority and collectivism foster a hierarchical
and group-oriented management style. Managers prioritize harmony, consensus, and
familial relationships, often blurring professional and personal boundaries. This can lead
to a paternalistic leadership style, where managers take on a caretaker role. However, it’s
important to note that these cultural norms may vary and evolve, and successful
management also requires adaptability and understanding of individual differences within
the workforce. Following Hofstede model, author analyzes those 5 factors which affect
Vietnamese managers’ engagement, guidance, and decisions making within organizations
as follows:
Power Distance: In Vietnam, hierarchical structures and unequal power distribution
are widely accepted. Authority figures command respect and are expected to provide
clear direction. Managers are typically viewed as decision-makers, and their authority
is seldom questioned by subordinates. The concept of “face” (preserving dignity and
social status) is pivotal. Managers refrain from criticizing or embarrassing their team
members in public.
Individualism: Vietnamese culture prioritizes collectivism over individualism. The
importance of family, community, and group harmony supersedes individual interests.
Managers place a high value on group objectives and cohesion. Loyalty to the team
and the organization is highly regarded. Decisions are often made with the entire
group’s impact in mind, rather than individual preferences.
Masculinity: Traditional Vietnamese values resonate with masculine traits such as
assertiveness, competitiveness, and ambition. Managers are anticipated to be robust
leaders, assert their authority, and deliver results. However, these traits are
counterbalanced with Confucian values of compassion, empathy, and respect for
others.
Uncertainty Avoidance: Vietnamese society has a propensity to eschew ambiguity
and favor structured environments. Managers strive for stability and predictability.
They prefer well-established processes and guidelines. Risk-taking is generally
discouraged, and managers tend to be cautious when confronted with uncertain
situations.
Long-Term Orientation: Vietnamese culture emphasizes perseverance, thrift, and
long-term planning. Managers concentrate on sustainable growth and stability,
thereby not preferring quick fixes are. Relationships are cultivated over time, and
loyalty to the organization is highly valued.

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It is universally acknowledged that Vietnamese societal and cultural values are gradually
changing to better suit the modern era. Managers are increasingly focusing on flexibility,
creativity, and adaptability to change. They are also emphasizing the development of
personal skills and leadership based on mutual respect and understanding, rather than
solely on power and position. Simultaneously, creating a positive work environment that
encourages cooperation and social interaction is also considered a key factor in effective
management. These changes not only reflect societal progress but also meet the needs
and expectations of the new generation of workers.
2. Board of Directors: Duties and Liabilities
2.1. The operation of the Board
2.1.1. The Board of Directors
The Board of Directors at Eximbank, like any other bank’s Board of directors, plays a
crucial role in a wide range of responsibilities including overseeing the bank’s policies,
strategies, and overall business performance. Here are their vital responsibilities:
 Policy and Strategy Oversight: The Board determines the bank’s vision and
important policies. They review and approve the enterprise plan, business plan,
and budget, ensuring alignment with the bank’s goals.
 Risk Management: Directors address key risks and major issues related to the
bank’s operations. Their decisions impact risk mitigation and overall governance.
 Business Performance: The Board holds accountability for the bank’s
performance. They monitor the management’s execution of plans and ensure
adherence to established strategies.
 Legal Compliance: Directors ensure compliance with current laws, the bank’s
charter, and resolutions from annual general meetings.
 Stewardship: They safeguard the bank’s interests, maintain integrity, and uphold
high standards of conduct.
In summary, the Board of Directors at Eximbank Vietnam combines expertise, integrity,
and competencies to guide the bank’s success and protect its stakeholders’ interests.
Board actions at Eximbank are conducted either through meetings or written
consent. In meetings, resolutions are proposed and voted on, with an action finalized
when it gains majority support. For written consent, a resolution is circulated among
board members for signatures, and the action is completed when the majority signs. As
written consent doesn’t require prior notice, it’s faster than meeting-based actions. Hence,
Eximbank frequently seeks written consent from board members, doing so 251 times
from 15/2-31/12/2022. However, for crucial matters, board meetings are held, totaling 16
in the same period. The duration of these meetings varies from 2 to 6 hours depending on
the agenda and discussions.

The following regulations regulate the Board of Directors' (BoD) supervision of

the Chief Executive Officer (CEO): (i) The Eximbank Charter, (ii) Eximbank's internal

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management regulations and the BoD's structure and operations regulations, and (iii)
regulations governing authority, risk management, business objectives, credit quality, and
personnel policies, among other things.

The Board of Directors (BoD) has been vigilant in monitoring the execution of
its resolutions and decisions. The CEO has been vigilant in monitoring the progress and
outcomes of these initiatives, guaranteeing timely updates in accordance with Eximbank
requirements. Regular meetings with management have helped the Board of Directors to
remain up to date on Eximbank's business operations and give appropriate comments.
Monthly reviews of management and business performance have been done in relation to
the BoD's objectives and ratios. The Board of Directors has also been careful in ensuring
that its recommendations are followed. The progress and outcomes of the BoD's and the
Board Chairman's resolutions and actions have been continuously watched.

In accordance with Eximbank standards, the Management has been responsible

for producing timely and complete reporting on the performance of these resolutions and
decisions. The BoD consolidates and evaluates the implementation of its instructions on
the Bank's operations on a regular basis, and suggests actions and remedies for concerns
that have not been properly and immediately handled. This stringent procedure assures
the bank's seamless functioning and the proper implementation of the BoD's orders.
2.1.2. Chairman of the Board of Directors
The Board of Directors, through a majority vote, elects a chairman and potentially a Vice
Chairman from its members. The Chairman, who is required to reside in Vietnam during
their tenure, holds a multitude of responsibilities.
These responsibilities encompass presiding over the Shareholders’ General
Meeting, formulating the Board’s program and plan, and preparing content for meetings.
The Chairman is also responsible for signing resolutions on behalf of the Board, ensuring
the distribution of financial reports to shareholders, and devising work plans.
Furthermore, the Chairman assigns tasks to board members, supervises their
performance, and annually evaluates their efficiency. They also ensure that employees
can report any abnormalities related to the financial situation, operations, and general
issues, including any violations of the bank’s code of ethics.
In the event of a Vice Chairman’s presence, their rights and obligations are
determined by the Board. During their absence, the Chairman can delegate their duties to
a Vice Chairman or another board member. If the Chairman is absent without delegation
or unable to perform their duties, a temporary Vice Chairman is elected. In the scenario
where both the Chairman and Vice Chairman are absent or unable to work, another board
member is elected to temporarily hold the position of Chairman.

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 2.1.3. Members of the Board of Directors
In the corporate world, a board member is a key figure who sits on a company’s board of
directors, the organization’s governing body. These individuals are often elected by the
company’s shareholders and are responsible for creating company policies and
overseeing the organization’s managerial positions.
At Eximbank, board members have a range of rights and duties. They work in
tandem with other board members to manage the bank in accordance with the law and the
bank’s charter. They are expected to perform their duties honestly and seriously, always
keeping the best interests of the bank and its shareholders in mind. Board members
review financial reports prepared by independent auditors and can request explanations
on issues related to these reports. They have the power to elect, dismiss, and remove the
Chairman of the Board of Directors. They can also request the Chairman to convene
extraordinary meetings of the Board of Directors or an extraordinary General Meeting of
Shareholders. Attendance at board meetings is mandatory for board members, where they
are expected to voice clear opinions on discussed issues and vote on all matters within the
board’s jurisdiction. They are personally accountable for their decisions before the law,
the General Meeting of Shareholders, and the Board of Directors.
The duties of board members encompass the execution of decisions and
resolutions made by the Board of Directors and the General Meeting of Shareholders.
They are obligated to provide a detailed and prompt report of any compensation received
from associated companies, subsidiaries, and other organizations to the Board of
Directors. Any transactions involving the bank and companies where a board member
holds a position as a founder or manager, or with subsidiaries or companies where the
bank has control over 50% or more of the charter capital, must be disclosed. Furthermore,
they are required to reveal information regarding their stock transactions with the bank as
per legal requirements. These rights and duties ensure that the Board of Directors
operates in the best interest of the Bank and its shareholders.
2.2. Board Committees
The entire board of directors doesn't discuss all corporate matters. Some are delegated to
committees. These committees can be either permanent or temporary, depending on the
issue at hand. Directors are appointed to committees based on their qualifications. When
it comes to critical matters, such as creating and approving executive compensation
contracts, the committee's recommendations are presented to the entire board for a vote.
The management structure of Eximbank comprises 10 subsidiary committees under the
Board of Directors, each with its own specific responsibilities, fostering consensus and
effective coordination in the corporation's management and operations.
Eximbank's Board of Directors has established a variety of specialized
committees under its purview to aid and support the Board of Directors in carrying out its
functions while mitigating conflicts of interest. These committees include the Risk
Handling Council, Risk Management Committee, Human Resources Committee, Strategy
and Restructuring Committee, Investor Relation Division, Steering Committee for
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Prevention of Corruption, Misconducts and Crimes, Committee for Correction and
Remedy against Inspectorate Conclusions (No.4661/KL-TTGSNH2), Investment
Council, Emulation and Commendation Council, Basic Construction and Network
Development Council, and Information Technology Investment Council. Each committee
serves specific roles in advising, consulting, and assisting the Board of Directors in the
management and development of the corporation. Among these Committees, author
indicates the duties and responsibilities of Risk Handling Council and Human
Resources Committee – two important departments of the bank’s Committees (and
Councils).
Risk Handling Council: The Risk Handling Council of Eximbank, incorporating
with the Risk Management Committee, is responsible for implementing measures for
risk management such as ensuring safe transactions, which includes checking all
large savings withdrawals, especially for customers with large deposits, partial
withdrawals, and withdrawals by proxy. Eximbank has organized training on risk
activities for Customer Service Leaders and Transaction Room Leaders across the
system, suggesting that the Risk Handling Council is responsible for raising
awareness about risks throughout the organization. The Risk Handling Council is
likely responsible for ensuring compliance with regulations and managing legal risks.
They are likely tasked with creating a safe, secure environment for all employees and
customers. Lastly, the board is likely responsible for preventing harmful events that
could affect the company and protecting all stakeholders and assets from damage.
Human Resources Committee: The Human Resources Committee of Eximbank
plays a crucial role in ensuring the bank’s operations are efficient and fair. Their
main responsibilities include recruitment, where they select suitable candidates for
necessary positions within the organization. They also ensure that employees are
provided with adequate knowledge and skills to perform their jobs effectively
through training and development. Administrative management is another key area,
handling administrative issues related to human resources such as working hours,
leave, etc. The committee ensures that employees are paid fairly and on time.
Performance evaluation is also conducted periodically to determine the work
performance of employees and identify development opportunities. During the
restructuring process, the Board of Directors of Eximbank has taken breakthrough
steps to fulfill Eximbank’s mission of creating value for all stakeholders including
customers, shareholders, employees, and the community through continuous growth
in business operations.
The Steering Committee for Prevention of Corruption, Misconducts, and Crimes
has three main roles. It advises on and proposes strategies, policies, and laws to
combat corruption. It plans by discussing and deciding on key annual programs and
anti-corruption initiatives. Lastly, it provides strategic guidance, aligning resources,
goals, and stakeholders, and facilitating decision-making.

15
 Investment Council, or Investment Committee, manages the bank’s investments.
They establish the Investment Policy, oversee its implementation, and monitor
investment performance to grow and protect the bank’s portfolio.
The Risk Management Committee of Eximbank is a guardian of stability. It
identifies, assesses, and mitigates financial risks. It also ensures compliance with
regulations, safeguards the bank’s assets, and maintains the trust of stakeholders. Its
strategic decisions are crucial for the bank’s resilience in the face of uncertainty.
The Strategy and Restructuring Committee designs and implements strategic plans,
ensuring the bank’s growth and competitiveness. It oversees restructuring efforts,
optimizing operations for efficiency. Its foresight and adaptability are key to
navigating the dynamic banking landscape.
The Investor Relations Division is the bridge between the bank and its investors. It
communicates the bank’s financial performance and strategies, addressing investor
queries and concerns. It fosters transparency and trust, ensuring the bank’s actions
align with investor expectations and market realities.
By December 18, 2020, according to the State Bank of Vietnam’s Inspection
Conclusion No.4661/KL-TTGSNH2, Eximbank committed numerous violations in
10 inspected areas from 1/1/2017 to 30/9/2019. The Board of Directors and the
Executive Board of EIB have not seriously performed their responsibilities and
duties, leading to violations in organizing meetings and issuing resolutions. This has
affected the operation and image of EIB, undermined the confidence of domestic and
foreign shareholders, and posed legal risks. Therefore, Eximbank established
Committee for Implementation of Inspectorate Conclusions No.4661/KL-
TTGSNH2 to lawfully adjust the operation of the board, in order to gain prestige
reputation.
The Basic Construction and Network Development Council oversees project
operations, ensuring tasks are completed efficiently. It structures activities, manages
resources, and coordinates events. The council’s role is pivotal in maintaining order,
resolving disagreements, and fostering a sense of identity within the organization.
The Information Technology Investment Council plays a crucial role in maximizing
the value of IT investments. It oversees the selection, control, and evaluation of
major IT initiatives. The council ensures effective use of technology for sophisticated
product development, risk control, and reaching diversified markets.
In summary, Eximbank’s Board Committees (and Councils), with the operating
regulations issued by the Board of Directors from time to time, have the responsibilities
for collaborating with the Board of Directors to ensure sustainable growth and
compliance with international regulations on sustainable development. The duties and
liabilities of those Committees (and Councils) bear not much difference to those of other
banks, in accordance with the government’s regulations.

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 3. Board of Directors: Selection, Compensation, and Removal
3.1. Market for Directors
The stringent selection process for Board of Directors (BOD) members guarantees that
they possess the necessary expertise and experience to effectively contribute to the
company’s governance. In addition to fulfilling Eximbank’s specific needs and legal
obligations, BOD members are expected to have a solid grasp of financial issues, be
proficient in risk management, and demonstrate knowledge in areas such as information
technology, legal compliance, and international business. This wide range of skills
enables the BOD to supervise various facets of the company’s operations, strategy, and
compliance.
The criteria for choosing board members and directors for the Eximbank Group
are comprehensive, ensuring the board’s efficiency, diversity, and alignment with the
company’s strategic objectives. These criteria are based on the practical requirements and
legal compliance stipulated in the Company Law and the Company’s Charter. The
primary selection criteria include:
Independence and Objectivity: The selection process emphasizes the independence of
the Chairman of the Board of Directors from the CEO. This separation of roles
ensures that there are no conflicts of interest, and that decision-making is impartial.
This is a vital aspect of corporate governance, as it minimizes the potential for undue
influence and prioritizes the company’s best interests.
Active CEOs: Directors who are also current CEOs contribute a strong combination
of management, industry, and functional knowledge. They can provide supervision in
a variety of areas, including strategy, risk management, succession planning,
performance evaluation, and shareholder and stakeholder interactions. The intensive
nature of the CEO job, on the other hand, may make it difficult for them to
successfully supervise and advise another firm. If the CEO is in charge of a large,
complex firm, they may not have the time to serve as a director for another company
and actively engage in the process. Furthermore, advising and supervision
responsibilities are not the same as having direct managerial authority. Active CEO
directors may be overly active or under-involved. They may also have a tendency to
use their own organizations as the primary standard for firms, assuming that this can
be readily adapted to a company with a different strategy, staff, and competitive
challenges. As a result, the functions of the Chairman and members of the Board of
Eximbank are separate from those of the CEOs. They feel that an independent
Chairman may serve as a strong watchdog as well as a counselor, influencing firm
results based on previous success. They may guarantee that all viewpoints are fairly
heard, preserve continuity throughout management transfers, and assist the CEO with
difficult public relations difficulties.
Special Expertise: Businesses often seek directors who possess unique expertise that
aligns with the company’s functional or situational requirements. For instance, a tech-
based company would benefit from directors who are industry experts capable of

17
 providing advice on research, development, and production. This function is
frequently filled by academics from subjects like as engineering, computer science,
medicine, and natural sciences.). Depending on the company’s specific needs,
directors with specialized knowledge are enlisted to offer guidance in particular areas.
This could involve tech experts providing counsel on aspects such as research,
development, and production. Such specialized knowledge is crucial in addressing
distinct challenges or opportunities within the industry.
Diverse Directors: Companies may look for directors from various ethnic
backgrounds or female directors when they believe that a diverse range of personal
perspectives can enhance board discussions or decision-making processes. At present,
the Board’s Chairperson is a woman, Mrs. Luong Thi Cam Tu, and the Board
includes a total of three female members. Companies have been making significant
strides in recruiting board members from diverse backgrounds. Eximbank’s
exceptional performance underscores the importance of balanced gender
representation, as diverse viewpoints can lead to more comprehensive decision-
making.
Professional Directors: Professional directors are those whose major job is to serve
on various boards of directors. These might be retired executives, consultants,
attorneys, bankers, or politicians who contribute a wealth of knowledge not just from
their professional backgrounds, but also from their multiple current and prior board
positions. A majority of the members of Eximbank’s Board also hold positions as
members or Vice Chairmen in other corporations, reflecting their proficiency and
professionalism in their roles as board members.
International Business Acumen and Continual Learning: Given the global nature of
the business, board members are expected to have international business acumen.
Understanding the strategic, operational, financial, risk, and regulatory implications of
international markets is crucial. This international perspective minimizes risks and
costs associated with global expansion.
Risks of Professional Directors: While professional directors offer valuable
expertise, they must be motivated by a genuine commitment to the role, rather than
prestige or personal gain. It's crucial that they maintain independence and have the
willingness to challenge management when necessary.
When analyzing the selection criteria, it can be seen that Eximbank places great emphasis
on the independence and expertise of the Board of Directors members. The division of
roles, commitment to continuous training, and the presence of professional knowledge
contribute to improving the quality of the board’s decisions. Gender diversity, although
recognized as an area for improvement, reflects a commitment to balanced representation
that can enhance the effectiveness of the board.
On the other hand, it is noticeable that the presence of professional directors is a
double-edged sword. While they bring extensive experience, their potential conflicts of
interest and the risk of being too "busy" require careful consideration and ongoing

18
monitoring. Overall, the criteria for selecting board members and directors at Eximbank
focus on building a capable, diverse, and independent board. This approach is aligned
with best practices in corporate governance and seeks to ensure that the board serves the
best interests of the company and its stakeholders.
3.2. Director for Compensation
Directors need to be compensated for their time, effort, and costs associated with their
roles. Recruitment specialists suggest that most board members would be hesitant to
work without pay, with the exception of those serving on nonprofit boards. As a result,
the compensation should be sufficient to attract and retain competent professionals who
possess the necessary expertise to provide guidance and supervision to the company.
Furthermore, the compensation structure should be designed to motivate board members
to act in the best interests of shareholders and stakeholders. Therefore, understanding this
compensation structure is vital for evaluating the incentives board members have to
promote strong governance.
The compensation for the board of directors includes not only the time spent
directly on board-related topics, but also the expense of keeping their calendars flexible
in case of unforeseen developments. These occurrences might include an unexpected
takeover proposal, a financial restatement, or the CEO's emergency succession. It also
considers the personal risk connected with serving on the board. While board members
are unlikely to pay for legal obligations or expenditures out of their own pockets,
litigation can nonetheless consume a substantial amount of time and attention. They can
pose a risk to one's reputation and might have an emotional impact on individuals
involved.
At Eximbank, the compensation for the Board of Directors is determined by a
designated committee. This committee aids the Board in overseeing the appointment,
performance evaluation, and compensation of the Bank’s Managing Director and Senior
Management. The Board of Directors also assesses the performance of top management
and sets their remuneration. As per the company’s Charter, the compensation for
Eximbank’s Board of Directors is regulated as follows:
 Board members receive remuneration and bonuses based on the Bank’s results and
business efficiency.
 The Board of Directors collectively estimates the remuneration for each board
member. The total remuneration of the Board of Directors is decided by the
General Meeting of Shareholders at the annual meetings.
 The total amount paid to each board member includes remuneration, expenses,
commissions, stock options, and other benefits from the Bank, its subsidiaries,
affiliates, and other companies where the board member represents the contributed
capital. These details are included in the Bank’s Annual Report. The remuneration

19
 of the board members is shown as a separate item in the Bank’s annual financial
report.
 A board member holding an executive position, serving on the Board’s
Committees, or performing other tasks deemed outside the normal scope of a
board member, may receive additional remuneration in the form of a lump sum,
salary, commission, percentage of profit, or other forms as decided by the Board
of Directors.
 Board members are reimbursed for reasonable costs of food, accommodation,
travel, and other expenses incurred in performing their duties, including costs
incurred in attending meetings of the General Meeting of Shareholders, the Board
of Directors, or the Board’s Committees. The operating costs of the Board of
Directors are included in the Bank’s business expenses.
 A board member may be insured by the Bank for liability as prescribed by law.
Overall, the compensation structure of Eximbank’s Board of Directors appears to be
comprehensive and well-structured. This compensation structure seems to be designed to
attract and retain qualified board members, align their interests with those of the bank,
and provide transparency to shareholders and other stakeholder. In detail, its rationality
and suitability are indicated as six following points.
Performance-based Remuneration: Tying remuneration and bonuses to the bank’s
results and business efficiency is a common practice. It aligns the interests of the board
members with the overall success of the bank.
Consensus on Remuneration: Estimating remuneration for each board member by
consensus ensures fairness and transparency. Having the total remuneration decided by
the General Meeting of Shareholders at annual meetings further ensures accountability.
Detailed Reporting: Including a detailed breakdown of all forms of compensation in
the Bank’s Annual Report provides transparency to shareholders and stakeholders. It’s
good practice to show the remuneration of the board members as a separate item in the
bank’s annual financial report.
Additional Remuneration: Offering additional remuneration for executive positions or
for members performing tasks outside their normal scope is a way to compensate for
the additional responsibilities and efforts. The form of this additional remuneration
seems to be flexible, which can be beneficial in tailoring compensation packages to
specific roles or tasks.
Reimbursement of Expenses: Reimbursing members for reasonable costs incurred in
the performance of their duties is standard practice. Including these operating costs in
the bank’s business expenses is a transparent way of accounting for these costs.
Liability Insurance: Providing liability insurance for board members is a prudent
measure that protects both the individual board members and the bank. It’s a common
practice in many industries, especially in sectors like banking where decisions can
have significant financial implications.

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In conclusion, compensation for the Board of Directors at Eximbank is determined in
compliance with government regulations and corporate policies. This system ensures
transparency and fairness while also considering various factors that determine the
compensation for different roles within the company's leadership structure. Compensation
for members of the Board of Directors is a critical aspect of corporate governance and
leadership within any organization. It serves as a key incentive and recognition for the
contributions made by these individuals who hold pivotal roles in steering the company's
strategic direction. To remain competitive and attract top-tier talent, it is imperative that
Eximbank keeps its information up-to-date and aligns promptly with market trends. This
will ensure that the compensation packages offered are not only competitive, but also
accurately reflect the responsibilities and performance of each board member.
4. Board of Directors: Structure and Consequences
4.1. Board Independence
4.1.1. Independence of Chairman
Many years ago, separating the Chairman and the CEO has raised a public controversy.
The idea of having an independent Chairman, with plenty of advantages, has been
supported by many professionals and experts, while others afraid of its drawbacks. Some
of purviews from experts are shown as follows:
Mr. Nguyen Trung Thang, CEO of Masso Consulting: Mr. Thang believes that one of
the biggest challenges for the Board of Directors (BOD) is the CEO transition
process. The CEO transition is an increasingly common trend in modern management,
including both positive and negative reasons. Positive reasons may include the CEO
reaching retirement age, taking over the position of Chairman of the BOD, or ending
the term and not wanting to continue for objective reasons. Alongside these, there
exist negative reasons that necessitate a CEO change such as failure to achieve
business objectives, conflict with the BOD, or unethical business conduct in
management.

Mr. Phan Le Thanh Long, Director of the Institute of Certified Management

Accountants Australia (CMA Australia), Director of AFA Research & Education
Consulting Firm: Mr. Long believes that businesses must understand the essence of
separating the titles of Chairman and CEO. President and CEO. If the separation is
only formal, it has no meaning. But at least formally, businesses must comply.

Common viewpoint in many countries: The separation between the roles of Chairman
of the BOD and CEO is inevitable, and the tasks of the Chairman of the BOD and
CEO are different and can even oppose each other. The separation of the titles of
Chairman of the BOD and CEO is evaluated to help strengthen the corporate
governance structure, reduce risks for the company, especially risks for non-
controlling shareholders.

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Larcker and Tayan (2011) proposed that having an independent chairman can offer
several potential advantages. Firstly, it can create a distinct separation of duties between
the board and management. Secondly, it can prevent disagreements in areas such as
evaluating the CEO’s performance, determining executive compensation, planning for
long-term succession, and appointing independent directors. Thirdly, it can assign one
director with the explicit authority to represent the board when communicating with
shareholders, management, and the public. Lastly, it can allow the CEO to concentrate
solely on the company’s strategy, operations, and culture.

The proponents of an autonomous chairperson believe that their role becomes crucial
under certain circumstances. These include instances when the organization appoints a
new CEO, particularly if the individual is an internal promotion and has no prior
experience in the role. Another situation is when the company’s performance is declining
and there is a need for substantial modifications in its strategy, operations, or culture. In
such cases, the management needs to focus entirely on these changes, while the board
contemplates leadership alterations or a potential company sale. Lastly, the presence of
an independent chairman is deemed necessary when the company receives an unexpected
acquisition offer. The management might struggle to evaluate this independently due to
apprehensions about their job security.

However, critics highlight several potential disadvantages of having an independent

chairman. They argue that it can cause an unnecessary divide, particularly if the company
already has an effective dual-role chairman/CEO. The recruitment of a new CEO could
also become more challenging, especially if the prospective candidate currently holds
both positions or anticipates being offered both. This arrangement could lead to a
duplication of leadership roles and cause internal confusion. Shared leadership might
result in inefficient decision-making. Additionally, the decision-making process could
incur new costs due to the potential information gap between the CEO and the chairman,
as specialized information might not be easily transferable. The introduction of a new
chairman could also add another layer of monitoring costs, as they too could present a
potential agency problem. Lastly, having an independent chairman could potentially
weaken leadership during a crisis.

Within Eximbank, Mrs. Luong Thi Cam Tu served as the Chairwoman

of the Board of Directors for the term 2020-2025, officially assuming
the position on February 17, 2022. Born in 1980 in Khanh Hoa, she
holds a Bachelor’s degree in Business Administration from Van Lang
University and a Master’s degree in Business Administration from
Griggs University. Prior to her role at Eximbank, Mrs. Tu held several
significant positions at Sacombank and served as the General Director
of Nam A Bank from 2015 to 2018. She was elected to the Board of
Directors of Eximbank in April 2018 and previously held the position of Chairwoman in
2019. Her tenure has been marked by notable contributions to the bank.

22
 Eximbank’s Chairwoman of the Board of Directors – Mrs. Luong Thi Cam Tu
operates independently from the CEO of the bank – Mr. Tran Tan Loc. This separation of
roles is a common practice in many organizations to ensure a balance of power and
prevent any single individual from dominating the organization’s decision-making
process. In her role as the Chairwoman of the Board, Mrs. Tu is responsible for
overseeing the strategic direction of Eximbank and ensuring that the bank’s operations
are in line with its mission and vision. She works closely with the Board of Directors to
set policies and make decisions that will guide the bank’s operations. In terms of board’s
meetings, she is in charge of leading the board and setting its agenda, ensuring that the
board’s work is carried out efficiently and effectively. The CEO of Eximbank – Mr. Tran
Tan Loc, on the other hand, is responsible for the day-to-day management of the bank.
The CEO implements the strategies and policies set by the Board, manages the bank’s
resources, and ensures that the bank’s operations are running smoothly. The CEO reports
to the Board of Directors and is accountable to them for the performance of the bank.

This separation of roles allows for a clear distinction between the board’s responsibility
to govern the bank and the management’s responsibility to run the bank on a day-to-day
basis. It also helps to ensure that the bank’s leadership is accountable to the board, and
ultimately, to the shareholders.

4.1.2. Lead independent director

According to Larcker and Tayan (2011), the job of lead independent director has arisen
as a compromise, allowing organizations to maintain a mixed chairman/CEO structure
while avoiding the necessity to split these responsibilities and select an independent
chairman. This position emerged from the traditional job of the director in charge of the
board's executive sessions. The New York Stock Exchange (NYSE) requires non-
executive directors to hold regularly scheduled executive sessions without management,
with these meetings presided over by an independent director. This director has recently
taken on a more significant role with increasing duties, gaining the title of lead
independent (presiding) director.

Specialists believe that lead directors can enhance a company’s performance in

several ways. They can improve the functioning of the board and build a fruitful
relationship with the CEO. They also play a crucial role in facilitating effective
communication with shareholders and providing guidance during times of crisis or
instability. Furthermore, they ensure the board’s active involvement in shaping the
corporate strategy. Lastly, they guide the board in planning for the succession of the
CEO, senior management, the board, and its leaders.

Many experts in corporate governance advocate for the formal designation of a

lead independent director, especially in companies where the CEO also holds the position
of board chairman. This is based on the belief that the lead independent director can

23
provide a significant counterbalance to the chairman/CEO, mitigating potential agency
problems or conflicts of interest inherent in the dual role. This role is often tasked with
leading board meetings.

However, in cases where the roles of Chairman and CEO are distinct, as in
Eximbank, there is no necessity for a lead independent director on the board.
Furthermore, Eximbank has not provided specific details regarding this position,
indicating that their board structure does not include a lead independent director. This
arrangement is deemed acceptable when a Board of Directors can operate effectively with
an independent chairman separate from the CEO, the existence of a lead independent
director is not necessary.

4.1.3. Outside (non-executive) directors

Securities legislation in most industrialized countries require firms to have a majority of

outside (non-executive) directors. A public corporation must ensure that at least one-third
of the total members of the Board of Directors are non-executive members, according to
Vietnamese legislation. Non-executive board members do not hold positions such as
General Director (Director), Deputy General Director (Deputy Director), Chief
Accountant, or other executive functions as stipulated by the company's charter. This is
done to ensure the BOD's independence. According to a research on Eximbank, the
company's Board of Directors in 2022 will consist of an independent chairwoman, 5 non-
executive members, and one independent member.

According to Larcker and Tayan (2011), outside directors are expected to fulfill
their tasks without undue influence from management because they do not report to the
CEO and are not financially dependent on the firm. They will also be required to use their
professional credentials and functional knowledge to give advice on the company's
strategy and business model. As a result, they are thought to be better suited than inside
directors to fulfill the board's advising and monitoring tasks.

On the other hand, non-executive directors, while crucial to the board’s

composition, may not always have the same depth of understanding about the company’s
inner workings as their executive counterparts. This disparity in knowledge, often termed
as the “information gap”, becomes even more evident when the company’s operations
demand specialized expertise. Such a gap can potentially hinder effective decision-
making. Furthermore, the question of independence can also influence decision-making
processes. Even though companies are required to adhere to the independence standards
set by listing exchanges, it doesn’t necessarily imply that non-executive directors, who
meet these standards on paper, are truly independent in practice. It’s worth noting that
some governance experts caution against the possibility of insiders swaying the board by
nominating seemingly independent non-executive directors who, in reality, may not be
so. Conversely, there could be instances where non-executive directors are indeed

24
independent, but may lack the necessary engagement or qualifications. In such scenarios,
having numerical targets for non-executive representation may not yield the desired
effectiveness.

According to research, the presence of outside directors on a company's board is

often seen positively by investors. When an external director is appointed to the board,
the stock price tends to climb dramatically. Interestingly, if the insider has a tiny
ownership in the firm, the appointment of an insider to the board might elicit a negative
reaction from shareholders. If the insider has a significant investment, the reaction is
favorable. This implies that investors are aware of the possible contradiction between
insiders' informational advantage and their capacity for self-interest, and they feel that
holding a large number of stocks can help mitigate this risk.

The impact of non-executive directors on a company's long-term performance is

rather uncertain. According to one study, there is no relationship between the proportion
of non-executive members on a board and the long-term success of the company's stock.
Other research has demonstrated that the ease with which non-executive directors may
obtain company-specific information influences their efficacy. Non-executive members'
performance tends to increase following the induction of non-executive directors when
they can readily collect knowledge about the organization. If non-executive members
have difficulty gaining expertise, the company's performance tends to suffer following
their appointment. These findings generally support the notion that non-executive
directors might be more effective when the knowledge gap between insiders and
outsiders is reduced.

Finally, it is uncertain if boards with a higher representation of outsiders are able

to negotiate more acceptable remuneration packages with CEOs. Some studies
discovered an unanticipated positive association between the amount of CEO salary and
the number of outside directors, while others discovered no correlation.

In conclusion, the implementation of a board structure at Eximbank, dominated

by non-executive directorships, could potentially enhance the independence of the
Board’s decision-making process. This could alleviate conflicts of interest and agency
issues, thereby augmenting the effectiveness and efficiency of the Board’s operations.
However, a board devoid of executive representation is susceptible to an “information
gap”, which could diminish the relevance of decision-making to the company’s daily
activities. Therefore, it might be prudent for Eximbank to consider appointing at least one
executive board member to keep the board updated on the company’s daily operations.
Alternatively, the company should explore strategies to bridge the “information gap”
between insiders and outsiders.
4.1.4. Independence standards
The regulations of Eximbank for independent board members comply with the provisions
of the 2020 Enterprise Law of Vietnam. When a joint-stock company is organized

25
according to the model prescribed in Clause 1, Article 137 of the 2020 Enterprise Law,
which includes: the General Meeting of Shareholders, the Board of Directors, and the
Director or General Director, at least 20% of the members of the Board of Directors must
be independent members.
To become an independent member of the Board of Directors, an individual needs
to meet the following standards and conditions, except in cases where the securities law
stipulates otherwise:

 They must not be a person currently working for the company, or a subsidiary of
the company; they must not be a person who has worked for the company, or a
subsidiary of the company, for at least 03 consecutive years prior.
 They must not be a person currently receiving a salary, remuneration from the
company, except for allowances that members of the Board of Directors are
entitled to according to regulations.
 They must not be a person whose spouse, biological father, adoptive father,
biological mother, adoptive mother, biological child, adopted child, biological
brother, biological sister, or biological sibling is a major shareholder of the
company; is a manager of the company or a subsidiary of the company.
 They must not be a person directly or indirectly owning at least 1% of the total
voting shares of the company.
 They must not be a person who has been a member of the Board of Directors,
Control Board of the company for at least 05 consecutive years prior.

Independent members are in charge of supervising and coordinating the

implementation of checks on the company's managerial actions. These principles are
intended to guarantee that directors carry out their duties with independent judgment.
Independence is an important characteristic for board members since it supports the
board's advising and supervisory functions. This independence enables a director to
evaluate senior management's plans, business models, and risk-management practices
objectively. It also ensures objectivity when comparing operational and financial results
to predetermined objectives. Independence guarantees that compensation arrangements
are set on an equitable basis and that acquisitions are carried out in the best interests of
the shareholders. Directors with significant ties to the firm or who rely on the company
for money are less likely to retain independence in these areas.
Essentially, the independence criteria of Vietnam's Law are quite similar to those
of the New York Stock Exchange (NYSE), with minor adjustments to account for the
local economy. Hwang and Kim (2009), on the other hand, identified a possible fault in
these criteria, prompting them to conduct a research that takes into account situational or
psychological aspects beyond the NYSE requirements that might possibly impact a
director's judgment. The authors distinguished between directors who fulfill the NYSE's
independence rules (referred to as conventionally independent) and those who have a
socially independent relationship with the CEO (referred to as socially independent). This

26
difference is critical because it might lead Vietnam's Law to make an incorrect
assessment of board independence.
Hwang and Kim identified six possible areas where the NYSE's independence rules
may fail to account for social interactions that might compromise a director's
independence. If the following commonalities exist between the director and the CEO,
these areas become relevant:
• They served in the military together, graduated from the same institution, and their
birth dates are three years apart.
• They were born in the same region of the United States or in the same nation
outside of the United States.
• They have the same academic subject.
• They work mostly in the same industry.
• They are linked through another director, from whom each is completely
independent. These similar experiences or relationships may have an impact on a
director's capacity to stay objective and unbiased.
4.1.5. Independent committees of the board

In the realm of corporate governance, the composition of board committees can

significantly impact the dynamics and effectiveness of decision-making processes. As
mandated by Article 17.1 of Decree 71/2017/ND–CP, the board of directors should be
enhanced by establishing specialized committees with specific responsibilities, such as
audit, compensation, nomination, and governance. However, Vietnam’s Law does not
have explicit regulations regarding “independent committees”. Therefore, to accurately
evaluate these committees, we can refer to The Sarbanes-Oxley Act of 2002. This statute
requires that only independent directors serve on audit, pay, and nomination and
governance committees of publicly listed firms in the United States. Other specialist
board committees, such as finance and investment committees, credit committees, and
science and technology committees, are exempt from this requirement and frequently
include a mix of internal and outside members. The concerns for these committees'
independence are comparable to those for the board's overall independence.

According to David Larcker and Brian Tayan (2011), The factors influencing the
independence of these committees are akin to those impacting the overall independence
of the board. Independent committees have the potential to provide an objective oversight
of managerial conduct and corporate performance. On the other hand, committees that
include inside directors may have specific insights about the company that could enhance
their contribution to long-term operational performance. Therefore, a structure that
integrates both insider and outsider directors could potentially achieve a balance between
these considerations.

27
 The research literature suggests that audit committees with a majority of
independent directors tend to exhibit superior earnings quality. This was a finding by
Klein in 2002, who, however, found no additional benefits when the committee was
entirely composed of independent directors.

Klein investigated the impact of having insiders on investment and finance

committees in a separate research done in 1998. The notion was that, unlike audit
committees, which are largely oversight organizations, these committees are focused on
strategic growth and might potentially benefit from insider knowledge about the business.
The findings confirmed this theory marginally, demonstrating that businesses with more
executive directors on their investment and finance committees have slightly better
operational returns and stock market performance. However, no association was found
between audit and compensation committees.

Collectively, these studies indicate that the degree of independence within

committees can impact corporate results. They also corroborate the idea that the presence
of internal directors on committees doesn’t always yield positive or negative effects. As
anticipated, the effect varies based on the committee’s role.

Eximbank’s strategy involves the formation of specialized committees, each

managed by individuals possessing profound expertise in the respective domain. Notably,
these committees are exclusively composed of members from the Board of Directors –
which entirely includes non-executive directors (or outside directors). This such
arrangement brings with it a unique set of advantages and disadvantages.

On the positive side, such a committee can be a melting pot of diverse opinions,
thanks to the varied backgrounds and perspectives of its members. This diversity often
leads to a richer knowledge base, fostering decisions of superior quality. The members,
familiar with each other’s viewpoints, are more likely to cooperate and coordinate
effectively. Moreover, participation in committee deliberations can boost motivation and
commitment. From an operational standpoint, these committees can enhance efficiency
by sharing the board’s load and delving into specific issues in depth.

However, this arrangement is not without its challenges. The diversity that fuels
rich discussions can also give rise to conflicts, given the differing viewpoints of the non-
executive directors. Decision-making processes can be slower due to the collective nature
of the committee. There’s also a risk of diffusion of responsibility, where each member
might rely on others to take action.

The effectiveness of a committee composed entirely of non-executive directors is

contingent upon the specific context and dynamics of the organization. It’s crucial to
have a clear purpose, document that purpose in a committee charter, and monitor
committees to ensure that they’re being productive.

28
 4.1.6. Representation on the board by selected constituents
A company's board of directors in Vietnam might contain representation from
selected stakeholders such as bankers, financial specialists, politically connected persons,
and employees. This structure is intended to guarantee that the board has a varied variety
of knowledge and opinions. The Vietnamese legal system protects all stockholders, even
small shareholders. This is critical for preserving investor trust and lowering investment
risk since it guarantees that management is supervised and property rights are preserved.
However, each board member may have various tasks and responsibilities, which can
have an impact on the board's efficacy. As a result, corporations may need to think about
the number and structure of their board of directors, as well as how members are selected,
compensated, and removed.

In Eximbank’s administration, the board does not include representation by

selected constituents. Based on the broad professional understanding and experience of
the members and the chairman of the Board of Directors, who have held leadership
positions in other companies for a long time, they can effectively operate the Board of
Directors and its activities without the need for additional bankers, financial experts,
politically connected individuals, and employees.

Instead, according to Article 50 of Eximbank’s Charter, there is a key role played

by an individual appointed by the Board of Directors. This person, who can also serve as
the Bank Secretary, is responsible for supporting the bank’s management work. Their
term can last up to five years. This individual must meet certain standards. For instance,
they cannot work simultaneously for an independent audit company that is auditing the
bank’s financial statements. There are also other standards set by law, the company’s
charter, and the Board of Directors’ decisions. The Board of Directors has the authority to
dismiss this individual, provided it doesn’t violate current labor laws. Additionally, an
assistant to this person can be appointed as needed.
The person in charge of company administration has several rights and
obligations. They advise the Board of Directors on organizing the General Meeting of
Shareholders and related work between the Bank and Shareholders. They prepare
meetings of the Board of Directors, Control Board, and General Meeting of Shareholders
as requested. They also advise on meeting procedures and attend these meetings.
Furthermore, they provide financial information, copies of meeting minutes, and other
information to members of the Board of Directors and Control Board. They supervise and
report on the bank’s information disclosure activities, act as the main contact with
interested parties, and are responsible for keeping information confidential. They also
have other rights and obligations as prescribed by law and the company’s charter.

29
 4.2. The size and structure of a board of directors
4.2.1. Board size
Human Resource and Remuneration Department periodically assesses the Board of
Directors' size and composition to make sure it facilitates effective discussions and
decision-making and includes a suitable proportion of independent directors. According
to David Larcker and Brian Tayan (2011), the size of directors on a board typically
correlates with the size of the company. For instance, companies with yearly revenues of
$10 million usually have around 7 directors, while those with revenues exceeding $10
billion typically have about 11 directors. Larger boards can offer more resources for both
oversight and advisory roles, and they can bring a wider range of experiences and
expertise through the diversity of the directors and the specialized committees. However,
larger boards also come with additional costs, such as compensation and coordination of
schedules. They may also face challenges such as slower decision-making, less open
discussion, responsibility diffusion, and risk aversion. Considering these trade-offs, some
experts propose that there is an optimal board size. For instance, Lipton and Lorsch in
1992 suggested that the ideal number of board members should be eight or nine and
should not exceed ten.
In 2022, Eximbank achieved a total revenue of 38,634,000,000 VND and
employed a workforce of 5,572 as of December 31. Meanwhile, the bank’s Board of
Directors, which consisted of 9 members at the end of 2021, underwent a strategic
restructuring to better align with the company’s size and operational efficiency, thereby
leading to a reduction in board size to 7 members on February 15, 2022. After that, the
board underwent another change on September 14, 2022, when Mr. Vo Quang Hien
stepped down, leaving the board with 6 members. This leaner structure was deemed to
enhance the effectiveness and efficiency of the firm’s operations.

Name Position of the Board

Mrs. LUONG THI CAM TU Chairman of the Board of Directors
Mr. NGUYEN THANH HUNG Member of the Board of Directors
Mr. VO QUANG HIEN Member of the Board of Directors
(resigned on Sep 14, 2022)
Mrs. LE HONG ANH Member of the Board of Directors
Mr. NGUYEN HIEU Member of the Board of Directors
Mrs. DO HA PHUONG Member of the Board of Directors
Mr. DAO PHONG TRUC DAI Independent member of the Board of Directors
Source: EXIMBANK’s Annual Report of 2022
Comprising of 6 members, the Board of Directors of Eximbank Vietnam is a
relatively small size when compared to other banks, and it carries both advantages and
disadvantages.

30
 On the one hand, a smaller BOD can lead to more efficient decision-making
processes. With fewer people involved, reaching a consensus can be easier and decisions
can be made more quickly. This can be particularly beneficial in a fast-paced industry
like banking, where swift responses to changing market conditions can be crucial for
success. Moreover, a smaller BOD can foster closer relationships among its members,
potentially leading to a more cohesive and unified leadership team. This can enhance the
BOD’s ability to work together effectively and to present a united front to stakeholders.
On the other hand, a smaller BOD might lack diversity in terms of skills,
experiences, and perspectives. This could potentially limit the bank’s strategic options
and its ability to manage risks effectively. It might also result in a lack of checks and
balances, which are important for good corporate governance. Furthermore, with a
smaller BOD, the workload for each director can be higher, which might impact their
ability to fulfill their duties effectively. It could also make the BOD more vulnerable to
disruptions if one or more directors are unable to perform their roles for any reason.
In conclusion, the size of Eximbank Vietnam’s BOD was not too large that it
becomes unwieldy, but it’s also not too small that it lacks diversity of thought and
expertise. While it might have facilitated efficient decision-making and closer
relationships among its members, it’s also important to consider the potential drawbacks
related to diversity, risk management, workload, and resilience. The optimal size of a
BOD can vary depending on many factors, and it’s crucial for any bank to strike the right
balance to ensure effective governance. Ultimately, the effectiveness of a Board of
Directors is not solely determined by its size, but also hinges on the diversity of expertise
and individual productivity of each member.
4.2.2. Diverse Board
Social psychologists propose that diversity within boards can mitigate the tendencies
toward groupthink, a situation where directors, influenced by their social similarities,
may prematurely reach a consensus. This diversity can foster a culture of open
discussion, as directors are more likely to question each other’s views without the undue
worry of disrupting social harmony. From a public policy perspective, diversity is a key
social asset that aligns with the principle of equality. However, some argue that diversity
in the boardroom may have a detrimental impact on decision-making quality. According
to studies, heterogeneous groups frequently exhibit poor collaboration. Disparities
between team members might lead to less information interchange, less accurate
communication, more conflict, lower cohesiveness, and an inability to develop common
goals.
Prior to the membership alteration on February 15, 2022, the Board of Directors
at Eximbank was chaired by Mr. Yasuhiro Saitoh, who is of Japanese nationality. The
board’s composition, which includes not only Vietnamese but also international
members, is viewed as a strategy to enhance ethnic diversity. This diversity is believed to
enrich the board’s collective understanding of market dynamics, customer behavior, and

31
employee concerns, thereby enhancing operational and cultural success in decision-
making. Over the years, Eximbank has strategically fostered stronger relationships with
Asian countries, with its collaboration with Japan yielding significant accomplishments.
Consequently, the appointment of a Japanese national as the Chairman is seen as a logical
move that could potentially enhance the board’s effectiveness and yield mutual benefits.
However, as we discussed before, there are indications that diversity within a boardroom
could potentially compromise the quality of decision-making processes. Studies in social
psychology have revealed that teams with diverse members often struggle with
teamwork. The disparities among team members can result in less effective information
exchange, miscommunication, heightened conflict, reduced unity, and challenges in
establishing shared objectives.
After the reappointment of the Board of Directors on February 15, 2022,
Eximbank’s Board lost this ethnic diversity. This raises the question: does a homogenous
board, in terms of ethnicity, function more effectively than a diverse one, or is it the other
way around? Numerous studies have explored the relationship between a board’s ethnic
diversity and its efficacy, yielding mixed results. Several studies, such as those by
Erhardt, Werbel, and Shrader (2003), and Carter, D’Souza, Simldns, and Simpson (2010),
found a positive correlation between these two factors, with diversity in gender and
minority representation on the board leading to improved corporate performance, and
board diversity correlating with higher market-to-book ratios. Conversely, other studies,
including the empirical research by Zahra and Stanton (1988), and Wang and Clift
(2009), found no significant relationship between boardroom diversity and corporate
performance.
Similarly, the findings on the impact of diversity on corporate decision-making
remain ambiguous. Westphal and Zajac (1995) discovered a correlation between the
CEO’s demographic similarity with the board and increased CEO compensation,
suggesting that social similarity could foster reciprocity. This suggests that boardroom
diversity has the potential to improve independence and monitoring. However, Belliveau,
O'Reilly, and Wade (1996) suggested that it is the CEO's social position compared to
other board and pay committee members, not social likeness, that leads in greater
remuneration. This shows that the CEO's power dynamics are more important in affecting
boardroom engagements.
4.2.3. Board with female directors

According to David Larcker and Brian Tayan (2011), the grounds for pushing for more
women on boards are comparable to those advanced by proponents of diversity. One
argument is based on basic economics. If we assume that management potential is
divided evenly between men and women, limiting board participation to entirely or
primarily males removes a considerable talent pool. Furthermore, increasing the number
of women on boards may improve board performance. Women on boards, for example,
can foster independence by minimizing social similarities that could lead to premature

32
agreement. Women may also exhibit higher levels of trustworthiness and cooperation,
thereby improving the dynamics in the boardroom. In addition, women may process
information and evaluate risk and reward differently from men, which could result in
better decision-making. Finally, promoting gender equality on boards has clear societal
benefits. However, there are hazards connected with expanding female board presence.
The major risk arises when corporations pick directors who are insufficiently competent
in order to project a more gender-balanced image. Tokenism is a risky practice that is
akin to hiring external directors only to appease perceived external demands for diversity.

During the initial half of 2022, the Board of Directors at Eximbank was
composed of 4 men and 3 women. However, the dynamics shifted on September 14th,
2022, when Mr. Vo Quang Hien stepped down from his position. His departure resulted
in a gender-balanced BOD, composed equally of 3 men and 3 women, notably featuring a
chairwoman. Such a gender-balanced board could potentially bring numerous
advantages. The diversity of perspectives that comes from having both men and women
on the board can lead to more comprehensive decision-making and reduce the risk of
groupthink. In fact, studies have shown that companies with women on their boards often
outperform those without in certain key metrics. Furthermore, having women on the
board can help to cultivate a broad talent pool within the company, and the diverse
perspectives can foster innovation and potentially open up new revenue streams.
Additionally, gender-balanced boards have been found to be more risk-averse and less
likely to engage in earnings manipulation, as women are generally more adept at business
ethics.

On the other hand, achieving gender balance on a board is not without its
challenges. There can be resistance to change, particularly in organizations where the
board has traditionally been homogeneous. There is always the risk of tokenism - that is,
appointing women to the board more for the sake of appearances than for their skills and
experience. Despite these potential hurdles, the benefits of a gender-balanced board often
outweigh the challenges, and many organizations are making concerted efforts to increase
gender diversity on their boards.

Numerous empirical studies have been conducted to explore the influence of

gender balance, particularly the increased representation of women on the Board of
Directors, on the operational effectiveness of a corporation. Despite the ongoing debates
and lack of definitive conclusions from these studies, Eximbank continues to champion
gender balance. They are convinced that the potential benefits outweigh the relatively
insignificant drawbacks. However, the decline in profits in 2022 compared to 2021, a
year when the BOD had a gender ratio of 8 men to 1 woman, suggests that the advantages
of a gender-balanced BOD do not necessarily outweigh the challenges it may present.
Despite their commitment to gender balance, Eximbank’s business performance did not
improve. In fact, administrative costs rose by 52.8% compared to 2021, and there was not
much positively significant change in revenue.

33
 4.2.4. Companies whose directors sit on multiple boards (busy boards)
Directors that serve on many boards are sometimes referred to as "busy directors" in
study. The numerical barrier for a director to be considered "busy" is subjective, although
three or more board seats are widely recognized. In the same sense, a "busy" board is one
in which a considerable proportion of directors are preoccupied.

According to David Larcker and Brian Tayan (2011), being a busy director may
have certain advantages. These directors are likely to have direct access to critical
information regarding associated firms' operations, strategy, and finances. They are also
more likely to have broad social and professional networks, which may help in recruiting
directors, evaluating executive talent, interacting with regulators, and forming alliances.
Furthermore, busy directors may have high integrity and good reputations, which are
important aspects leading to their high demand. However, there are possible downsides,
such as busy directors becoming careless in their monitoring or missing during critical
moments owing to other commitments. As a result, several corporations limit the number
of boards on which its directors can serve concurrently.

Eximbank’s Board of Directors is composed of 3 per 6 members who are also

serving as directors in various capacities at other large corporations, as detailed in the
table below. One of these members, Mr. Hung, holds the dual roles of Chairman and Vice
Chairman at four other companies. This multitude of high-level positions could
potentially lead to an overwhelming workload for Mr. Hung, possibly limiting his time
for managing Eximbank. However, holding leadership roles at multiple major companies
not only provides Mr. HUNG, but also Mrs. Hong Anh and Mr. Hieu, with direct access
to vital information about the operations, strategies, and finances of these companies.
These directors are likely to have extensive social and professional connections, which
can be beneficial for tasks such as recruiting board members, evaluating executive talent,
liaising with regulators, and forming partnerships. Moreover, these occupied directors
often possess a high level of integrity and robust reputations, which are essential
attributes that heighten the demand for their expertise. However, there could be potential
drawbacks. Directors with multiple commitments might not be as vigilant in their
supervision or might be unavailable during crucial moments due to their obligations
elsewhere. Consequently, some companies have implemented policies limiting the
number of boards that their directors can concurrently serve on.

Position at
No. Full name Board member titles at other companies
Eximbank
Board Vice Board Chairman of Thanh Cong
1 Le Hong Anh
member Group Joint Stock Company
2 Nguyen Thanh Hung Board - Vice Board Chairman of Bamboo Capital
member Group
- Standing Vice Board Chairman of

34
 Transport and Communication
Development Investment Corporation
(TRACODI)
- Chairman of the Members’ Council of
Antraco Joint Venture Company Ltd.
(Antraco)
- Chairman of the Members’ Council of
Eximbank AMC
Board Board member of Viet Dragon Securities
3 Nguyen Hieu
member JS Company
Source: Eximbank’s 2022 Annual Report

Numerous studies have examined the correlation between the quality of

governance and boards that are overcommitted. It has been consistently observed that
corporations with overcommitted boards often exhibit subpar long-term performance and
supervision. Fich and Shivdasani’s 2006 research indicated that such corporations have
diminished market-to-book ratios and return on assets. They also found that these
corporations are less likely to terminate an underperforming CEO compared to those with
non-overcommitted boards. Furthermore, they discovered that the resignation of an
overcommitted director is generally met with a positive response from investors, while an
external director assuming an additional directorship is met with a negative response.
This negative reaction from investors is particularly noticeable when the external director
or the board becomes “overcommitted” after taking on more directorships.
Other studies have also confirmed these findings. A 1999 research by Core,
Holthausen, and Larcker, for example, analyzed several governance characteristics, such
as overcommitted directors, elderly directors, and directors selected by the CEO, to
assess their impact on future business operating performance, CEO salary, and other
factors. They observed that overburdened boards prefer to give CEOs bigger pay
packages. Overcommitted boards of directors also have inferior operating performance
(as assessed by return on assets) and stock market returns over one, three, and five years.

4.2.5. Companies whose senior executives sit reciprocally on each other's boards
(interlocked boards)

An interlocked board is a term used when a top executive from one company is a member
of another company’s board, and the same is true in reverse. It’s believed that
approximately 8% of boards are interlocked due to reciprocal representation by CEOs.
This percentage increases to 20% when the scope is expanded to include retired CEOs
and other high-ranking executives currently in office.

The practice of interlocking can establish a network among board members,

which could enhance the flow of information and, as a result, lead to better decision-

35
making. It facilitates the effective exchange of best practices in corporate strategy and
company oversight across firms with mutual board representation. Furthermore, these
director networks can cultivate valuable business relationships, including new clients,
suppliers, capital sources, political connections, regulators, and referrals for directors and
executives.

This configuration, however, has several limitations. Interlocking can be harmful

if opposing businesses communicate sensitive information, resulting in collusion on
market activity. Furthermore, interlocking produces a reciprocity dynamic. For example,
if one CEO authorizes a large remuneration package for another, it is impossible for the
latter not to reciprocate. This can compromise directors' objectivity and diminish their
capacity to oversee effectively.

At Eximbank, most of the Board members concurrently serve as executive

managers such as CEO and Deputy CEO in other large corporations. However, the board
members from those corporations do not simultaneously hold executive positions (such
as CEO, CFO, Supervisor, etc.) at Eximbank. As a result, the phenomenon known as
“interlocked board” does not occur within Eximbank’s board structure. Based on Maria
Raptis and David P. Wales (2021) and James Chen (2022), the absence of an interlocked
board allows Eximbank to avoid the following potential risks and limitations.

Firstly, there’s the specter of antitrust risks. In industries that are rapidly evolving,
interlocking directorates can inadvertently lead to violations of antitrust laws. This is
particularly true when two competing corporations share directors or officers, creating
a situation that could be perceived as anti-competitive.

Secondly, interlocking directorates can give rise to conflicts of interest. The same
individuals making decisions that affect multiple companies may find their loyalties
divided. This could potentially compromise the decision-making process, leading to
choices that are not in the best interest of each individual company.

Thirdly, as businesses evolve, competitors change, and through acquisitions and spin-
offs, interlocks can be unintentionally created. This can complicate the corporate
governance landscape and lead to unexpected legal and strategic challenges.

Lastly, interlocking directorates can result in a concentration of power. This means that
a few board members could end up wielding outsized control over an industry. Such a
scenario could stifle innovation and competition, which are vital for the health and
progress of any industry.

In short, if a majority of Eximbank’s board members also hold significant positions in

other large companies, it could enhance decision-making and information flow, facilitate
the efficient transfer of best practices in corporate strategy and firm oversight, and

36
cultivate valuable business relationships, including new clients, suppliers, capital sources,
political connections, regulators, and referrals for directors and executives. Furthermore,
by opting not to have an interlocked board, Eximbank can avoid potential pitfalls,
fostering an environment that encourages fair competition, minimizes the risk of legal
issues, and ensures decisions are made with the company’s best interests at heart.

4.3. Consequences
4.3.1. Independence

The Board of Directors of a corporation, such as Eximbank, acts as a crucial link between
the company’s management and its shareholders. The board’s primary role is to
safeguard the interests of the shareholders, especially by monitoring the company’s
management performance and ensuring actions taken are in the best interest of
shareholder wealth. This responsibility can be challenging as managers often face ethical
dilemmas and potential conflicts of interest due to their access to extensive information
and the impact of their decisions on the company’s financial performance and
shareholder wealth.

In the case of Eximbank, the Board of Directors efficiently organizes the Annual
General Meeting of Shareholders, a key platform for shareholders to voice their opinions,
influence management decisions, and vote on changes to the corporate charter. Active
participation in these meetings allows shareholders to be heard, and the board ensures
that management’s actions align with the corporation and its shareholders’ broader
interests.

Eximbank maintains a distinct separation between the authority of management

and the board, allowing the chairman and CEO to concentrate on their respective roles
without conflicting interests. This commitment to transparency and accountability forms
a robust foundation for the corporation’s governance framework, benefiting the company
and its shareholders in the long term. It also highlights the board’s crucial role in
reinforcing corporate governance principles and maintaining the trust shareholders have
in their stewardship.

4.3.2. Balance of Power

With an unwavering commitment to transparency and shareholder empowerment,

Eximbank has taken significant strides in enhancing its corporate governance practices.
Emphasizing the vital role of timely, comprehensive information in strengthening
shareholder influence over management, the company has adjusted the regulations to
balance the power between major and minor shareholders. The implication of this is
Eximbank’s dedication to providing equitable access to vital information through various
communication channels, ensuring that shareholders and stakeholders remain well-
informed. The establishment of a specialized investor relations department further
37
exemplifies Eximbank’s dedication to providing a welcoming and accessible resource for
shareholders and investors.

Eximbank always makes sure that information produced by various

communication platforms is accessible with ease and without discrimination in order to
promote effective and optimal access to pertinent information. By improving compliance
with governance regulations and aligning with international standards, Eximbank ensures
that its corporate governance practices reflect best-in-class benchmarks, reinforcing its
commitment to transparent, accountable, and responsible corporate leadership.

In the Board of Directors (BoD) of Eximbank, apart from the Chairman, no other
member holds company shares. This is seen as a strategy by Eximbank to balance the
power among the shareholders within the company. Firstly, it paves the way for avoiding
conflicts of interest. The absence of personal financial stakes allows the BoD members to
make decisions that are fair and unbiased. Their judgement is not clouded by the
fluctuating value of shares, enabling them to act in the best interest of the company.
Secondly, it allows the BoD members to focus solely on business operations. Without the
constant worry about the share value, they can channel their energy towards managing
the company and steering it towards success. Lastly, this arrangement enhances the
company’s internal control mechanism. Non-executive directors, who represent this
mechanism, can effectively reduce agency costs that might arise from having a large cash
pool.

The efficacy and integrity of the overarching corporate governance framework

and corporate oversight heavily hinge on these institutional investors. Their ability to
judiciously wield their shareholder rights and effectively execute their ownership
prerogatives in invested companies becomes paramount. In cases of managerial lapses in
fulfilling fiduciary duties, the legal system may need to step in to enforce disciplinary
measures, underscoring the commitment to safeguarding shareholders' interests and
enhancing corporate governance standards.

4.3.3. Managerial performance

The Board of Directors (BoD) supervises the CEO based on several regulations, covering
areas such as authority, risk management, and business objectives. The CEO is
responsible for implementing the BoD’s resolutions and decisions, with their
performance monitored regularly. The BoD ensures strict oversight of compliance with
its guidelines, including monitoring the progress of implementing its resolutions. The
BoD has strengthened its oversight in areas such as human resources, banking risk
management, and corporate governance to ensure the responsibilities of the units and the
practicability of the oversight.

38
 Furthermore, thanks to the structuring of the Board of Directors (BOD) members
of Eximbank, which set and successfully fulfilled the standards and duties, the company
has improved its management efficiency, leading to profit growth and market expansion
for the company. Eximbank is making daily efforts to adjust the structure of the BOD
members and related regulations to achieve the goal of maximizing the company’s
management efficiency as well as benefits for shareholders.
The Board members have been assigned specific tasks, which they have executed with
diligence, contributing to the stability of Eximbank’s operations. Here are some details:
• They completed the organizational framework by suggesting candidates for
election to the Board of Directors and Board of Supervisors for the VII term
(2020-2025).
• They successfully arranged the delayed 2021 Annual General Meeting (AGM) on
February 14, 2022, and the 2022 AGM on May 27, 2022, completing the
composition of the VII term's Board of Directors (BoD) and Board of Supervisors
(BoS).
• They proposed to the General Meeting of Shareholders that the reform and
completeness of internal legal frameworks be approved. This comprises the
revision and addition of the Charter, the issue of the Internal Management
Regulations, the Organization and Operations Regulations of the BoD, and the
Organization and Operations Regulations of the BoS.
The Board members have been actively engaged and have made significant efforts to
fulfill their assigned responsibilities, which has helped to maintain and stabilize
Eximbank’s operations. In addition to their general regulatory functions and duties, the
Board members also serve on councils and committees under the Board of Directors
(BoD) to perform directing, supervisory, and advisory roles related to issues within their
competence. Each Board member has assumed specific responsibilities and duties as
outlined in the Charter, law, and internal regulations of Eximbank to ensure the overall
performance of the BoD.
4.3.4. Firm performance
Despite the global economy showing signs of resilience and growth momentum in the
aftermath of COVID-19, it was not without its challenges. Supply chain disruptions,
energy and food crises, and economic slowdowns cast a shadow over the global
economic landscape throughout the year. A host of uncertainties have hindered further
development of the world economy since mid-year. As per the International Monetary
Fund (IMF), the global economic growth rate only reached 3.4% in 2022, while inflation
soared to a record 8.8%.
Following two years of pandemic-related challenges, Vietnam's economy
displayed a remarkable comeback. The macroeconomic situation had been stabilized, and
39
inflation had been adequately controlled. The country's GDP growth rate for the year was
8.02%, an all-time high since 2011. The Consumer Price Index (CPI) increased by 3.15%
in comparison to 2021, meeting the National Assembly's expectations. The trade balance
was positive, surpassing USD 11.2 billion. Foreign Direct Investment (FDI) achieved a
new high of USD 22.4 billion. The USD/VND exchange rate's stability was an important
factor in policy choices.
The State Bank of Vietnam (SBV) administered monetary policies aggressively
and flexibly during 2022, closely cooperating with fiscal and other macro policies to
promote economic and monetary market recovery and stabilize the fundamental foreign
currency market. Deposit and lending interest rates increased somewhat as a result of
large interest rate rises by other nations across the world. Credit growth in the overall
industry was recorded at 14.18% as of December 31, 2022, deposits climbed by 7.98%
compared to the end of 2021, total means of payment increased by 6.15% from the
beginning of the year, and the Non-Performing Loan (NPL) ratio was regulated at 1.92%.
As the economy has bounced back, the demand for funding has risen. In response,
Eximbank has concentrated on empowering businesses, seizing more opportunities, and
has achieved the following key results:
• Total assets reached VND185,056 billion, a rise of 11.6% from 2021 and a 103%
growth above the goal.
• Total capital financing from economic companies and people increased by 8.2% to
VND148,615 billion, attaining 101% of the objective.
• Total credit exposure (including loans outstanding and corporate bonds) reached
VND130,581 billion, a 13% increase from 2021 and a 103% increase over the
target.
• The NPL-to-total ratio was 1.8%, a 0.16% decrease from 2021 (1.96%).
• Profit before tax reached VND3,709 billion, a 207.8% increase over 2021 and a
148% increase above the goal.
4.3.5. Stockholder reaction/Stock prices

Eximbank, a stalwart in the petroleum industry with over 33 years of experience,

continued to uphold its reputation as a renowned and trusted brand both domestically and
internationally in 2022. Eximbank Vietnam had a memorable year in 2022 with many
significant achievements. The bank’s after-tax profit tripled compared to the previous
year, reaching 2,504 billion VND (approximately 106.78 million USD). Eximbank’s total
assets also increased by 11.6% compared to the end of 2021, reaching 185,045 billion
VND (approximately 7.89 billion USD). Loans to customers increased by 14% to
129,196 billion VND (approximately 5.51 billion USD), while customer deposits
increased by 8.2% to 148,614 billion VND (approximately 6.34 billion USD). Notably,
Eximbank’s bad debt only increased by 4.4% compared to the previous year, a much
lower increase compared to the credit growth rate. The bad debt ratio improved,
decreasing from 1.96% to 1.8%. These achievements not only demonstrate Eximbank’s
40
strong commitment to supporting the development of the Vietnamese economy, but also
serve as evidence of the bank’s sustainable growth and development.

The company's robust corporate governance practices received favorable

feedback from shareholders due to its transparent information, customer trust, and
successful business development strategies. Eximbank’s strict adherence to company
regulations has established a fair and transparent management system, accurately
reflecting market information - a significant advantage in the eyes of stockholders and
investors. The effectiveness of Eximbank’s management system is demonstrated by a
15.2% growth in shareholders’ equity from 17,785 in 2021 to 20,480 in 2022.

Notably, within Eximbank’s governance structure, the Board of Directors has

established the Investor Relation Division, which provides specific information available
for stockholders, thereby appealing to investors. Investor Relation Division, in 2022,
implemented and well finished their duties, including:

• Created the Information Disclosure Procedures and Manuals, which provide legal
guidance on public announcements.
• Prepared two Investor Newsletters on time for the second and third quarters of
2022 to offer information to shareholders;

• Worked with the Board of Directors' Office and the Finance - Planning Division to
prepare processes and applications for share issuance in order to pay dividends to
shareholders in 2022.
• Worked with and supported the Board of Directors' Office and appropriate
departments in preparing materials and processes for holding annual and
extraordinary general meetings of shareholders throughout the year;
• The Board of Directors approved Resolution 342/2022/EIB/NQ-HQT on August
19, 2022, implementing the plan for share issuance to pay dividends from earnings
in 2017, 2018, 2019, 2020, and 2021. SBV authorized Eximbank's plan for charter
capital augmentation by payment of stock dividends at a ratio of 20% in
Document No. 6381/NHNN-TTGSNH dated 09/09/2022. The Board of Directors
has completed the processes in accordance with the regulations.

In summary, the significant growth in business performance and the improvement in the
bad debt ratio in 2022 are positive signs that benefit stockholders and attract a large
number of investors. The transparency and strict compliance with regulations have helped
Eximbank consolidate its reputation and position in the stock market, as evidenced by the
substantial increase in shareholders’ equity. The establishment and good management of
the Investor Relation Division have strengthened the connection and created a significant
position for Eximbank in the stock market. Providing full and transparent information

41
and increasing the dividend payout ratio to 20% is a matter of great concern for
stockholders as well as investors. Consequently, thanks to Eximbank’s achievements, the
stock price of Eximbank in 2022 has increased significantly from 33,900VND at the
beginning of the year to 37,450 VND at the end of the year. This reaction of stockholders
and stock prices has shown the effectiveness of Eximbank’s management system in the
year 2022.

42
PART III. Executive compensation and Ownership structures
1. Analysis of the firm’s Executive compensation

Conducting research on Eximbank’s executive compensation, the author found that the
compensation package for executives of Eximbank generally includes the following
elements:

Annual salary: The salaries of each individual in executive positions at Eximbank in

2022 increased significantly compared to the previous year, most notably a salary
nearly double that of the previous year paid to the CEO in 2022. However, due to the
resignation of 2 executive positions, the Acting CEO (Mr. Vinh) and Deputy CEO
(Ms. Nhi), the overall salary level did not increase significantly compared to the
previous year. This higher payout is a way to retain the company’s executives if they
performed well.

Annual bonus: An extra compensation, typically given in cash, is provided when the
company’s annual performance surpasses certain financial and non-financial goals.
The bonus amount is usually stated as a percentage of the basic salary. The bonus and
welfare fund of Eximbank, including executive bonuses, have significantly increased

43
 in 2022 compared to 2021. This is evident as Eximbank’s business performance has
strongly grown over the past year.

Perquisites: When sitting in an executive position at Eximbank, these individuals

have the perquisites to use transportation and communication means, and enjoy
services related to their work provided by Eximbank.

Contractual agreements: When serving as an employee of a company, including

executive roles, the contract will include benefits related to other cash or stock
payments specified in the employment agreement, such as severance agreements,
post-retirement consulting agreements, and golden parachutes (payments made upon a
change in control).

 Post-employment benefits: Retired staff from the Bank and its subsidiary
receive post-employment benefits from the Social Insurance Agency, under the
Ministry of Labor and Social Affairs. The Bank and its subsidiary contribute
17.5% (17% from 1 July 2021 to 30 June 2022) of an employee’s basic
monthly salary, allowances, and other income towards these benefits. There are
no additional obligations for the Bank and its subsidiary.
 Voluntary resignation benefits: According to the Section 46 of the Vietnam
Labor Code 45/2019/QH14, which came into effect on January 1, 2021, both
the Bank and its subsidiary are obligated to provide a voluntary resignation
allowance to their employees. This allowance is calculated as half of the
employee’s monthly salary for each year they worked up until December 31,
2008, in addition to any other salary allowances. Starting from January 1,
2009, the monthly salary used for this calculation is the average salary of the
last six months before the employee’s resignation. The total actual working
duration at the Bank and its subsidiaries, excluding the time the employee has
been covered by unemployment insurance and the time for which the employer
has already paid a severance allowance, is considered when calculating the
severance pay.

Other benefits provided with employment, such as health insurance, post-retirement

health insurance, life insurance, payment for the services of a personal financial
adviser, and tax refunds on taxable benefits. According to current unemployment
insurance regulations, the Bank and its subsidiaries are required to pay unemployment
insurance at 1% (only from 1 October 2021 to 30 September 2022, the rate is 0%) of
its salary fund used to pay for unemployment insurance and to deduct 1% of each
employee's salary to pay simultaneously to the Unemployment Insurance Fund.

Furthermore, as part of the executive remuneration process, the Board of Directors (BoD)
analyzes the CEO's activities on a regular basis. The BoD's supervision of the CEO is
based on several regulations, including (i) the Eximbank Charter, (ii) the Eximbank

44
Internal Management Regulations and the Regulations on the Organization and
Operations of the BoD, and (iii) regulations pertaining to authority, risk management,
business objectives, credit quality, and employee treatment, among others. The BoD
monitors the progress and execution outcomes of its resolutions/decisions, and the CEO
reports on their performance in compliance with Eximbank standards.

2. Analysis of the firm’s Executive Equity Ownership

Numerous studies have delved into the correlation between the equity ownership of
executives and the performance of their companies. A study by Morek, Shleifer, and
Vishny (1988), which is often referenced, discovered a “see-saw shaped” correlation
between ownership and company performance.

The relationship between managerial ownership and company value is complex

and varies depending on the percentage of ownership. When managers own less than 5%
of the company, their ownership positively influences the company’s value, indicating
that such ownership can motivate managers to improve the company’s performance.
However, when the ownership percentage increases to between 5% and 25%, the
relationship becomes negative, suggesting that higher ownership percentages might
decrease the company’s value. This could be because large ownership stakes can result in
management entrenchment and less oversight, enabling managers to control the company
and use their power to increase their personal wealth at the expense of other shareholders.

Interestingly, the relationship turns positive again when the ownership

percentage exceeds 25%. This might be because managers who own a large portion of the
company’s stock bear a significant cost of their actions, which discourages them from
accumulating personal wealth and motivates them to increase the company’s value.
Therefore, managerial ownership can have both positive and negative effects on the
company’s value, depending on the ownership level.

Several studies have generally found that equity ownership by executives yields
more positive outcomes. For instance, the findings of McConnell and Servaes (1990)
were in line with those of Morek, Shleifer, and Vishny (1988). However, their research
indicated that the adverse effects of higher levels of ownership were largely offset. They
discovered that managerial ownership only turned negative when it surpassed 40 to 50
percent (a rarity for most publicly traded companies), and even then, the impact was
minimal. These results lend credence to the idea that equity ownership helps to
synchronize the objectives of executives and shareholders.

In this research conducted on Eximbank, it was found that only three deputy
CEOs hold a minuscule portion of Eximbank’s ownership equity, ranging from 0.001%
to 0.002%. Furthermore, the CEO and other executives, including the Chief Accountant
and members of the Supervisory Board, hold no shares in the company. Research by

45
 Morek, Shleifer, and Vishny (1988) suggests that when managerial ownership is less than
5%, there is a positive correlation between equity ownership and company value. This
implies that managerial ownership can act as a beneficial incentive to boost company
performance. Moreover, supporting this notion is a study by McConnell and Servaes
(1990), which posits that an executive equity ownership ratio of less than 40% or more
than 50% can align executive interests with those of shareholders.

Consequently, it is genuinely believed that having a low ratio of executive equity

ownership (less than 5%) includes a positive correlation with company value, suggesting
that it can serve as an incentive to enhance Eximbank’s performance. This is because it
aligns the interests of executives with those of shareholders, encouraging efforts to
increase company value. However, it’s important to note that these benefits can diminish
or even reverse as ownership levels increase, due to potential issues such as management
entrenchment and reduced oversight.

Ownership of
Position at Ownership of shares
No. Full name shares with voting
Eximbank with voting rights (%)
rights (shares)
1 Tran Tan Loc CEO 0 0
2 Dao Hong Chau Deputy CEO 9,871 0.001
3 Dinh Thi Thu Thao Deputy CEO 20,352 0.002
4 Nguyen Ho Hoang Vu Deputy CEO 28,427 0.002
5 Nguyen Huong Minh Deputy CEO 0 0
Total shares volume at 31/12/2022 1,235,522,904 100
Source: Vietstock & Eximbank’s 2022 Annual Report.

Furthermore, Elsila, Kallunld, and Nilsson (2009) discovered that executive

equity ownership had beneficial benefits. Rather than measuring executive incentives
based on the proportion of the firm held by an executive, they assessed them based on the
amount of personal wealth the executive had put in the company. They claimed that a
CEO with a very small percentage of a company's shares might represent a considerable
chunk of her personal fortune if her entire wealth is modest. A CEO who owns a
reasonably big percentage of the stock, on the other hand, may only have a little amount
of her fortune if her total wealth is enormous. They hypothesized that CEOs who had put
a significant percentage of their money in the firm are more driven to perform well,
which is exactly what they discovered. The ratio of CEO wealth to personal wealth is
related to both firm success and value. It is, however, difficult to collect particular details
regarding the personal wealth of executives, including those at Eximbank. In terms of
practical implications, Elsila, Kallunld, and Nilsson's conclusions are not particularly
contentious. As a result, we will consider this fact as an extended part in our Eximbank
study.

46
 3. Analysis of the firm’s ownership structures
The equity ownership of Eximbank is quite diverse, including institutional and individual
shareholders, foreign and domestic shareholders, and also state shareholders, etc.
Generally, Eximbank’s shares are distributed fairly evenly between institutional and
individual shareholders, while there is a significant disparity between the equity
ownership of domestic and foreign shareholders. To analyze further, the data on
Eximbank’s equity ownership structure is summarized in the table below.

Ownership
Number of
No. Shareholder to charter
shares
capital (%)
Major shareholders (owning 5% stake and more) 185,329,207 15.00
1
Shareholders owning less than 5% stake 1,050,193,697 85.00
Institutional shareholders 525,549,484 42.54
- Domestic 292,145,324 23.65
- Foreign 233,404,160 18.89
2
Individual shareholders 709,973,420 57.46
- Domestic 709,565,205 57.43
- Foreign 408,215 0.03
Domestic shareholders 1,001,710,529 81.08
3
Foreign shareholders 233,812,375 18.92
State shareholders 62,375,308 5.05
4 Other shareholders 1,172,880,596 94.95
Founding shareholders 0 0
Total 1,235,522,904 100
Source: Eximbank’s 2022 Annual Report

3.1. Major and minor shareholders

The disparity in the ownership ratio between major and minor shareholders of Eximbank
was quite significant. Major shareholders, who held a stake of 5% or more in Eximbank’s
equity, constituted 15% of the ownership. On the other hand, minor shareholders, who
held less than a 5% stake, accounted for 85% of the ownership, which was approximately
5.6 times greater than that of the major shareholders.

An article by Shraddha Sureka (latest update in 2023) indicated that a larger

number of shareholders can lead to more trading activity, which can increase the liquidity
of the company’s shares. This makes it easier for shareholders to buy and sell shares
without significantly impacting the share price. Moreover, if a company has many minor
shareholders, it may be able to raise more capital through the issuance of additional
shares, compared to a company dominated by a few major shareholders, which increase
the firm’s potential for greater capital. Another study by Niti Gupta found that having a

47
higher number of minor shareholders can help mitigate the risk of hostile takeovers. If a
single shareholder or a small group of shareholders hold a majority stake, they could
potentially sell their shares to a hostile bidder. With more minor shareholders, this risk is
reduced. According to James Rickard (2019), a structure with high proportion of minor
shareholders can increase the diversification of ownership. With more minor
shareholders, the ownership of the company is spread out. This can lead to a more
democratic decision-making process, as no single shareholder or small group of
shareholders can dominate the company’s direction.

However, there are also challenges that come with having a higher proportion
of minority shareholders. According to an article reviewed by Dheeraj Vaidya, one of the
main issues is the limited influence these shareholders have on the strategic direction of
the company. Their voices may not be heard or taken into account when key decisions are
being made. Besides, the diversity among minority shareholders can also pose a
challenge. The current corporate governance paradigm fails to account for the diversity
among minority shareholders and their interests. This calls for a paradigm shift in
corporate law’s treatment of minority shareholders. Furthermore, the negotiating power
of minority shareholders can be limited. The study by James Rickard (2019) also
indicated that as statutory rights will only afford a minority shareholder with limited
protection, a minority shareholder should attempt to supplement their statutory rights
with contractual protections in a shareholders’ agreement or in the Articles of Association
of the company. Whether this is achievable or not will depend solely on the negotiating
power of the minority shareholder. Additionally, minority shareholders usually have less
than 50% of shares in a company that have voting rights attached, which means they have
limited legal rights.

In summary, while there are benefits to having a higher proportion of minority

shareholders, significant challenges that need to be addressed also exist. Therefore, it’s
crucial for Eximbank to truly assess the ratio between major and minor shareholders and
find out the right balance that suits the company’s specific needs and circumstances.

3.2. Institutional and individual shareholders

The distribution of shares between institutional and individual shareholders was relatively
balanced, with institutional shareholders holding 42.54% of the total shares, while
individual shareholders accounted for the remaining 57.46%. This equitable distribution
of shares between institutional and individual investors offers a whole host of benefits.

On one hand, a study by Glenn Curtis (updated in 2023) found that institutional
investors, often seen as “smart money”, bring with them a wealth of corporate and market
data, allowing for in-depth analysis of opportunities. Their involvement can also drive
interest in the stock, potentially boosting its value. On the second hand, Adam Hayes
(2022) indicated that individual investors contribute to the potential for capital gains and
dividends, a significant benefit of common shares. Moreover, a higher number of shares

48
at a lower price can increase the liquidity of the share, making it more attractive to
potential investors.

However, this balance is not without its challenges. Based on the findings by
Bob Haegele (2022), the large size of institutional investors’ trades can significantly
impact the market. They also have access to investment research that retail investors do
not, creating a potential information gap. Furthermore, Barclay Palmer (updated in 2023)
suggested that mutual funds, a type of institutional investor, can come with high expense
ratios and sales charges, which may deter some investors. They can also have tax
inefficiencies and there can be possible management abuses.

In short, while a balance between institutional and individual investors can bring
about a dynamic shareholder structure, it also comes with its own set of challenges. It’s
important for Eximbank to manage the equity ownership proportion between institutions
and individuals effectively to ensure a healthy and dynamic shareholder structure.

3.3. Foreign and domestic shareholders

The next aspect we’ll examine is the distribution of shares between foreign and domestic
shareholders. Foreign shareholders hold a significant majority, with 81.08% of the shares,
which is approximately four times the 18.92% held by domestic shareholders.

When a company has a higher ratio of domestic shareholders compared to

foreign investors, it can gain certain benefits. According to the Corporate Finance
Institute (CFI), domestic shareholders often bring stability to the company. They are less
likely to withdraw their investments due to global market fluctuations, providing a sense
of security. The company is less exposed to currency risk as investments are in the local
currency. Moreover, when it comes to alignment with the local market, domestic
shareholders may have a better understanding of the local market and business
environment, which can lead to more informed decision-making.

On the other hand, this structure is not without its drawbacks. Hunkar Ozyasar
(2019) indicated that a higher ratio of domestic shareholders can lead to less
diversification, potentially increasing the company’s risk. Furthermore, the pool of
capital that can be raised might be limited if the company relies heavily on domestic
shareholders. This could restrict the company’s growth and expansion plans. Lastly,
domestic shareholders might have greater access to the company’s operations, leading to
increased scrutiny and pressure on the company.

In conclusion, Eximbank should strategically leverage the advantages offered by

domestic investors, who currently hold a majority stake in the company’s equity.
However, it’s equally important to acknowledge and address any potential drawbacks of
this arrangement. Simultaneously, the benefits that foreign investors bring to the table
should not be overlooked, especially considering the current economic climate. The

49
ultimate goal should be to strike a balanced and effective proportion between foreign and
domestic shareholders, ensuring the company’s stability and growth.

3.4. State shareholders

A state ownership of 5.05% in Eximbank’s equity structure can be considered relatively
low. The extent of government ownership and control in firms can vary significantly.
Some firms are essentially an arm of the government, whereas others have a mix of
public and private owners. Generally, having a low state-owned equity proportion not
only bring Eximbank a majority of benefits but also potential drawbacks.

According to a study by Caroline Banton (latest update in 2023), when the state’s
stake is low, the firm often enjoys a degree of autonomy and flexibility that might not be
possible with a higher level of government involvement. This freedom allows the firm to
make swift decisions, implement innovative strategies, and adapt to market changes
without the need for government approval or alignment with state policies. Moreover, a
lower proportion of state ownership can make the firm more appealing to private
investors. These investors, often wary of government intervention, may perceive the firm
as less risky and more aligned with market forces.

Nonetheless, having a lower state equity ownership comes with its own set of
challenges. Caroline also indicated that the firm might miss out on the financial and non-
financial support that government ownership often brings. This support can take various
forms, including subsidies, tax breaks, and preferential treatment in regulatory matters.
Additionally, with less government oversight, there’s a potential risk of exploitative
practices. Without the watchful eye of the state, some firms might prioritize profit over
public interest, leading to practices that harm consumers or the environment. Finally, a
low state equity ownership means the government has less influence over strategic
sectors of the economy. This lack of control can be a concern, especially in sectors that
are vital for national security or public welfare.

In conclusion, low state equity ownership offers firms autonomy and flexibility,
enabling swift decision-making and innovation, and making them attractive to private
investors. However, it also means missing out on government support in the form of
subsidies, tax breaks, and regulatory advantages. Additionally, it could lead to
exploitative practices in the absence of government oversight and limit government
influence over strategic sectors, which could be a concern for national security or public
welfare. Therefore, Eximbank should take into account that it needs to have an
appropriate state equity ownership proportion to bring efficiency to the company and
attract investors, but at the same time take advantage of the opportunities that government
support brings to optimize the benefits from using state capital.

50
3.5. Founding shareholders
One notable point of Eximbank equity structure is that this bank’s founding shareholders
hold no stakes. This arrangement, while unusual, carries its own set of advantages and
disadvantages.

On the positive side, Marin Penchev (2021) found that the absence of founding
shareholders can lead to an environment free from their influence or interference,
allowing the bank’s management to make objective decision-making. Moreover, the bank
may enjoy greater flexibility in strategic decision-making, unencumbered by the
preferences or biases of the founders. Another study by Glenn Curtis (latest update in
2023) suggested that this freedom can also open the doors to large institutional investors
such as mutual funds, pension funds, and hedge funds, infusing the bank with substantial
capital.

Nevertheless, this structure is not without its drawbacks. According to Marin, the
departure of founding shareholders might result in a loss of continuity and institutional
knowledge, as these individuals often possess a deep understanding of the business and
its history. Furthermore, without a stable base of founding shareholders, the bank could
become more susceptible to hostile takeovers. Lastly, Glenn also argued that the focus of
institutional investors on short-term gains could potentially overshadow the bank’s long-
term growth.

In conclusion, whether having 0% of founding shareholders in Eximbank’s

equity structure is a problem or not really depends on the specific circumstances of the
bank and its operating strategies. As mentioned earlier, there are both advantages and
disadvantages to this situation. On the one hand, it can lead to more objective decision-
making, attract large institutional investors, and provide more flexibility in strategic
decisions. On the other hand, it might result in a lack of continuity and institutional
knowledge, a potential for short-term focus, and an increased risk of hostile takeovers.
Therefore, it’s not inherently a problem, but it does change the dynamics of the bank’s
operations and could present challenges that need to be managed.

51
PART IV. CONCLUSION AND DISCUSSION

Eximbank is making strides in Vietnam, a market abundant with potential and poised to
become an emerging market. However, given the current conditions and evaluation
criteria, Vietnam is presently classified as a frontier market, which is typically associated
with low efficiency level.

Over recent years, the legal system in Vietnam has seen significant
transformations, transitioning from a stance that heavily favored majority shareholders to
one that enhances the protection of minority shareholders. The legal framework in
Vietnam is comprehensive, with regulations specifically designed to protect shareholders
in enterprises. While the corporate governance environment in Vietnam is still in its
developmental phase, there are encouraging signs of improvements in governance quality
and a push for transparency in business operations.

The traditional work culture of the Vietnamese, which aligns closely with
Confucianism, is quite distinct from Western practices. However, in response to societal
progress and the evolving needs of the new generation of workers, Vietnamese societal
and cultural values are gradually adapting to better fit the modern era. Managers are now
prioritizing flexibility, creativity, adaptability to change, and the enhancement of personal
skills and respectful leadership over power and position.

In terms of the operation of the Board, the Board of Directors at Eximbank

Vietnam combines expertise, integrity, and competencies to guide the bank’s success and
protect its stakeholders’ interests. The Chairman and members of the Board of Directors,
along with 10 committees, have been and are striving to fulfill their duties in evaluating
and developing appropriate strategies for the company. In the structure of the Board, in
addition to expertise and experience related to the position, Eximbank particularly
emphasizes the independence of the Chairman as well as the members of the Board of
Directors. Eximbank’s evaluation standards for independence, expertise, and
remuneration of the Board of Directors are quite similar to the general regulations of
Vietnamese law and other banks. Most members of Eximbank’s Board of Directors
operate on the Board and CEO, Deputy CEO at other companies without the phenomenon
of “interlocked board”. With their professional experience and wide relationships,
Eximbank may gain certain benefits.

In 2022, Eximbank made significant changes in the structure and members of the
Board of Directors. Eximbank is making efforts to adjust important characteristics to
enhance the independence and fairness of power of the members in the Board of
Directors; at the same time, it also adjusts the diversity of the Board (reducing nationality
diversity but enhancing gender balance). In addition, to suit the company’s size and
business scale, Eximbank has considered and reduced the number of members of the

52
Board of Directors with the hope of reducing redundant costs and managing the company
more effectively. The adjustments in the structure of Eximbank’s Board of Directors are
expected to bring benefits to the company in the management process and attract
investors as well as customers.

Consequently, Eximbank is well-regarded for its independence and balance of

power within the Board of Directors structure, and its strict adherence to corporate
governance regulations. This has resulted in good managerial performance and
significant growth in business performance. These Eximbank’s positive points, along
with its attention to its stockholders through the establishment of the Investor Relation
Division and transparent disclosure of company information, have brought significant
benefits to stockholders such as increasing the dividend payout rate. Therefore,
Eximbank has seen a significant increase in shareholders’ equity, and correspondingly, a
significant rise in its stock price.

In terms of executive compensation, Eximbank’s regulations bear no difference

with other local banks. Eximbank’s executive compensation package mainly involves
annual salary and bonus, perquisites, contractual agreements, and other benefits provided
with employment. These factors are considered to fairly compensate for the effort they
put in to bring maximum benefit to the company.

When it comes to executive equity ownership, executive positions at Eximbank,

including the CEO and Deputy CEO, etc., hold a very small percentage of the company’s
shares, which can be said to be almost zero. Our findings indicated that such a proportion
of executive-owned equity not only serves as a positive incentive to enhance company
performance and firm value, but also aligns executive interests with shareholder interests.

Our study concluded that Eximbank had a highly diversified equity ownership
structure. This structure is characterized by a 5.5:1 ratio between major and minor
shareholders, almost equal equity percentages held by institutional and individual
shareholders, a domestic-owned equity that is four times greater than foreign-owned
equity, and a relatively low state ownership proportion of 5.05%. These aspects of
Eximbank’s capital structure each come with their own advantages and disadvantages.
Therefore, it’s crucial for Eximbank to thoroughly evaluate and balance these factors in
order to select a capital structure that aligns with the company’s objectives.

53
 APPENDIX
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https://www.msci.com/our-solutions/indexes/market-classification

https://www.msci.com/documents/1296102/6a6cbb4e-d14d-10a4-0cec-7a23608c0464

https://www.msci.com/our-solutions/indexes/market-classification

https://mof.gov.vn/webcenter/portal/tttpen/pages_r/l/detail?
dDocName=MOFUCM171317

https://theinvestor.vn/vietnam-climbs-to-10th-on-emerging-global-markets-index-
d4235.html

https://rpc.cfainstitute.org/en/research/foundation/2021/apac-capital-markets-vietnam

https://vlr.vn/economic-integration-open-doors-for-vietnam-s-export-sectors-14793.html

https://lawfirmvietnam.com/en/law-on-enterprises-2020/

https://thuvienphapluat.vn/news/headlines/30156/overview-of-new-and-significant-
regulations-in-2020-law-on-enterprises

https://link.springer.com/chapter/10.1007/978-3-030-51533-1_1

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06_LoanTKPhan_Fullpaper.pdf

https://sc.edu/study/colleges_schools/moore/documents/
center_for_executive_succession/2017_051_benefits_board_chair_roles.pdf

https://sc.edu/study/colleges_schools/moore/documents/
center_for_executive_succession/2017_051_benefits_board_chair_roles.pdf

https://www.eximbankja.com/about-us/board-committees/

https://vietstock.vn/2022/02/ba-luong-thi-cam-tu-lam-chu-tich-eximbank-214-
934114.htm

https://vietnambiz.vn/ba-luong-thi-cam-tu-tro-lai-ghe-chu-tich-eximbank-
20220217165221104.htm

54
https://www.vietnam.vn/en/mien-nhiem-ba-luong-thi-cam-tu-chu-tich-hoi-dong-quan-tri-
eximbank/

https://theleader.vn/moi-quan-he-giua-chu-tich-hdqt-va-ceo-lam-the-nao-de-tranh-do-vo-
1534390463105.htm

https://www.stockbiz.vn/News/2019/5/19/726039/rot-rao-thuc-hien-tach-bach-chu-tich-
hdqt-va-tong-giam-doc.aspx

https://vietnambiz.vn/tach-bach-chu-tich-hdqt-va-ceo-tien-de-quan-trong-de-nang-hang-
thi-truong-chung-khoan-20200727115615924.htm

https://www.skadden.com/insights/publications/2021/06/the-informed
board/interlocking-boards

https://www.investopedia.com/terms/i/interlocking-directorates.asp

https://www.educba.com/advantages-of-ratio-analysis/

https://www.wallstreetmojo.com/majority-shareholder/

https://www.stephens-scown.co.uk/corporate-commercial/minority-vs-majority-
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