DISCUSSION POINTS 1.

Explain corporate governance, the five key elements *Corporate governance: Corporate Governance Definition (y l defination cho Family Business Governance. Nn c gi li) Corporate governance refers to the structures and processes for the direction and control of companies. Corporate governance concerns the relationships among the management, board of directors, controlling shareholders, minority shareholders, and other stakeholders. Good corporate governance contributes to sustainable economic development by enhancing the performance of companies and increasing their access to outside capital. This definition focuses on three key elements: Direction refers to all the decisions that relate to setting the overall strategic direction of the company such as: (i) long-term strategic decisions; (ii) largescale investment decisions; (iii) mergers and acquisitions; and (iv) succession planning and appointment of key senior managers, such as the CEO of the company. Control refers to all the actions necessary to oversee the managements performance and follow up on the implementation of the strategic decisions set above. Relationship among the main governing bodies of the firm refers to the interactions among the shareholders, the directors of the board, and the managers. An important element of any good corporate governance structure is the clear definition of the role, duties, rights, and expectations of each of these governing bodies. The directors of companies, being the managers of other peoples money rather than their own, cannot well be expected to watch over it with the same anxious vigilance with which (they) watch over their own (Adam Smith, the Wealth of Nations, 1776) Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the companys strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The boards actions are subject to laws, regulations and the shareholders in general meeting. _UK Corporate Governance Code (the Code) was produced in 1992_ (Slide Dr. L Vnh Trin)

It can be said as a genernal, Corporate Governance is a mechanism established to allow different parties to contribute capital, expertise, and labor, for the maximum benefit of all of them.{ The investor gets the chance to participate in the profits of the enterprise without taking responsibility for the operations. The management gets the chance to run the company without taking the responsibility of personally providing the funds. In order to make both of these possible, the shareholders have limited liability and limited involvement in the companys affairs. That involvement includes, at least in theory, the right to elect directors and the fiduciary obligation of directors and management to protect their interests.} *Five key elements: Good board practices: make board work more effectively Clearly dened roles and authorities Duties and responsibilities of directors understood Board is well structured Appropriate composition and mix of skills Appropriate board procedures Director remuneration in line with best practice Board self-evaluation and training conducted

Control processes (environment) Independe nt audit committee established Risk-management framework present Internal control procedures Internal audit function Independent external auditor conducts audits Management information systems established Compliance function established

Disclosure and transparency Financial information disclosed Non- nancial information disclosed Financials prepared according to International Financial Shareowner rights Minority shareowner rights are formalized Well-organized general assembly conducted Policy on related-party transactions Policy on extraordinary transactions Clearly de ned and explicit dividend policy

Board Commitment The board discusses corporate governance issues and has created corporate governance committee The company has a corporate governance champion A corporate governance improvement plan has been created Appropriate resources are committed Policies and procedures have been formalized and distributed to relevant staff A corporate governance code has been developed The company is publicly recognized as a corporate governance leader

2. Outline the benefits of Corporate Governance to address misconceptions and inaccuracies regarding: Companys interests: Now in almost companies, the power and influence do not completely concentrated on individual person which mean existing a person is the chairman of director as well as the CEO. So that Corporate Governance requires the management of board of directors and management of company are two independent missions. The CEO is a person who represent the owners of company, so when the CEO focus too much on the interest of these owners, the companys interest will be under threat Corporate Governance may offer several advantages to family businesses and their shareholders, including: Improved Marketability of Shares: This makes it possible for family shareholders to sell their shares at the prevailing stock price in the open market. It also makes it easier for shareholders to use their shares as collateral to obtain loans. As a result, the improved marketability of the companys shares helps reduce family issues as it solves the liquidity needs for shareholders who prefer to hold their wealth in assets other than their interest in the company. Improvement of the Companys Financial Position: This is a direct result fromselling the companys shares to the public. The stronger financial position makes it easier for the company to seek loans and to negotiate the terms of these loans. Potential Increase in the Value of the Shares: Many family-owned companies that went public saw their stock price rise above the initial estimation made by the investment banking firm. This increase in value is partly due to the willingness of investors to pay a higher price for the companys stock because of

its greater credibility as a public company, the improved marketability of the shares, and the increased transparency of accounts. Greater Visibility: Going public gives family businesses increased prestige and visibility in the market. Markets tend to perceive public companies as professionally managed and more transparent (audited accounts and periodic publication of financial statements and performance data). As a result, a family business that goes public might increase its visibility in the market. Separation of control from ownership:

In this aspect, corporate governance requires company should have the balance between number of members in executive director and number of members in nonexecutive director in the board of director. The process of appoint to the chairman of BOD must be disclosure and clear. Annually, BOD must evaluate the efficient working of board of managers. By separate the control, corporate governance also help company prevent and find out financial fraud and corrupt activities. So that the annual financial report will be honest, objective as the result more investors believe in company. Moreover, the benefits of separating ownership and control come from the interaction of three factors. First, under certain conditions and for certain types of decisions, hierarchical decision making may be more efficient than market allocation. Second, due to economies of scale in both production and decision making, optimal firm size can be quite large. Third, optimal investment strategy requires investors to be able to diversify and pool and to be able to change their allocations in response to changing market conditions. Compliance: In the corporate governance compliance device into two mechanisms: legal compliance mechanism and ethical compliance mechanism. Although there is a distinction between ethical compliance and legal compliance, but both of them help to restore the confidence and build the trust to company. Moreover, compliance can result in the substitution of accountability for responsibility. More specifically, the legal compliance mechanism is insufficient in dealing with fraudulent practices, but it does not encourage or inspire ethical activities and behavior. The ethical compliance mechanism is addressed from virtue perspective, so in basic level, it concern relationship and build the trust both inside and outside company. Additionally, the legal compliance programs is believed to only protect the board of managers from blame while the ethical compliance mechanism protect all of member such as create the fair treatment of employees.

Protecting investors interests:

The problems with investors interests will not happened if there is one person hold 100% of shares of company, because when he do something wrong, the consequence only harm to himself and so that is rare to happen. The problem is major shareholder can control company by holding 51%. If they act in the opposite way of the companys interest, they only bear with the bad consequence based on the percentage of shares they hold and the rest of course will be beard by others investors.

3. Demonstrate the link between well-governed companies and better societies, with examples relevant to your company and country Good corporate governance practices instill in companies the essential vision, processes, and structures to make decisions that ensure longer-term sustainability. More than ever, we need companies that can be profitable as well as achieving environmental, social, andeconomic value for society. (Rachel Kyte, Vice president, business advisory services, IFC) 1) Poverty reduction If the corporate sector is able to show strong growth, promote a better business environment for all, increase productivity, temper their pursuit of profits with the needs of their stakeholders and pay taxes properly that would contribute towards the first steps for poverty reduction. The state would have to reduce inefficiencies and waste, provide good education, quality healthcare, good security, judiciary, etc to support businesses to do well in a legal way. For example: in 2011 both Vietinbank, Vietcombank, BiDV pay more than 1000 billion dong in tax. Vietnam will use this tax to improve education system, quality healthcare, infrastructures 2) Solve unemployment problems, increase labors income and improve their quality life. Well-governed led to successful in business, it means that enterprises need more labor to expand their business. Good performance in business also led to increase labor income. It helps a country solve unemployment problems, increase GDP. High income of labor in enterprises areas contributes to improve and increase general living standard For example: Viettel now has more than 25000 employees. This corporation announced the total revenue in 2013 about 163000 billion dong, earning before tax 35000 billion dong, the average income of Viettels employee is about 23.7 million dong per month.

It means that Viettel creates more than 25000 jobs, increasing Vietnams GDP, contributing to improve general living standard in Vietnam. 3) Business growth and development are key determinants of high and stable growth of the economy. Higher benefits that business growth brings is generated greater volume of goods and services, richer, better quality, more alternative to imported goods, improving and raising the level of domestic consumption and export growth, this is the main factors that keep the economy stable and developed over the years. For example: Vinamilk now hold about 40% milk market in Vietnam, they produce more than 570000 ton of milk each year. It can be seen that Vinamilk generates a big volume of goods and services. 4) Growth in business impacts greatly to solve social issues. In recent years, commodities products and services by enterprises creates the increasing diverse categories of goods, quality of goods and services, so has solved the basic needs of consumption of goods and services, contribute to improving the living standards of the population and increase the export of goods. Many products have previously imported for consumption, this has been alternated by domestic enterprises such as automobiles, motorcycles, transport, electrical items, electronics, apparel, food, beverage, cosmetic, household appliances. 4. Note the challenges developing and emerging market countries confront in achieving progress, specifically: Close-knit business communities: Close-knit business communities that facilitate gossip. It may cause the community have a large of information which confict to others. Trade now can not be predict easily base on the forcast, estimate or evaluate. People in Close-knit business communitys trade is followed the trend. Close-knit business communities is sensitive to the new business from different countries. It may cause problem for foreign company with less reputation than the domestic one to enter the market. Family-held companies: Complexity: Family businesses are usually more complex in terms of governance than their counterparts due to the addition of a new variable: the family. Adding the family emotions and issues to the business increases the complexity of issues that these businesses have to deal with. Unlike in other types of businesses, family members play different roles within their business, which can sometimes lead to a non-alignment of incentives among all family members. Informality: Because most families run their businesses themselves (at least during the fi rst and second generations), there is usually very little interest in setting clearly articulated business practices and procedures.

As the family and its business grow larger, this situation can lead to many inefficiencies and internal confl icts that could threaten the continuity of the business. Lack of Discipline. Many family businesses do not pay suffi cient attention to key strategic areas such as: CEO and other key management positions succession planning, family member employment in the company, and attracting and retaining skilled outside managers. Delaying or ignoring such important strategic decisions could lead to business failure in any family business. (Challenge of Family hold business, p.8, Case study of Organica Futura) Low concentrations of ownership and cross ownership: Cross ownership of shares is criticized for: o Stagnating the economy o Wasting capital that could be used to improve productivity o Expanding economic downturns by preventing reallocation of capital Cross-ownership breaks the traditional rule of one-sided corporate control. Low concentration of ownership and cross ownership may lead to the replace of many ownership become cross ownership, currently, two broad approaches coexist to work out the shareholders control stakes in a corporate structure, which is represented by an ownership graph, and cross ownership will create the family hold business. That will cause company face many disadvantage of family hold business, but actually, that company not effect too much on the family reputation, they giving up one of the most strenght of that type: family pride. Ineffective judicial system; Ineffective judicial system is the main cause of corruption, cheating and unethical behaviour. The judicial system failure to protect human right and extended to criminal and illegal may harm the trust of the people to the rule-base- if its legal, its ethical. People will find in the ineffective system leading to wide-spread perceptions that "justice" depended in large part on the political connections and resources of the parties involved.