As
many as 16% of listed firms on Vietnam’s stock markets incurred losses
in 2011, with the results blamed on incompetent leadership.
According to statistics released by
the State Securities Commission (SSC), 16% of listed firmed in
Vietnamese stock market suffered from losses in 2011, and 60% of firms
see reduction in their revenues, leading to CEOs being criticised
seriously by their board of directors and shareholders.
Responsibilities lie with CEOs
Poor CEO risk management skills were
largely blamed for the results, and this had meant many listed companies
had been forced to borrow capital beyond their asset value, yet
yielding much lower results than initially expected.
Some economists explained that some
companies had been overly hasty to diversify their investment into
non-core businesses, with some investors confused about what the markets
the companies were actually concentrating on.
Many CEO decided to use shareholder
capital to invest in real estate and securities, but when they couldn’t
predict the potential consequences of their decisions, put at risk the
company’s human resources and finances.
Prime examples this year included Song
Da Urban & Industrial Zone Investment and Development Joint Stock
Company (Sudico) which dismissed its CEO at the end of 2011.
In the latest shareholder meeting of
Saigon-Hanoi Securities Joint Stock Company (SHS), Chairman of the
board, Do Quang Hien officially admitted his poor supervision over the
former general director, leading to the company accumulating losses
worth hundreds of billion of VND.
La Nga Sugar Cane and Sugar Joint
Stock Company dismissed its general director who was also its deputy
chairman of the board because he was found to have a fake university
certificate. At the end of 2008, this company dismissed one general
director because he had caused losses worth more than VND12 billions
(USD 574,712) due to speculative stock investment.
Concerned parties had to share responsibility
Almost companies blamed unprofitable
business results on their CEOs. However, if the company’s investment in
non-traditional markets can make profit which outstrips that made from
its main business aspect, the CEO is honoured as a hero for their risky
decisions.
Anne Molyneux, international senior
consultant in the field of business management said, “Responsibilities
cannot be the sole burden of a CEO, we have concerned parties that stand
beside him. The investors often entirely trust an auditing company for
checking the company’s operation and pointing out violations by the
board.”
However, auditors only have the responsibility to read annual reports and check the company’s accounting system.
It’s the management board that has the
right to supervise and check the company’s trading activities to detect
ineffective projects, unusual transactions, and lack of risk management
skill by the CEO and the board.
“In many companies, auditors don’t have proper rights to make decisions or question the board”, Anne said.
Dominic Scriven, General Director of
Dragon Capital, said, “When the business status of a company becomes
unprofitable, the CEO should resign, but other concerned parties also
need to explain what has happened to shareholders.”
“Management boards here operate
ineffectively. Each board should establish an auditing committee
operating independently to point out shortcomings in CEO’s decisions,
with the responsibility to report these failings in time to the board.
Vietnamese investors still depend too much on the State to help them
supervise and detect problems inside the business. But no management
agency can do that task properly for them,” Dominic said.
Bui Hoang Hai, Deputy Manager of the
Issuance Management Department under the SSC, emphasised, “We can only
manage risks in some conditional business like securities or investment
funds.”
“Instructions on risk management given
to public enterprises are optional. We are planning to publish a
handbook and open training courses on risk management skills,” Hai said.
VNA/DTnews