Foreign invested enterprises perform poorly in organizational transparency
By Minh Anh
August 26, 2018 | 07:16 AM GMT+7
Large multinationals tend to neglect public disclosure of their subsidiaries abroad, because this is not a compulsory requirement, however, this lack of information limits monitoring and oversight by local stakeholders in countries where these subsidiaries operate.
EB Services (Big C) scores zero per cent in organizational transparency and company ownership
According to Transparency in Corporate Reporting (TRAC Vietnam 2018) recently announced by Towards Transparency (TT), the national contact of Transparency International (TI) in Vietnam, publicly listed companies (PLCs) perform strongest in transparency on organizational apparatus and company ownership at an average score of 88 per cent, followed by State-owned Enterprises (SOEs) at 60. FDIs are lagging behind with 32 only.
As indicated earlier, score of PLCs in this area is very encouraging, with 10 out of 15 companies reaching even 100 in organizational transparency. The remaining companies score above average, with only one company scoring less than 50 (Truong Hai company at 38).
SOEs also perform relatively well in this assessment dimension. Agribank, MobiFone, Vinataba, SJC and Vietnam Rubber Group (VRG) all achieve the maximum score of 100. On the other end of the spectrum, Viettel is the worst performer with 10. Saigon Petro and Saigon New Port all score as low as 25.
Meanwhile, foreign companies’ performance in this dimension is disappointing, especially as only two out of 15 companies provided feedback comments on their draft scoring.
Panasonic Vietnam and Greenfeed Vietnam outperform at 75. Big C, Zuellig Pharma Vietnam and Olam Vietnam score zero.
Company scores in Organizational Transparency. 0% means the least scoring and 100%, the maximum scoring. Source: TRAC Vietnam 2018
According to TRAC Vietnam 2018, in practice, experience indicates that the majority of multinational subsidiaries operating in Vietnam typically have not established second-tier subsidiaries, either in Vietnam or outside of Vietnam. Nonetheless, searches identified information on second-tier subsidiary holdings and operations by some foreign companies in Vietnam and abroad.
Limited transparency in this area is problematic and limits Vietnamese stakeholders’ ability to understand and hold to account foreign businesses operating in the country.
Meanwhile, given the regulatory requirements mentioned above, these low scores raise the question of the effectiveness of enforcement and sanctions on noncompliant companies.
TRAC Vietnam 2018 also showed that disclosure of company ownership and structure of a company group and related party transactions is a recognized principle of effective corporate governance. It reveals inter-connections between companies and facilitates detection of illicit financial flows, thus limiting opportunities for corruption and other financial irregularities.
Therefore, these results clearly show the importance of legally mandated transparency as well as the limits of voluntary disclosure. Vietnam has enacted regulations prescribing disclosure of information by companies, such as ownership, structure and subsidiaries.
These regulations have set PLCs and SOEs on the path to good practices in organizational transparency and TRAC Vietnam 2018.
At the same time, large multinationals tend to neglect public disclosure of their subsidiaries abroad, in the absence of such a compulsory requirement for these companies. This lack of information limits monitoring and oversight by local stakeholders in countries where these subsidiaries operate.
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