HO CHI MINH CITY -- Saigon Beer Alcohol Beverage Corp., or Sabeco, has seated independent members on its board of directors and set up an audit committee, becoming Vietnam's second listed state-owned enterprise to do so since the current corporations law came into effect in 2014.

It follows Vietnam Dairy Products, or Vinamilk, which added independent directors and replaced its board of supervisors with an audit committee in 2017.

Two new independent directors have jointed Sabeco. One is Nguyen Tien Vy, vice chairman of the Vietnam Beer Alcohol Beverage Association. He holds a master's degree in law and formerly filled multiple posts at the Ministry of Industry and Trade. The other is Pramoad Phornprapha.

The audit committee's makeup has not been announced. But under the corporate charter, a majority of members must be independent or nonexecutive directors on the board. The committee comprises three or more members, at least one them a professional in accounting, finance or auditing who does not work in Sabeco's accounting and finance department. The audit committee is headed by an independent member of the board.

Sabeco's shift to the new management model came after the leading Vietnamese brewer was acquired by Thai Beverage. ThaiBev secured a 53% stake in the Vietnamese state-owned brewery this past December for $4.8 billion. Sabeco Chairman Koh Poh Tiong recently told shareholders that the change will help Sabeco to improve its management to devise a better growth strategy.

Sabeco and Vinamilk are Vietnam's top two listed SOEs by market capitalization, with the government's stakes amounting to 36% each. They opted for the new management regime under the 2014 corporations law, which lets joint-stock companies choose from two. One system employs a board of directors, a board of supervisors and a general director. The other has a board of directors and general director, with an independent audit committee under the board.

Since 2015, listed Vietnamese companies have had to replace the board of supervisors with an independent audit committee and add more independent members to the board of directors in order to meet international standards on management, widely applied in the U.S. and the U.K. The new model will enhance transparency and sustainable growth at companies, according to Phan Duc Hieu, deputy director of Vietnam's Central Institute for Economic Management. It will help reduce abuse of power by directors and protect shareholders' rights and benefits, he said.

Sabeco's move only underscores corporate Vietnam's slowness to adopt international governance standards, given the nearly 700 SOEs in the country.

Even counting large private companies with independent directors and audit committees, such as Novaland, Refrigeration Electrical Engineering and Coteccons Construction, the share remains small out of the 700-plus listed companies on the two main bourses and the more than 770 companies on the secondary market in Vietnam.

This is due largely to the unclear legal framework regarding the function, appointment and responsibilities of internal auditors as well as a lack of skilled auditors, Smart Train CEO Pham Ngoc Hoang Thanh, a financial accounting expert, said at an auditing workshop in August.

At most Vietnamese enterprises, the governance structure comprises a board of directors with no independent members and a board of supervisors. But this model has been criticized as enabling wrongdoing at many SOEs. Boards of supervisors have long been blasted as costly and ineffective, since their members are company employees who cannot stand up to directors. The formation of boards of supervisors might have been inherited from the old business model of the Soviet Union, which once strongly influenced Vietnam's business community, Thanh said.

(Nikkei)