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<b>UEH UNIVERSITY COLLEGE OF BUSINESS SCHOOL OF FINANCE </b>

<b>TERM PROJECT SUBJECT: CORPORATEGOVERNANCE RESEARCH ON SSI</b>

<b>CORPORATION </b>

<b>Lecturer: PhD. Vu Viet Quang </b>

<b>Student name: Nguyen Hoang Bao NgocStudent ID: 31211023915</b>

<b>Class: DH47FNC10 </b>

<b>Email: Phone: 0853 191 557 </b>

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<b>PART I: OVERVIEW ABOUT CORPORATION...2</b>

<b>PART II: CORPORATE GOVERNANCE ANALYSIS...4</b>

2.1 Corporate Governance Analysis...4

2.1.1 Analysis of Factors that Shape the Quality of the Governance System in Vietnam... 4

2.2.2 Board Committees...14

2.3 Board of Directors: Selection, Compensation, and Removal...18

2.3.1 Market for Directors...18

2.3.2 Director for compensation...19

2.4 Board of Directors: Structure and Consequences...20

2.4.1 Board Independence...20

2.4.1.1 Independence of the chairman...20

2.4.1.2 Lead Independent Director...22

2.4.1.3 Outside (non-executive) directors ...23

2.4.1.4 Independence standards ...23

2.4.1.5 Independent Committee of the Board...23

2.4.2 The Size and Structure of a Board of Directors...24

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2.4.3 Consequences...25

2.4.3.1.1 Balance of Power:...25

2.4.3.2 Managerial Performance/Firm Performance...26

2.4.3.2 Stockholder Reaction/Stock Prices...29

<b>PART III: Executive compensation and Ownership structures...30</b>

3.1 Executive compensation and Ownership Structures...30

3.1.1. Firm’s Executive Compensation...30

3.1.2 Analysis of the firm’s ownership structures; Analysis of the firm’s Executive Equity Ownership...32

3.1.2.2 Firm’s ownership structures...32

3.1.3 Firm’s Executive Equity Ownership...34

<b>IV. CONCLUSION AND PROPOSAL FOR IMPROVING THE QUALITY OF GOVERNANCE SUPERVISION FOR THE COMPANY...41</b>

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SSI Securities Corporation is one of the leading securities companies in Vietnam, specializing in providing financial services including securities brokerage, investment advisory, fund management, and financial market research1. The essay aims to analyze the governance structure of SSI Securities Corporation, focusing on the structure, roles, and responsibilities of the board of directors. It also evaluates the effectiveness of management decisions and company operation policies. Additionally, the essay 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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<b>PART I: OVERVIEW ABOUT CORPORATION</b>

SSI Securities Corporation (SSI-HOSE) was established in December 1999 and is one of the oldest financial institutions operating in the Vietnamese Stock Market (VSM). Over the past 22 years, SSI has grown rapidly and is currently the largest financial institution in the VSM, with its charter capital increasing by more than 2,400 times. With a strong financial foundation, international-standard corporate governance, and a large and professional workforce, SSI provides customers with comprehensive and superior products and services, ensuring maximum benefits for shareholders. Currently, the company has an extensive network of operations in major cities throughout Vietnam such as Hanoi, Ho Chi Minh City, and Hai Phong.

The main business lines of SSI include Securities Services, Online Services, and Asset Management Services. In addition, the company’s capital source business activities include foreign exchange transactions, capital investment through deposit contracts, loan contracts, trust services, repurchase agreements (Repo) of bonds, fixed-rate interest paper trading, and other specially structured transactions. Furthermore, the company is also involved in investment and investment banking services and has a subsidiary called SSI Asset Management Co., Ltd.

Through a long-term development process, with a history dating back to 1999, SSI has become the first Securities Company to achieve a market capitalization of over 1 billion USD. Especially in 2022, SSI successfully issued over 496 million shares to shareholders for 15,000 VND per share, thereby increasing its charter capital to 14,911,301,370,000 VND and maintaining its position as the largest Securities Company in Vietnam.

Having operated for 22 years and contributed significantly to the Vietnamese stock market, SSI has been honored by numerous prestigious organizations within and outside the country, such as the Asia Money Brokers Poll for 10 consecutive years. In 2022, SSI overwhelmingly won 28 out of 29 categories. Notably, SSI continued to lead the category of "Best Individual Customer Broker in Vietnam." Hundreds of awards have affirmed SSI's pioneering position and recognized its relentless efforts to bring the best quality services to customers. They

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simultaneously demonstrate the outstanding reputation of the SSI brand in the market, attesting to the strong potential of the Company in terms of human resources quality, financial resources, and an extensive network of partners nationwide.

SSI’s mission is to connect investment opportunities with financial resources, and this orientation is reflected in all of SSI’s products and services, both now and in the future. In addition, SSI maintains its core values. First is “ready to solve” - listening and focusing on finding the best solution for each specific customer need. Second is “deep expertise” - as a financial industry expert, SSI continues to update and improve its professional skills to meet all customer expectations at SSI. Finally, “creative stamping” encourages and creates every condition for colleagues to have full authority to think creatively in their profession for the benefit of SSI and its customers.

Therefore, SSI deserves the success it has achieved in recent years, and that is why the author

<b>chose SSI to analyze.</b>

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<b>PART II: CORPORATE GOVERNANCE ANALYSIS2.1 Corporate Governance Analysis </b>

<b>2.1.1 Analysis of Factors that Shape the Quality of the Governance System in Vietnam </b>

<b>2.1.1.1 Efficiency of Local Capital Markets</b>

After two years of grappling with the COVID-19 pandemic, the world continues to face numerous new challenges in 2022, including geopolitical conflicts and supply disruptions that have intensified inflationary pressures, forcing nations to swiftly tighten monetary policies. The surge in interest rates, at a pace and scale not seen in over 20 years, by a range of major Central Banks worldwide, has tightened global financial conditions and reversed global economic growth. This trend has also propelled the US dollar (USD) to its highest level in two decades, exacerbating the burden of debt in emerging markets and developing economies. The outlook for the global economic and trade situation in 2022 does not hold many bright prospects, especially in the latter half of the year, as major economic organizations continue to downgrade global economic growth forecasts.

In this context, the Vietnamese economy in 2022, despite not being immune to adverse impacts, demonstrated strong resilience and recorded promising results. The GDP growth for the entire year of 2022 reached 8.02% compared to the same period, marking the fastest growth rate since 1997 and positioning Vietnam as one of the countries with the highest growth rates in the Asian region. The growth momentum was evenly distributed across most sectors, the main areas of the economy, as the economy fully reopened after COVID-19, along with fundamental factors stemming from domestic consumption and FDI inflows. Foreign direct investment (FDI) inflows in 2022 showed robust growth, reaching $22.4 billion, a 13.5% increase compared to the same period, surpassing the pre-COVID-19 average growth rate. Vietnam has benefited directly from the trend of production relocation to diversify the supply chain.

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Figure 1: Quarterly GDP growth statistics

The year 2022 posed significant challenges for monetary policy management, as the Vietnamese economy faced pressure from the trend of rising inflation, interest rates, the US dollar globally, and difficulties in the domestic Securities Market, Real Estate, and Corporate Bond Market. The monetary policy throughout 2022 was flexible with a tightening tendency, aimed at stabilizing the domestic currency market, while still maintaining favorable conditions to support economic growth. The State Bank of Vietnam (SBV) implemented two interest rate hikes in 2022 (with a total increase of 200 basis points) to alleviate pressure on the exchange rate and inflation. Overall interest rates in the market have returned to the pre-COVID-19 level (or even higher in some cases, such as mortgage interest rates). The domestic currency depreciated by only 3.5% against the USD in 2022, a much lower depreciation rate compared to other countries in the region. Credit was estimated to increase by about 14.5%, and the basic system liquidity was ensured.

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Figure 2: Exchange rate fluctuations statistics.

Figure 3: Stock price fluctuations statistics ( 2018 - 2022 ) - ( Source: Vietstock )

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The stock market, in recent years, has experienced significant volatility, especially during the period of the pandemic from 2021 to the present. Stock prices saw a sharp peak from 2021 to early 2022, but experienced a substantial decline in 2022 and early 2023. The year 2022 marked a period of great turbulence and challenges for the Vietnamese Securities Market, with the VN-Index plummeting by 32.78% compared to the end of 2021, recording the sharpest decline since the global financial crisis in 2008. The peak of the VN-Index was 1,536.45 points established in January 2022, while the trough was 873.78 points set in November 2022, signifying a 43% drop from the peak.

In the face of increasing interest rates and tight capital management policies from domestic and international financial institutions, raising capital at a reasonable cost is a difficult problem for the entire economy. Despite this challenge, SSI has successfully raised and maintained stable short-term loan capital. This not only demonstrates SSI’s operational capacity and keen market evaluation ability but also reflects the increasing trust of SSI with credit institutions both domestically and internationally.

<b>2.1.1.2 Extent to which the legal system protects all shareholders </b>

The legal system in Vietnam has undergone significant changes, shifting from an overly protective stance towards majority shareholders to enhancing the protection of minority shareholders. The 2020 Law on Enterprises (LOE) and the 2019 Law on Securities (LOS), along with their accompanying guidelines, have introduced more robust tools to encourage shareholder activities, including those of risk-taking fund investors. They can leverage these tools and new mechanisms to pursue either personal or corporate interests. The objectives of the LOE (2020) and LOS (2019) are to empower shareholders in overseeing the board and balancing the board's authority.

Furthermore, the new Securities Law also promotes transparency in day-to-day management, specifying reporting obligations and disclosures for publicly listed companies, listing organizations, securities firms, fund management companies, the Securities Trading Center, and the Securities Exchange. Overall, companies operating in jurisdictions where the legal system safeguards the rights of minority shareholders are likely to receive higher evaluations in the stock market compared to those operating in countries with lax regulations.

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<b>2.1.1.3 Enforcement of regulations</b>

The legal system in Vietnam is 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. 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.

It is important to note that, according to information from the Ministry of Finance, Vietnam has issued Decree 71/2020/ND-CP regarding Corporate Governance for State-invested companies. This Decree has established a more solid legal basis to strengthen management within companies, ensuring the rights of related parties and creating more favorable conditions for investment and business operations in Vietnam. Overall, the development and improvement of legal regulations regarding corporate governance in Vietnam are creating a stable and attractive business environment, demonstrating the strong commitment of the government and relevant authorities to building a sustainable and developed economy.

Below is a list of regulations and laws referenced in the context of businesses in Vietnam:

<b>-</b> 2020 Law on Enterprises (LOE 2020): This important law governs the establishment, management, reform, dissolution, and related activities of enterprises.

<b>-</b> 2019 Law on Securities (LOS 2019): This law regulates the activities of listed companies, including provisions on information disclosure, listing, trading, and securities investment.

<b>-</b> 2019 Vietnam Corporate Governance Code of Best Practice for Public Companies (CG Code 2019): This code establishes the best principles and standards for corporate governance applicable to joint-stock companies in Vietnam.

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<b>-</b> Decree 155/2020/ND-CP (Decree 155): This is a decree of the Government guiding the Securities Law, with a special chapter focused on corporate governance of listed companies.

<b>-</b> Circular 116/2020/TT-BTC (Circular 116): This is a circular of the Ministry of Finance guiding provisions on corporate governance applicable to listed companies in Decree 155/2020/ND-CP.

<b>-</b> Circular 96/2020/TT-BTC (Circular 96): This is another circular of the Ministry of Finance related to corporate governance.

Having a strong understanding of the regulations in these legal documents will help businesses operate effectively, comply with the law, and build credibility in the business market.

<b>2.1.1.4 Societal and cultural values </b>

Management behavior is believed to be strongly influenced by society and culture, where activities that might be considered acceptable in some societies are deemed inappropriate in others. Not only do cultural values significantly impact the willingness of managers to engage in certain activities and self-serving behavior, but they also influence the relationship between the business and its stakeholders. These values play a crucial role in the development of governance systems, despite their complexity and difficulty to quantify. According to the theory of the renowned social psychologist Geert Hofstede, a culture can be evaluated based on six cultural dimensions.

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Figure 5: Geert Hofstede’s cultural dimension theory

In Vietnamese culture, there is acceptance of a hierarchical order in which everyone has a place without needing further justification. Additionally, Vietnamese society encourages strong relationships and values equality, solidarity, and quality in their working lives, resulting in lower female representation on boards in high-masculinity cultures. Furthermore, companies need to ensure stakeholders that the board of directors adequately addresses their individual concerns and needs. In practice, many Vietnamese consider their coworkers a "second home" and are deeply invested in what happens there, even beyond the pure context of work.

Moreover, in Vietnam, hard work is undertaken when necessary but not for its own sake, and the development of long-term relationships is key to success. Last but not least, Vietnam adheres to long-standing traditions and beliefs, persisting in achieving set goals. Finally, Vietnamese culture is characterized as restrained and pessimistic, as people do not emphasize leisure time much and control the gratification of their desires.

<b>2.2 Board of Directors: Duties and Liabilities 2.2.1 The Operations of the Board </b>

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Figure 6-7: Company overview and organizational structure summary (Source: 2022 Annual Report)

Based on the organizational structure chart of SSI, we can easily see that this is a one-tier board model. It includes the General Meeting of Shareholders, the Board of Directors - Investment Council (BOD), and the Executive Board (EB).

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According to Resolution No. 01/2020/NQ-ĐHĐCĐ, the General Meeting of Shareholders approved a change in the company’s management structure to an operating model with an Audit Committee under the Board of Directors and no longer a Control Committee. Accordingly, the General Meeting of Shareholders dismissed the Control Committee members on June 27, 2020. From this, it can be seen that SSI has officially transformed its management model from a two-tier to a one-two-tier model. This transformation demonstrates SSI’s efforts to modernize its management model, ensuring that its operations are continuous and more effective. This reflects SSI’s role as a leading company in Vietnam.

Regarding the activities of the Board of Directors, in 2022, the company organized meetings and resolutions/decisions of the General Meeting of Shareholders (including written opinions). In 2022, the BOD held 10 meetings and passed 22 resolutions to implement decisions of the General Meeting of Shareholders as well as other matters under the authority of the BOD. The meetings were held online and/or by written opinions. All members attended all 10 meetings. In the past year, the BOD has played a leadership role in directing, guiding, managing, and supervising the company's business operations between two General Meetings of Shareholders (GMS) following GMS resolutions and the company's charter, except for matters under the authority of GMS. The BOD carried out its activities by issuing resolutions and directing the Executive Board to implement them.

In addition, the BOD has made efforts to improve its management capacity, comply with current regulations, and comply with good governance practices recommended by international organizations and regulatory agencies.

The BOD ensures the number of BOD meetings, the number of members summoned to meetings, and the role of each BOD member comply with legal requirements and are effective. The BOD also distinguishes the roles of independent BOD members and executive BOD members to ensure legal benefits for shareholders.

The BOD passes resolutions that are consistent with the company’s vision and business strategy in each stage, ensuring the interests of customers, shareholders, and employees’

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rights; respecting partners, building a strong business community, thereby contributing value to society and gradually fulfilling the company’s mission.

The Board of Supervisors monitors the implementation of resolutions of the General Meeting of Shareholders and the Board of Directors, evaluates the effectiveness of the implementation of the Company’s resolutions; regularly reviews the Company’s policies, and regulations, and timely adjusts them to suit new situations or requirements.

The Board of Directors provides guidance, direction, and regular supervision of the activities of the Executive Board and supporting departments to ensure that the management complies with the company’s policies and regulations.

<b>2.2.2 Board Committees </b>

The Strategy Development Committee, established on October 25, 2019, is responsible for preparing monthly reports on the activities of the Board of Directors, evaluating the effectiveness of the Company’s resolutions, and regularly reviewing the Company’s policies and regulations to adjust them promptly to suit new situations or requirements. The committee is also responsible for developing human resources, developing foreign markets, and managing the brand.

The Audit Committee, established on June 27, 2020, is an independent Board of Directors with the function of independently examining and evaluating various aspects of the company’s operations.

<b>Here are some regulations regarding the company's audit committee:Article 2. Operating principles of the Audit Committee</b>

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1. The Audit Committee is required to directly submit the written report to the Board of Directors and not intervene during task fulfillment to ensure that any legal regulations are adhered to by the Company.

2. The members of the Audit Committee fulfill the assigned tasks under the provisions of the laws and relevant regulations; not involved in activities, that adversely affect occupational prestige.

3. The members of the Audit Committee must not disclose any provided information unless the disclosure is required by the legal requirements.

4. The members of the Audit Committee must be honest, not affected or governed by any persons during the conclusions are released.

<b>Article 3. Rights and obligations of the Audit Committee</b>

The Audit Committee has rights and obligations prescribed in Article 36 of the Company's Charter, concretely:

1. To monitor the honesty of the Company's financial statements and official disclosures on the Company's financial results;

2. To review the Internal Control and Risk Management System;

3. To review the transactions with the related person under the approval authority of the Board of Directors or the General Meeting of Shareholders and put forward the recommendations on transactions to be approved by the Board of Directors or the General Meeting of Shareholders; 4. To supervise the Company's internal audit department and performance of internal audit functions and duties, internal auditing principles under Clauses 2 & 3, Article 9 of the Circular No. 121;

5. To recommend the independent auditor, remuneration, and relevant terms in the Contract signed with the auditor to the Board of Directors for approval before it is submitted to the Annual General Meeting of Shareholders for approval;

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6. To supervise and assess the independence and objectives of the auditor and the efficiency of audits, especially when the non-auditing services of the auditor are used;

7. To monitor to ensure that the Company complies with the provisions of the law, requirements of the regulators, and other internal regulations of the Company;

8. To access to the documents related to the Company's operation situation, discuss with other members of the Board of Directors, the Chief Executive Officer, the Chief Accountant, and other managers to collect information to serve for the operations of the Audit Committee; 9. To have the right to request the approved auditor representative to participate and answer the issues related to the finance and accounting reports at the meetings of the Audit Committee; 10. To use the legal, accounting consultancy services or other external consultancy services as necessary;

11. To set up and submit to the Board of Directors the policies on risk identification and management; propose the risk management solutions during the Company's operation to the Board of Directors;

12. To prepare a written report to submit to the Board of Directors when the Board member, Chief Executive Officer, and other managers are found not to fully perform the responsibilities as prescribed in the Law on Enterprises and the Company's Charter;

13. Annually, the Audit Committee and independent Member of the Board of Directors within the Audit Committee must prepare the operating report as prescribed in Article 38 of the Company's Charter to submit to the General Meeting of Shareholders for approval.

14. To develop the Regulation on the operation of the Audit Committee and submit it to the Board of Directors for approval;

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Figure 8: Key personnel chart of SSI (Source: 2022 Annual Report)

All members of the Board of Directors, Chief Financial Officer, Chief Accountant, and Company Secretary have completed training courses on corporate governance and have been granted certificates by the State Securities Commission as required.

Nguyen Kim Long, who is in charge of company administration and also serves as the company secretary, completed the 3rd Board Member Certification Program (DCP3) organized by the Vietnam Institute of Board Members in August 2019.

In 2022, the Audit Committee received close cooperation and favorable conditions to carry out its monitoring duties from the Board of Directors, CEO, and management staff of the company, through being provided with full documents and information related to the company’s management situation, business activities, and financial situation

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<b>2.3 Board of Directors: Selection, Compensation, and Removal2.3.1 Market for Directors</b>

In the organization of SSI, all members of the board of directors are people with diverse professional knowledge, and half of them have previously held various high-level management positions. For example, Mr. Hironiri Oka previously held many senior positions at Daiwa Corporation and began to take on tasks and responsibilities as the head in 1994. Besides, Mr. Pham Viet Muon, previously, was the Deputy Head of the Government Office and Deputy Head of the Standing Committee for Innovation and Business Development.

From this, it can be seen that the board of directors of SSI are all capable people with experience and qualifications to effectively manage and control the company. This is demonstrated through SSI’s business results in the past year, along with the achievements that the company has achieved

<b>2.3.1.1 Special Expertise:</b>

As we know, every company needs directors with special expertise that suits the functional needs and situations of the company. The board of directors of SSI also includes people with very special expertise. SSI is essentially a financial company, so the team of the company is also particularly strong in this aspect. Directors in strategy, finance, risk management, accounting, auditing, etc. all contribute greatly to the success of the company.

<b>2.3.1.2 Diverse Directors</b>

Not only men but also women occupy a significant number of positions on the board of directors and management in companies. This also contributes to creating diversity, balance, and richness in the company’s management approach.

<b>2.3.2 Director for compensation</b>

In the salary policy for managers and directors, SSI has also realized that attracting and retaining highly qualified experts is very important. And each salary level must correspond to the talent of each director. SSI has also introduced incentive forms such as a “6:2 stock bonus”

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(Owners of 06 shares will receive 02 new shares). This increases the ownership ratio in the company for those who receive bonus shares while reducing the ownership ratio of other shareholders. This process is usually carried out to promote shareholder loyalty or to promote employee performance.

In addition, SSI also organized an ESOP stock issuance program to align the interests of employees and the company. This initiative aims to attract and promote the effective performance of the company's leadership team.

For SSI, the evaluation of the board of directors’ performance is usually based on two main parts. This is also considered the company’s supervisory board. The first is the Strategy and Development Subcommittee, where the Board of Directors has designated a member of the Board of Directors to prepare a monthly report on the activities of the Board of Directors, and the results of monitoring the CEO are sent to members of the Board of Directors following the Company’s Charter. A member is assigned to be in charge of developing human resources, developing foreign markets, and managing brands.

The second is the Audit Committee under the Board of Directors, which was established according to the Annual General Meeting resolution on June 27, 2020. The Board of Directors has appointed members of the Audit Committee, who are independent members of the Board of Directors, with the function of independent monitoring and evaluation of various aspects of the Company’s operations. The activities of the Audit Committee include: Inspect, and supervising the compliance with laws, the Company's charter, and implementation of the Resolutions of GMS, the BOD, and BOM; The Audit Committee and its Independent members of BOD in the Audit Committee have reported on the operations of Audit Committee and the supervision results in 2022 to shareholders.; Supervise the business operation and financial situation of the Company in 2022; Supervise the BOD operations and management of BOM in the business operations; Appraise the separated and consolidated financial statements of the Company.; Assess the effectiveness of the internal governance system through reviewing reports of internal audit, internal control, and risk management departments.

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<b>2.4 Board of Directors: Structure and Consequences 2.4.1 Board Independence</b>

<b>2.4.1.1 Independence of the chairman</b>

Mr. Nguyen Duy Hung is currently the Chairman of the Board of Directors of SSI, and he is also the founder of SSI Securities Corporation. He is also the founder and Chairman of the Board of Directors (BOD) of PAN Group Joint Stock Company (PAN - HOSE) - a leading company in the field of high-quality agriculture and food packaging. He is also the chairman of each annual general meeting of the company and is responsible for the work of each meeting. Along with that, some decisions will be passed, below are examples of decisions in the 2022 annual meeting:

i. Report on business results in 2022, business plan in 2023; ii. Report on the operation of BOD in 2022;

iii. Report on the operation of the Audit Committee and its Independent members of BOD in the Audit Committee in 2022;

iv. Audited financial statements for 2022; v. Profit distribution in 2022;

vi. Remuneration for BOD in 2023;

vii. Selecting an audit firm for the fiscal year 2023;

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