Dear Clients and Partners,
If you are operating a business in Vietnam in 2026, you are likely aware that the regulatory landscape for corporate governance has undergone a profound transformation. With the full implementation of the 2026 Vietnam Corporate Governance Code, the focus has shifted from mere administrative compliance to a sophisticated "Comply or Explain" model.
One of the most critical: yet frequently misunderstood: pillars of this new code is Board Diversity. For many enterprises, particularly foreign-invested legal entities, diversity is no longer just a "nice-to-have" ESG metric; it is a regulatory requirement that impacts your cost of capital, your reputation, and your legal standing.
Through our extensive work in corporate governance counseling, we have identified seven common mistakes that businesses are currently making regarding board diversity. In this article, we will detail these pitfalls and provide actionable solutions to ensure your firm remains not only compliant but also optimized for growth.
1. Treating Diversity as a "Checkbox" Exercise (Tokenism)
The most common mistake we see is "tokenism": appointing a single diverse director (often a woman or a foreign national) simply to meet a perceived quota without integrating them into the board’s decision-making process.
Under the 2026 Code, regulators and investors are looking for substantive participation. If your diverse board members are consistently excluded from key committees (like Audit or Risk Management), it raises a red flag during governance audits.
The Fix: Ensure that diversity is integrated into your Board Charter. Every director should have a clearly defined role and be given equal opportunity to lead committees. Move beyond the numbers and focus on how diverse perspectives are actually influencing your strategic direction.
2. Focusing Exclusively on Gender While Ignoring Skill Diversity
While gender diversity is a major focus of the 2026 guidelines, many boards neglect other critical dimensions of diversity, such as professional background, age, and nationality. A board composed entirely of financial experts: even if they are gender-diverse: lacks the cognitive breadth to navigate today's complex digital and regulatory environment.
The Fix: Implement a Board Skills Matrix. This tool maps out the existing skills of your board (e.g., legal, tech, ESG, finance) and identifies gaps. Use this matrix to drive your next recruitment cycle, ensuring you bring in individuals who offer unique professional insights as well as demographic diversity.
3. Providing "Boilerplate" Explanations for Non-Compliance
Vietnam’s ‘Comply or Explain’ rule offers flexibility, but it is not a "get out of jail free" card. Many companies make the mistake of using vague, repetitive language in their annual reports to explain why their board lacks diversity (e.g., "We are currently seeking suitable candidates").
The State Securities Commission (SSC) and savvy investors will flag these boilerplate explanations as a lack of commitment to transparency.
The Fix: If you cannot meet the diversity recommendations this year, your "Explain" response must be substantive. Include:
- The specific challenges your industry faces in finding diverse talent.
- The alternative measures you are taking to ensure balanced decision-making.
- A clear, time-bound roadmap for when you expect to achieve full compliance.
4. Failing to Separate the Roles of Chairman and CEO
A key tenet of the 2026 Governance Code is the separation of the Chairman of the Board and the Chief Executive Officer (CEO). A lack of separation often leads to a concentration of power that stifles diverse viewpoints. We often see FDI companies where the legal representative holds both titles, which significantly increases governance risk.
The Fix: If your company currently combines these roles, consider appointing a Lead Independent Director. This role can act as a check and balance, ensuring that the board remains an independent oversight body rather than a rubber stamp for management.
5. Neglecting the "One-Third Independent" Requirement
The 2026 guidelines recommend that at least one-third of your board consist of independent directors. Many businesses fail to audit the "independence" of their board members properly. A director who has a significant business relationship with the company or has served too many consecutive terms is no longer independent.
The Fix: Conduct an annual Independence Audit. Review the background and current affiliations of all board members. At BLaw Vietnam, we assist clients in performing these audits to ensure their board structure adheres to the strictest definitions of independence.
6. Overlooking the Link Between Diversity and ESG Disclosures
In 2026, corporate governance is inextricably linked to Environmental and Social (ESG) performance. Many firms treat their board diversity report and their ESG report as two separate documents. This fragmentation prevents you from telling a cohesive story about your company's values and long-term sustainability.
The Fix: Streamline your reporting. Board diversity is a "Social" and "Governance" indicator. Use your board’s diverse expertise to oversee your ESG strategy. For instance, if you have a board member with an environmental background, they should naturally chair your Sustainability Committee. This demonstrates that your board is structured to solve the problems of the future.
7. Ignoring Succession Planning for Diverse Talent
Diversity at the top is unsustainable if the "pipeline" beneath it is homogenous. Many companies focus on the current board but fail to develop diverse leadership within their middle and senior management. When a diverse board member leaves, the company often struggles to find a replacement, leading to a temporary (or permanent) lapse in compliance.
The Fix: Formalize your Succession Planning. Look at your HR strategy through the lens of the 2026 Labor and Governance laws. Are you mentoring diverse high-performers for future board roles? Establishing a formal mentorship program now will save you from a governance crisis three to five years down the line.
Why Good Governance is Your Competitive Advantage
At BLaw Vietnam, we believe that compliance should never be a burden; it should be a strategic advantage. Companies that master the nuances of the 2026 Governance Code enjoy:
- Lower Cost of Debt: Lenders view well-governed firms as lower risk.
- Enhanced Reputation: Transparency serves as a powerful competitive advantage in the Vietnamese market.
- Attraction of Top Talent: High-level executives are drawn to organizations with professional and transparent governance structures.
How BLaw Vietnam Can Help
Navigating the complexities of the 2026 Investment Law and the updated Governance Code requires a partner with deep local expertise and a global perspective. Our team of knowledgeable attorneys is ready to help you:
- Conduct a comprehensive Governance Audit of your current board.
- Draft or update your Board Charter to reflect 2026 standards.
- Provide expert-backed "Explain" narratives for annual reports.
- Advise on the legal implications of Director Liability under the new law.
Whether you are a large FDI enterprise or a growing local firm, we are here to streamline your compliance and optimize your corporate structure.
Contact us today to schedule a consultation and ensure your board is ready for the future.
Sincerely,
The BLaw Vietnam Team