CORPORATE SOCIAL RESPONSIBILITY IN VIET NAM A STUDY OF ITS IMPORTANCE FOR VIETNAMESE INVESTORS BY NGUYEN CONG VIET Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business (Accounting) Hons June 2010 Declaration of Originality and Word Count DECLARATION I declare that this graduation project is based on my original work except for quotations and citation which have been duly acknowledged I also declare that it has not been previously or concurrently submitted for any other courses/degrees at HELP University College or other institutions Word Count: 10,125 words Nguyen Cong Viet Date Abstract CORPORATE SOCIAL RESPONSIBILITY IN VIET NAM: A STUDY OF ITS IMPORTANCE FOR VIETNAMESE INVESTORS BY NGUYEN CONG VIET June 2010 Supervisor: Dr Le Van Lien Corporate Social Responsibility is no longer a new term for developing countries It has developed through the long history and nowadays it is expected to implement by any business entities in the world However, the term is not familiar to Vietnamese until the recent years when the economy is more open and there are many critical cases and scandals concerning about Corporate Social Responsibility as the result of the economic boom There are not so many researches on that field; therefore, the understanding of Corporate Social Responsibility in Viet Nam is limited That is the motivation for the researcher to conduct the survey about the importance and perception of CSR among Vietnamese individual investors in FPT Securities Company’s office (FPTS) The objective of the research is to access the understanding of Vietnamese individual investors on the topics of CSR Besides that, the research also wants to define which major factors contributing to the CSR importance by asking respondents’ understanding and opinion on CSR awareness, investment decision and CSR reporting By conducting the research, the research is able to show that the understanding of CSR concepts and its importance is limited The investors have little basic knowledge of CSR; however, the understanding is somehow distorted such as thinking of CSR as regulation compliance only Besides that, the investors in Viet Nam find hard to use CSR as a tool to value firm and it is also difficult for them to make investment decision when CSR issues are mentioned Table of contents Declaration of Originality and Word Count Abstract Table of contents List of Figures and Tables List of Abbreviations CHAPTER 1: INTRODUCTION 10 1.1 Research Background 11 1.2 Problem Statement 12 1.3 Objectives and Sphere of Research 13 1.3.1 Objectives of Research 13 1.3.2 Sphere of Research 14 1.4 Research Methods 14 1.5 Structure of Research 15 CHAPTER 2: LITERATURE REVIEW 16 2.1 Research’s related concepts 17 2.1.1 CSR definition 17 2.1.2 Investment Decision 17 2.1.3 Responsible Investment 18 2.1.4 CSR Reporting 18 2.1.5 Investor Relation 19 2.2 Researches and Studies 19 2.2.1 Business Ethics in Viet Nam – Reality and Solutions 19 2.2.2 CSR in business entities in Viet Nam – Reality and Solutions 20 2.2.3 CSR – The Investors’ Perspective 21 2.2.4 CSR, PR of Foreign-Invested Companies 22 2.3 Researches Summary 24 CHAPTER 3: RESEARCH METHODOLOGY 26 3.1 Research Objectives 27 3.2 Theoretical Framework and Measurement 27 3.2.1 CSR Importance 28 3.2.2 CSR Awareness 28 3.2.3 Investment Decision 29 3.2.4 CSR Reporting 29 3.3 Measurement and Quality Design 29 3.3.1 Section 30 3.3.2 Section 30 3.3.2.1 CSR Awareness 30 3.3.2.2 Investment Decision 31 3.3.2.3 CSR Reporting 32 3.4 Research Method 33 3.4.1 Sampling 34 3.5 Hypothesis Statement 34 3.5.1 Correlation of Independent Variable 35 CHAPTER 4: RESULT ANALYSIS 36 4.1 Collection of Questionnaires 37 4.2 Description of Result 37 4.2.1 Age 37 4.2.2 Gender 38 4.2.3 CSR Awareness 38 4.2.4 Investment Decision 44 4.2.5 CSR Reporting 49 4.3 Result Analysis 51 4.3.1 Hypothesis 52 4.3.2 Hypothesis 53 4.3.3 Hypothesis 54 CHAPTER 5: CONCLUSION AND RECOMENDATION 55 5.1 Conclusion 56 5.2 Recommendation 57 5.3 Limitation of Study 58 5.4 Suggestion for Future Research 59 Reference (Harvard referencing system) 61 APPENDICES 63 List of Figures and Tables Figure 1: Theoretical Framework 28 Table 1: Researches and Studies Summary 25 Table 2: Age 37 Table 3: Gender 38 Table 4: Question - Result and Analysis 39 Table 5: Question - Result and Analysis 41 Table 6: Question - Result and Analysis 42 Table 7: Question - Result and Analysis 43 Table 8: Question - Result and Analysis 45 Table 9: Question - Result and Analysis 46 Table 10: Question - Result and Analysis 47 Table 11: Question - Result and Analysis 49 Table 12: Question - Result and Analysis 50 Table 13: Question 10 - Result and Analysis 51 Table 14: Hypothesis 52 Table 15: Hypothesis 53 Table 16: Hypothesis 54 List of Abbreviations FPTS FPT Securities Company CSR Corporate Social Responsibility RI Responsible Investment IR Investor Relations WTO World Trade Organization VCCI Viet Nam Chamber of Commerce and Industry NIRI National Investor Relations Institute PR Public Relations CHAPTER 1: INTRODUCTION 1.1 Research Background 1.2 Problem Statement 1.3 Objectives and Sphere of Research 1.3.1 Objectives of Research 1.3.2 Sphere of Research 1.4 Research Methods 1.5 Structure of Research 10 Sample Variance 1.385395 Kurtosis -0.5046 Skewness -0.4847 Range Minimum Maximum Sum 187 Count 54 Table 12: Question - Result and Analysis In question 9, respondents were asked about the understanding of the term of “CSR reporting” Most of the respondents answer this question by choosing “strongly agree” or “agree” accounted for 53.7% of the sample size Question 10 Frequency Percent Strongly Agree 13 24.07% Agree 18 33.33% Disagree 16 29.63% Disagree 9.26% Strongly Disagree 3.70% Neither Agree Nor Total 54 100.00% Data Analysis 50 Mean 3.648148 Standard Error 0.14517 Median Mode Standard Deviation 1.066778 Sample Variance 1.138015 Kurtosis -0.21193 Skewness -0.50004 Range Minimum Maximum Sum Count 197 54 Table 13: Question 10 - Result and Analysis The last question was used to inspect the importance of CSR reporting for the respondents to make investment decision Most of the respondents choose “strongly agree” or “agree” which can show the need of CSR reporting for the respondents (57.4%) 4.3 Result Analysis The average means imply the relationship between independent variables and dependent variable The result will give a conclusion about the determined factors for CSR importance and perception of individual investors 51 4.3.1 Hypothesis The first hypothesis is used to inspect the relationship between CSR importance and CSR awareness Using five points Liker Scale method, is the average point to determine the relationship between variables This is considered as no correlation between two variables if the value of mean is less than Mean Standard Deviation Question 4.296296 0.983441 Question 3.166667 1.29949 Question 3.333333 1.081578 Question 2.777778 1.207940 Average Mean 3.393519 Table 14: Hypothesis The average mean for those questions under CSR awareness section has value which is greater than Therefore, the null hypothesis of there is no relationship between CSR importance and CSR awareness is rejected and the alternative hypothesis is accepted Looking at the question and results, we can easily recognize that even though most of the investors are aware of the term “corporate social responsibility”; however, the number of respondents believes that they full understand the term is less The implication behind these numbers may be the investors have heard or read about the term in media as recent media coverage on CSR issues However, they have not taken any formal courses, seminars or read books on CSR The third question gives us the more detailed limitation on the awareness and understanding of CSR concept With the mean of 3.33 and the highest percentage of 52 respondents who “neither agree nor disagree”, we can see that there is confusion among investors about the issue Many investors not differentiate regulation compliance and CSR activities They may believe that following the regulation made by the government is good enough The last question is about a specific real case In that case, the company’s deputy general director states to the press that his company has to discharge directly waste water into river to save cost With the mean of 2.7778, the number of respondents who think that the firm should that way in order to survive without any ethical conducts 4.3.2 Hypothesis Mean Standard Deviation Question 1.981481 1.036881 Question 3.925926 1.130234 Question 2.777778 1.369019 Question 2.888889 1.253925 Average Mean 2.893519 Table 15: Hypothesis We can easily see that the average mean for this section is less than (2.893519); therefore, the null hypothesis is accepted However, it does not simply mean that there is no relationship between CSR importance and investment decision That only shows the limited concerns about CSR of individual investors when they make investment decision Responsible investment or RI in short is quite a new terminology Therefore, it is easy to have the low mean for the 5th question The next two questions were used to 53 access the importance of CSR for investors to make investment decision While investors usually use CSR information to understand the potential viability of a firm, they find it hard to use that type of information in valuing firm We can see that using financial ratio is easier for investors to value a firm Question was asked for a specific situation in which the investors should make a decision They find it hard to choose to invest or not into a wrong-doing firm which generates a lot of profit The investors seem not decisive in that situation where financial interests make them confused 4.3.3 Hypothesis Mean Standard Deviation Question 3.462963 1.177028 Question 10 3.648148 1.066778 Average Mean 3.555556 Table 16: Hypothesis The average mean for those questions under CSR reporting section has value which is greater than Therefore, the null hypothesis of there is no relationship between CSR importance and CSR reporting is rejected and the alternative hypothesis is accepted With the two questions concerning about the understanding and desire to have CSR reports of investors The researcher recognizes that the investors are quite familiar with the CSR reporting term and a large number of them want to have a CSR reports With the CSR reports, the investors may find it easier and safer for investment decision It also can help the firm to build up its reputation and image which will be financial benefits for investors on long-term basis 54 CHAPTER 5: CONCLUSION AND RECOMENDATION 5.1 Conclusion 5.2 Recommendation 5.3 Limitation of Study 5.4 Suggestion for Future Research 55 5.1 Conclusion In this study, the researcher focuses on the CSR importance and the factors which contribute to the CSR importance and understanding by the conduct of a research among Vietnamese individual investors in FPTS office, Ha Noi, Viet Nam After reviewing various sources of literature from different countries and within Viet Nam; the researcher has come up with the three factors which have been chosen for this study as follows: - CSR Awareness - Investment Decision - CSR Reporting The result of the research has shown that, not all three factors are affecting the CSR importance for the individual investors CSR awareness and reporting are the two factors at which the investors care about However, the investment decision is not really the thing Vietnamese individual investor care much when they think of CSR CSR seems to be quite irrelevant for investors to make investment decision From the results, we can also have the more detailed following implications Firstly, the investors are aware of the CSR related terms and concepts except for the “responsible investment” which is quite new concept However, the degree of understanding of investors on those terms is quite limited Secondly, the investors are sometimes confused about the CSR and regulation Many of them think that CSR activities and objectives are limited to regulation compliance only Thirdly, investors not use CSR information for valuing firm and they find hard to implement investment decision based on those information However, they know that CSR 56 implementation and activities are good for firm, themselves and the society as the whole on the long-term basis Last but not least, the investors are confused when they have to face with real situation in which they have to make hard decision and/or incur financial loss This study has concluded that only two out of three independent variables which are CSR awareness and CSR reporting have relationships and affect the dependent variable CSR importance However, there are differences in set level among them to CSR importance CSR importance seems not to be the base for investors to make financing decisions 5.2 Recommendation After the findings about CSR in Viet Nam reveal some positive signals, the awareness of Vietnamese intellectual and investors about CSR still has some seriously shortcomings The shortcomings not only harm investors but also cause a bad image for organization and society as the whole which will affect long-term benefits of investors We can see that the understanding of CSR related concepts and terms are limited; therefore, there is a need to raise the awareness and perception of CSR related issues It is necessary to supplement and complete the legal frame of Viet Nam to create firm legal foundation for CSR activities This is good measure because law is the most obvious frame for CSR In Viet Nam now it is necessary to complete the related Acts such as Investment Act, Labour Act, Enterprise Act, and Environment Act and so on An important reason for weakness of CSR starts from the incompleteness in Viet Nam’s laws Complete and rational regulations will prevent firms from conducting the wrong things by exploiting the law slot 57 It is also needed to enhance awareness of investors and society as the whole of CSR Awareness and understanding of CSR will help the inve1stors have better understanding of firm and use it as a good measure in valuing firms Moreover, not only investors or businessmen but also the whole society should be aware of CSR To so, it is required to have various information channels Firstly, media coverage should be involved to spread the knowledge on the topic of CSR to the public in mass manner Secondly, state bodies like Ministry of Industry and Trade, VCCI, Department of Planning and Investing in the provinces should participate to popularize the knowledge Universities and colleges will be the good channel to educate and express information to students, post-graduates and especially MBA students who are doing the jobs as managers The firm itself should be able to provide better CSR information to the investors There is a need to raise the investor relation of public firm which will be beneficial for not only the investors but also create the professional and good image for firm Providing investors’ with such information does help firm to better communicate with its shareholders Having that, the firm will be more attractive for investors as they are able to find information about the firm easily and accurately Better understanding of firm will enhance trust of investors in investing in that firm 5.3 Limitation of Study There are some limitations which make the research not sufficient, accurate and wide-scale enough: The first limitation is that the research is conducted with Vietnamese individual investors only The limited objects could lead to the narrow and limited 58 understanding of the population There are some other types of investors such as institutional and foreign ones The second limitation is the small sample size used in the research With the large number of investors coming in and out of the office everyday, such small sample size may not represent sufficiently the population Moreover, the research does not pay attention to characteristics of investors such as gender and age As conducting research in the office, there are not many young investors there Therefore, the mostly old sample size may not be good for understanding the whole population as there may be difference in understanding and perception due to age Gender also plays an important role in any research; however, due to limitation in time and budget, the research find hard to expand the research into other aspects Last but not least, including only three factors including CSR awareness, investment decision and CSR reporting may be not enough for understanding the CSR importance and the perception of investors 5.4 Suggestion for Future Research Due to the various limitation of the research, there will be some suggestions for the future researches on the similar or related topics The first suggestion is that the future researches may pay attention to or include other objects of research besides individual investors to have an overall picture of the topic Secondly, the future research should have larger size of sample which would give a more accurate result The sphere of research should be bigger which can be conducted in Hanoi or in the North of Vietnam Other characteristics of the objects could be used for further 59 understanding of different objects’ perception and valuation Furthermore, other contributing factors may be included for further understanding of the topic 60 Reference (Harvard referencing system) Economist Intelligence Unit (2005), the importance of corporate responsibility London: Economist Intelligence Unit Ho Thien Nga (2008), CSR, PR of Foreign-Invested Companies, Da Nang University publication Invest in Vietnam (2008), Dong Nai: Foreign-invested firm killing Thi Vai River, available at http://investinvietnam.vn/Default.aspx?ctl=CD&tID=2&pID=332&aID=570 [accessed May, 2010] Kevin Wilhelm (2009), Return on Sustainability, Dog Ear Publishing, 2009, pp 157 – 159 Louche C Tagger J (2005), socially responsible investment - now and looking forward, Public Service Review, (9): 20 -22 Louche C (2009), Corporate Social responsibility: The investor's perspective, in Idowu, S.O & Filho, W., Professional’s Perspectives of Corporate Social Responsibility, 211 -232 Marcus, B.W and S.L Wallace (1997), New Dimensions in Investor Relations: Competing for Capital in the 21st Century, John Wiley & Sons, New York Nguyen Hoang Anh (2008), CSR in business entities in Viet Nam – Reality and Solutions, Foreign Trade University, Ha Noi NIRI (2001), NIRI Mission and Goals, available at http://www.niri.org/about/index.cfm [accessed 19 May, 2010] Richard Butler (1993), Strategic investment decisions: theory, practice, and process, Taylor & Francis publisher, page Saigon Businessman Newspaper (2009), CSR Award 2009, available at http://doanhnhansaigon.vn/online/tin-tuc/xa-hoi/2009/07/1035471/giai-thuong-trachnhiem-xa-hoi-doanh-nghiep-nam-2009-csr-award-2009/ [accessed 19 April, 2010] Securities Investment Newspaper (2008), CSR – still an interesting matter, issued January, 2008 ThanhNien News (2010), Polluter blames crisis for untreated wastewater release, available at http://www.thanhniennews.com/2010/Pages/20100419151214.aspx [accessed May, 2010] Tran Ngoc Chau (2009), CSR in business entities in Viet Nam – Reality and Solutions, Ha Noi University of Commerce publication UN (2008), Joint statement on melamine milk contamination, available at http://www.un.org.vn/index.php?Itemid=1&id=671&lang=vn&option=com_content &task=view [accessed 30 April, 2010] 61 Vietnamnet English (2007), Soya sauce stirs worry and discontentment among public, available at http://english.vietnamnet.vn/reports/2007/05/699774/ [accessed May, 2010] WBCSD (1998), CSR: Meeting changing expectations, pg.3, available at http://www.wbcsd.ch/includes/getTarget.asp?type=d&id=ODgwMw [accessed May, 2010] WTO website (2006), General Council approves Viet Nam’s membership, available at http://www.wto.org/english/news_e/pres06_e/pr455_e.htm [accessed 17 April, 2010] 62 APPENDICES Appendix A: Questionnaire Sample The Survey on Importance of CSR in FPTS office, Ha Noi, Viet Nam Please choose the most appropriate answer: Age: Gender: CSR awareness: Question 1: I am aware of the term “corporate social responsibility” a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree Question 2: I fully understand the term “corporate social responsibility” a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree Question 3: Corporate social responsibility is NOT only limited to regulation compliance a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree Question 4: To overcome the financial crisis in the recent year, a company said that it has to discharge untreated waste water to the environment to cut the refining cost This action is NOT appropriate a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree Investment decision: Question 5: I fully understand the term “responsible investment” a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree Question 6: I use CSR to access potential viability of firm a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree 63 Question 7: I use CSR related information in valuing firm a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree Question 8: I will NOT invest in a wrong-doing firm even though the firm is making high profit a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree CSR reporting: Question 9: I fully understand the term “CSR reporting” a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree Question 10: I will be more likely to invest in a firm which issues CSR reports a Strongly Agree d Disagree b Agree c Neither Agree nor Disagree e Strongly Disagree 64 ... Date Abstract CORPORATE SOCIAL RESPONSIBILITY IN VIET NAM: A STUDY OF ITS IMPORTANCE FOR VIETNAMESE INVESTORS BY NGUYEN CONG VIET June 2010 Supervisor: Dr Le Van Lien Corporate Social Responsibility. .. 12 contaminated milk in Vietnam, people are scared of using that product Recently, a Taiwanese-owned company in Quang Minh industrial zone near Ha Noi has been found discharging waste water directly... understanding - compliance only and implementation in Viet Nam Tran - Ngoc Chau Viet Nam CSR context - (2009) The join of Viet Nam to WTO and CSR requirements Viet Nam The join of Viet Nam to WTO is major