WHY IS INTELLECTUAL CAPITAL “FROZEN” BY THE LACK OF A REWARD MECHANISM, CREATING A TRAP OF AMBIGUOUS COMPENSATION, AND WHAT LESSONS DOES THIS OFFER FOR FAIR STARTUP REMUNERATION?

1. SUMMARY OF THE REAL-LIFE SITUATION

Mr. M and Mr. K are co-founders and have been close neighbors for many years in the [LOCAL] residential area. In 2024, they pooled their capital to establish TechReward [LOCAL] Digital Solutions Joint Stock Company, a company specializing in logistics automation solutions.

Mr. M serves as Chief Executive Officer (CEO), overseeing human resources, finance, and cash disbursement. Mr. K serves as Technical Director, responsible for the company’s technology infrastructure. Because of their close neighborhood relationship, Mr. K entrusted Mr. M with full authority to develop the company’s internal remuneration and incentive policies.

In early 2026, the R&D department successfully developed a smart warehouse-sorting algorithm that reduced customers’ operating costs by 40%. Mr. K implemented this innovation in practice, enabling TechReward [LOCAL] to prepare to finalize a major commercial contract worth VND 2 billion.

However, Mr. M’s careless and authoritarian approach to day-to-day administrative management resulted in the complete absence of a formal policy for material and non-material rewards for employee innovations. Believing that employees were already adequately compensated through their salaries and therefore simply had to perform their daily duties, Mr. M ignored proposals for fair rewards.

Deeply dissatisfied because their contributions were not recognized, the engineering team began engaging in collective work slowdowns on a recurring basis. They refused to hand over the original technical documentation, causing the commercial project to be urgently frozen and resulting in severe cash-flow shortages.

The company was pushed into a state of paralysis. Mr. K became extremely angry and demanded that Mr. M personally compensate for all economic losses using his own assets.

Their long-standing neighborly relationship immediately collapsed. The two families engaged in heated arguments and exchanged serious insults in the neighborhood. They even threw dirty substances into each other’s homes, causing a disturbance to public order and requiring local police intervention.

2. LEGAL PERSPECTIVE – “A STRONG SHIELD”

From the perspectives of civil law, labor law, and intellectual property law, failure to establish a clear remuneration and reward mechanism for the authors of innovations may constitute a breach of the management obligations of the company’s executive officers.

Obligation to Pay Remuneration and Rewards to the Author of a Technical Solution

Under Article 135 of the Law on Intellectual Property, as cited in this case, an organization that owns a patent, utility solution, or technological design is generally required to pay remuneration to the creator, unless otherwise agreed in writing by the parties.

Mr. M’s unilateral abuse of his managerial authority, as referred to under Article 162 of the 2020 Law on Enterprises, and his intentional delay in establishing an innovation reward policy may be regarded as a failure in corporate administrative governance.

Such a failure to establish appropriate remuneration safeguards may weaken the company’s internal protection mechanisms and create potential disputes concerning intellectual property and compensation, including under Article 584 of the 2015 Civil Code.

Civil Liability of the Executive Officer

Under Article 165 of the 2020 Law on Enterprises, managers are required to perform their duties honestly, prudently, and in the best interests of the company.

Mr. M’s inadequate management, which allegedly contributed to the freezing of cash flow and economic losses, may therefore raise questions concerning managerial fault and liability.

Under Article 585 of the 2015 Civil Code, compensation for damage must be determined on the basis of the applicable legal requirements, including the actual damage suffered and the causal relationship between the wrongful conduct and the damage.

Accordingly, Mr. M’s potential personal liability should be assessed based on the specific circumstances, the existence of fault, the actual losses suffered, and the applicable legal framework.

3. PSYCHOLOGICAL, EDUCATIONAL AND MANAGEMENT PERSPECTIVES – “THE HUMAN KEY”

Psychological and Educational Perspective

Financial Greed by Management Can Destroy Internal Motivation

Mr. M was driven by a desire to minimize the company’s expenses by relying on employees’ existing salaries rather than establishing meaningful incentives.

This short-term cost-saving mentality made him insensitive to employees’ need for recognition, respect, and appropriate compensation for their contributions.

When the crisis occurred, Mr. K became increasingly anxious and feared losing the business they had built together. This triggered intense distrust and hostility, ultimately destroying their long-standing relationship as neighbors.

The Lack of Education in Fair Talent Compensation

Many business managers lack sufficient awareness of administrative compliance and intellectual property principles.

They may mistakenly believe that human-resource management simply means paying basic salaries on a regular basis, without recognizing that specialized intellectual contributions require appropriate mechanisms for recognition and compensation.

This reflects a fundamental confusion between rigid administrative management and the organization’s responsibility to build a fair and sustainable working environment.

Management Perspective

A Critical Failure in R&D Employee Retention and Innovation Motivation

Innovation Motivation Failure occurred when Mr. M placed the company’s survival at risk by relying on the engineers’ willingness to continue working despite the absence of a transparent reward mechanism.

Managing a business through ambiguous compensation practices can become a serious organizational risk.

The absence of an Incentives Audit and a structured reward-fund planning process weakened the company’s ability to prevent employee disengagement and protect its critical technical resources.

Gaps in the Innovation Reward Policy Control Process

TechReward [LOCAL] had no clear process for establishing and implementing its employee incentive policies.

A properly governed enterprise should establish clear procedures under which every newly developed technical innovation must be accompanied by an independent written remuneration agreement, appropriate documentation for the allocation and reconciliation of the reward fund by the finance department, and formal approval by the Board of Directors before implementation.

These procedures help ensure transparency, accountability, and effective internal control.

4. COMPREHENSIVE SOLUTIONS PROPOSED BY EXPERT NGUYỄN HỮU LONG

Step 1: Reconcile the Neighborhood Dispute and Stabilize the Internal Work Slowdown – Short Term

Urgent Neighborhood Mediation

Mr. M and Mr. K should immediately stop throwing dirty substances at each other’s homes in order to prevent further escalation and potential legal consequences.

Mr. M should remain calm, set aside his personal ego, and proactively invite the local neighborhood representative to mediate a private meeting.

The objective is to establish a written record of the mediation, ensure the safety of both families, and resolve the personal conflict before addressing the underlying economic dispute.

Establish an Emergency Reward Mechanism and Conduct a Human-Centered Dialogue

Mr. M should immediately coordinate with Mr. K to organize regular dialogue sessions with the R&D department.

He should acknowledge the serious shortcomings in the company’s internal administrative and remuneration processes.

An appropriate portion of innovation rewards could be advanced to the relevant contributors, subject to proper legal and financial procedures, in order to ease tensions and encourage the engineering team to resume cooperation and hand over the original technical documentation necessary to rescue the VND 2 billion commercial contract.

Step 2: Restructure Financial Governance and Internal Compensation – Medium Term

Establish Written Commitments Regarding Financial Responsibility

To address the budget deficit caused by the interruption of the project and ease Mr. K’s concerns, the two founders should establish a written agreement based on the applicable provisions of the 2015 Civil Code.

Where legally appropriate and voluntarily agreed, Mr. M may undertake financial measures to compensate the company, such as contributing personal assets or adjusting future dividend entitlements, subject to the company’s corporate and legal framework.

The objective is to restore trust and stabilize the company’s financial position.

Establish an Innovation Reward Policy and Dual-Approval Mechanism

The company should immediately develop and implement a Corporate Innovation Reward Policy together with an intellectual property management and innovation remuneration procedure.

The policy should clearly establish that the CEO may not unilaterally use an employee’s innovation based solely on an informal verbal promise.

The approval and disbursement of innovation rewards should be supported by appropriate documentation from the accounting and legal departments and subject to a dual-approval mechanism involving the two founders or other authorized corporate bodies.

This would strengthen internal controls and reduce the risk of unilateral decision-making.

Step 3: Long-Term Lesson – Separate Personal Relationships from Corporate Assets

Fair Compensation Is a Long-Term Investment in Financial Protection

The fundamental lesson for startup managers is clear:

“If a startup’s intellectual capital is not properly governed through transparent and fair reward mechanisms, dissatisfaction among talented employees can ultimately undermine the entire business.”

Clear and disciplined human-resource and financial governance, combined with compliance with intellectual property law from the outset, should not be viewed merely as additional costs.

On the contrary, they serve as essential safeguards for protecting personal assets, corporate cash flow, intellectual capital, and long-term business relationships in the face of commercial challenges.

EXPERT PERSPECTIVE

This article was developed based on the professional consultation and expert input of MSc. Nguyễn Hữu Long – Leadership, Legal, Psychology & Education Expert.

Through an integrated multidisciplinary approach, we aim not only to provide a strong legal framework but also to offer comprehensive solutions for risk management and psychological understanding, contributing to sustainable development within the community.

If you or your organization are facing similar difficulties relating to legal, educational, management, or other matters, please contact us through our hotline or submit your questions via the website tuvanphapluattamlygiaoduc.vn or call 0898.627.762 for timely assistance