TRANSPARENCY AND DISCLOSURE

IN
CORPORATE GOVERNANCE

By :
Bijaya Paudel
Gunjan Shahi
Romana Khatiwada
Sumin Ratna Kansakar
Sushil Shrestha
 Introduction
Transparency is a critical component of corporate governance which ensures
that all of a company's actions can be checked at any given time by an
insider/outside observer.

Its processes and transactions verifiable, so if a question does come up about a

step, the company can provide a clear answer.

Transparency promotes accountability and provides information to the agencies

that an organization has relation with such as Government , BOD, Stakeholders,
General Public .(Disclosure of financial and non financial information's)

Transparency and disclosure (T&D) are essential elements of a robust corporate

governance framework as they provide the base for informed decision making by
shareholders, stakeholders and potential investors in relation to capital allocation,
corporate transactions and financial performance monitoring.
 Transparency and Disclosure
 Organizations should clarify and make publicly known the roles and
responsibilities of board and management to provide shareholders with a
level of accountability.

 It should ensure that disclosure needs to be made on all material matters

regarding the cooperation, including the financial situation, performance,
ownership, and governance of the company both timely and accurately.

 Disclosure of material matters concerning the organization should be

timely and balanced to ensure that all investors have access to clear,
factual information.

 For example; an annual audit should be conducted by an independent,

competent and qualified, auditor in order to provide an external and
objective assurance to the board and shareholders and should be
published .
 Importance
Transparency and disclosure is a necessity in today’s business world. It benefits
everyone and helps set goals that all can understand and contribute to. Here are
some reasons why transparency from the top down is so important:

 Being transparent in bad times can strengthen an organization , various

agencies can trust the organization for being honest.

 Transparency and disclosure Increases Trust and Builds good Relationships

among various agencies .

 Transparency fosters a healthier work culture.

 Transparency and disclosure brings people together and helps a team find better,
smarter solutions. It also lets the team mix and match certain assignments based on
individual strengths and weaknesses.
 OECD Disclosure Principles
Annual, interim , and material events disclosure of :
a. Financial and operating results
b. Company objectives
c. Major share ownership and voting rights
d. Remuneration policy
e. Related Party Transactions
f. Foreseeable risk factors
g. Issues regarding employees/stakeholders
h. Government structure and policies
 BAFIA ACT 2017
 Provisions on Transparency:

 (1) A bank or financial institution or a branch of a foreign bank or

financial institution shall have to publish a periodic report on its
financial position and status of risks in every three months for
transparency of the transactions it has carried out.

 (2) The minimum matters to be included in the report as referred to in

Subsection (1) shall be as prescribed by the Rastra Bank.

 The governance of the bank should be adequately transparent to its

shareholders, depositors, other relevant stakeholders and market
participants.
 Transparency and disclosure as an
instrument for corporate governances:
 In the context of Nepal the Nepalese banking industry, in recent years has
practiced to disclose the material matters including regulatory requirements in
line with there commendations of the Basel Committee.

 Commercial banks in Nepal, are now required to disclose profitability ratios like
return on assets, earning per share which are important ratios to judge the
performance and strengthening corporate governance of Bank.

 Transparency and disclosure is essential tool to make all aware and the systems
actually effective and more efficient by enabling information published and
available to all.

 Without transparency, it is little impossible to ensure good corporate governance

in practice actually. So to make efficient and effective performances and practice
of corporate governance, an organization should make information available.
 Role of Agencies in
Transparency and Disclosure
 Role of Government : Ensures the market is fair and transparent (NRB policy,
BAFIA ACT)
 Role of Board of Directors :
i. Monitoring and Planning.
ii. Review, understand and discuss the company's goals
iii. To inspire trust from investors, it's necessary for board directors to be able
articulate their plans for the future so that investors have a clear picture of the
long-term outlook.

 Role of Shareholders :Shareholders may reach out to the members of the

community who don’t necessarily hold an interest in the company but who can
nonetheless benefit from its goods or services. Reaching out to the members of the
community encourages lines of communication that promote company
transparency.
 Current Issues on
Transparency and Disclosure

 Corruption
 Institutionalized Problem
 Socio-economic and political disparities
 Ethnic disharmony
 Weaker state capacity
Disclosure system and transparency level of Nepalese
financial institutions is not in well-built condition.
 The top-level, management is reluctant to disclose many
friendly information, if disclose, that reduces the gap between
management and the other stakeholders.
 Suggestions for policy implications :
BAFIA needs to be amended to address the policy urgency to transform
institutional structure, design and services with respect to the spirit of
federal structural system under changing national scenario.

Policy makers need to revise regulation for promoting social awareness

through more mandated public disclosure of information.

 Top-management need to develop more responsive work-conditions and

provisions to promote transparency and accountability in the organizations.

Companies should create a range of avenues (both online and offline) for
citizens to get access to their information by making it visible and
retrievable.
 Conclusion :
Thus, in a nutshell, in order to assure good governance in a country with
weak state capacity like Nepal, it needs a strong political will to make social
political and economic reforms.

Corporate governance has been proving a very efficient and effective system
for our economy and to save the interest of shareholders but some more
efficient monitoring and transparent internal audit system, efficient board
and management can lead it to effective corporate governance through
transparency and accountability in Nepalese corporate sectors.

 Focus on corporate governance should be broaden to encourage emerging

market companies to bolster strategic management of sustainability issues
and enhance public disclosure on sustainability performance.
Thank You !!