CSR, Business Ethics and Corporate Governance

Issues in Nepal
•Management and status of CSR in Nepal
•The role of Government in promoting CSR in Nepal
•Legal provisions governing CSR in Nepal
•Ethical business practices and issues in Nepal
•Corporate governance system in Nepalese
organizations
•Suggestions for improving existing ethical practices
and corporate governance system in Nepal
Management and status of CSR in Nepal
• CSR is most commonly associated with philanthropy or
charity
• Business in Nepal often finds itself engaged in the
provision of social services that would be seen as
government's responsibility in developed countries, for
example, investment in infrastructure, schools, hospitals
and housing
• Spirit and practice of CSR is often strongly resonant with
traditional communitarian values and religious Hindu
concepts
• Research onto CSR in Nepal is still relatively
underdeveloped and tends to be ad hoc with a heavy
reliance on convenience based case studies or descriptive
accounts
Management and status of CSR in Nepal
• CSR in Nepal is a rich and fascinating areas of
enquiry, which is becoming more important in CSR
theory and practice
Challenges to CSR
• Maintain continuous improvements in safety
performance throughout the organizations
• Building more robust culture
• Achieving significant reductions in resource use
• Reducing waste arising and improving recycling rates
• Integration of environmental considerations into supply
chain management and purchasing decisions
Management and status of CSR in Nepal
Challenges to CSR
•To strengthen the people management framework to
develop a positive and productive working environment
•To achieve greater consistency in the management of
people processes across the business
• To communicate effectively the organization's goals and
directions
• To improve the employee attitude survey ratings
• To achieve greater diversity in workforce
• Build the relationship with business in the community
and with local authorities
• To integrate consideration of environmental and social
issues into purchasing process
Management and status of CSR in Nepal
•There is  a  marked  difference between  the  firms’ 
responsibility towards the government (highest) and 
towards the society (lowest).
•Similarly, Nepalese financial service and manufacturing 
sector firms have above‐average performance in almost 
all aspects of CSR (except society aspect)
•It is generally argued that it is nice to talk or express 
views on  CSR, but when it comes to reality, firms are 
reluctant
•In Nepalese financial service and 
manufacturing sectors context, though the actual CSR eff
orts are not as greener as the 
views are, there is a positive relationship
 Management and status of CSR in Nepal
•Positive views on  strategic and moral dimensions of 
CSR, actual CSR performance of companies is not 
much encouraging, at least in all aspects of CSR
•Government,  pressure  groups and other  stakeholders
are  also  required  to encourage socially responsible
corporate behaviour in order to sustain and increase their 
degree of  positive views and actual practice on CSR

(Chapagin- CSR-Evidence from Nepalese financial service and manufacturing

sectors)
• CSR is not mandatory in Nepal and all the banks that,
have made the disclosure in voluntary basis
 Management and status of CSR in Nepal
• Child and women developments, religious activity,
games and sports activities, blood donations were among
the thrust areas of CSR
(Dhungel & Dhungel- CSR Reporting and Practices in banking sector of Nepal)

• Nepal has long history of cultural and religious

giving practices. The cultural and religious context
influence Nepali corporations usage, understanding and
implementation of philanthropy and CSR
• In Nepal, giving carries a special relationship with
religion, as charity is believed to ensure a positive after
life experience
• As a whole, giving in corporate Nepal is called
Corporate Social Responsibility (CSR)
Management and status of CSR in Nepal
• Of the 15 companies interviewed, only one organization
was unfamiliar with the term CSR
• The most common way of defining CSR was “giving
back to the society.”
• Kathmandu Guest House sees CSR as a two-fold
process that requires both internal and external reflection
and engagement of activities.
•Internally, they have reviewed aspects of their
operations to be more environmentally conscious.
•Externally, they believe they have a duty to engage
and give back to society, so they organize volunteer
days, and work towards women’s empowerment
Management and status of CSR in Nepal
•Standard Chartered Bank believes “as a financial
institution, [their] definition of CSR is slightly different
than what people normally understand. “CSR is suppose to
be part of the business model. It is sustainability, and should
be part of the business model”
• We are not only a profit-oriented organization; we also have
social responsibility (Kaski Finance Limited 2014).
• It not like we are giving all the money to that sector, but we
are segregating a small amount to that part. It just balances
everything – we are earning money, and we are giving back
to society as well. That creates a balance. There is a balance;
there should be a balance (Dwarika’s Hotel 2014)
Management and status of CSR in Nepal
•When a business has the ability to make a profit, it is their
social obligation to give some back to the society
(Buddha Air Nepal 2014)
•CSR should be strategic and streamlined
•The majority of these donations for CSR focused on the
social sector, such as health, education and women’s
empowerment.
•Standard Charter Bank, an international financial institution,
is famous for its in-depth, comprehensive CSR activities.
Being a multi-national bank, there is a bank-wide protocol
that all national branches must adhere to.
• Fishtail Lodge, located in Pokhara, places protion of
profits into a trust fund that supports heart disease health care
for Nepalese
Management and status of CSR in Nepal
•Dwarika’s Hotel’s primary method of CSR is also connected
to its founding idea of collecting traditional pieces of
woodwork from around Kathmandu valley. As a result, they
have outlined their main initiative as the “restoration and
conservation of our culture and architectural heritage,”
• Yeti Airlines has developed their CSR program by
evaluating negative impacts of their businesses and finding a
way to mitigate those aspects (four rupees per ticket for CSR
related activities, plant trees to lower carbon emissions)
•Kathmandu Guest House, within the hotel that mitigates
their environmental such as using LED light bulbs and
recycled paper, and dual flush European style toilets, and
investing in a efficient generator Externally they organize
volunteer days and work towards women’s empowerment.
Management and status of CSR in Nepal
• Nepali corporations interviewed for this study, the key
motivation to engage with CSR primarily comes from an
innate, unspoken moral obligation to give back to
society as a result of cultural and historical influences.
• People expected businesses to behave in ethical ways and
they generally felt that businesses are, the profit was
accepted. Businesses are supposed to make a profit, that was
accepted, but the profit should not be very huge. There are
certain margins. They expect that the businesses are running
within certain margins (Nepal Business Initiative 2014)
• FNCCI provided the context to build trust by referencing
almost two decades of conflict, which disrupted the private
sector and led the public to view the corporations as negative
Management and status of CSR in Nepal
•The definitions, while varying slightly, reveal that CSR is
largely viewed to be the giving back to society
•The type of activities undertaken in the name of CSR
demonstrate corporate Nepal’s interpretation of giving back
to society, although there are different levels of involvement
ranging from pure donations to the integration of CSR into
the mission and policy of the corporation
•“Certain sectors, which are more exposed to foreign
markets, for example those depending on exports or those
depending on tourisms, they are more aware and more
interested in this issue. Whereas other sectors are more
isolated, and more into the local grounds, are less aware of
these issues” (Nepal Business Initiative 2014).
Management and status of CSR in Nepal
•CSR involvement increases
•When there is pressure from the consumer. For sectors
where the customer is aware of CSR, particularly the
tourism industry, this pressure is higher. Kathmandu
Guest House notes that the tourists frequenting their
hotel are “responsible citizens” and that in order to
attract more customers, they have expanded their CSR
program (Kathmandu Guest House 2014)
• Employees were educated
• Additionally, affiliations with other international
institutions are likely to increase knowledge and
involvement in CSR, as is the case of Standard Charter
Bank.
 Management and status of CSR in Nepal
•Although trust in the political economy may be increasing,
corporations are still struggling to find trust and transparency
in the process of giving
( Knoop Taylor: Nepali Corporate Culture of Giving: Investigating Practices of Corporate
Social Responsibility )
CSR Issues in Nepal
• Lack of community participation in CSR
activities
- Lack of knowledge about CSR within local communities
due to lack of efforts in rising awareness about CSR and
this results in lack of participation of communities
- Lack of communication between the company and the
community at the grassroots
• Need to build local capacities
- Need to build capacity of the local non- governmental
organizations as there is serious dearth of trained and
efficient organizations that can contribute to the CSR
activities initiated by companies
CSR Issues in Nepal
•Issues of transparency
-Exists lack of transparency on the part of local
implementing agencies as they do not make
adequate efforts to disclose information on their
programmes, audit issues, impact assessment and
utilization of funds
• Non availability of well organized non-governmental
organizations
- Non availability of well organized non-governmental
organizations in remote and rural areas that can
assess and identify real needs of the community and
work also the companies to ensure successful
implementation of CSR activities
CSR Issues in Nepal
•Visibility factor
- Role of media in highlighting good cases of
successful CSR initiatives is welcomed as to spread
good stories and sensitizes the local population about
various ongoing CSR initiatives of companies
• Narrow perception towards CSR initiative
- Non- governmental organizations and government
agencies usually posses a narrow outlook towards
CSR initiatives of companies , often defining CSR
initiatives more donor driven than local approach
• Non availability of clear CSR guidelines
- No clear cut statutory guidelines on policy directives
in Nepal to give a definitive direction to CSR
initiatives of companies
CSR Issues in Nepal
-Scale of CSR initiative depend upon their business
size and profile
• Lack of consensus on implementing CSR issues
- Lack of consensus among local agencies regarding
CSR projects and this often results in duplication of
activities by corporate houses in the areas of their
intervention
Role of government in promoting CSR in Nepal
• State / Government should always and will be
significant driver of CSR
• As per Wezel study on CSR in Nepal government is
absent in all levels in this filed and there are lack of
clear cut policies in this regard
•CSR concepts involves three actors- government,
business and society aiming at solving societal
problems that affect all three actors
•Government interventions and actions should be
providing a better framework for CSR exercised by
business and civil society
Role of government in promoting CSR in Nepal
• Government as regulatory authority do always possess
a right ensure proper functions of CSR activities
• Government through different regulations can make
companies legally binding in the CSR activities (this
will be further explored in next topic- legal provisions
of CSR in Nepal)
• Government can acts as facilitator that will help in
creating conducive environment for the promotion of
CSR activities
• CSR is not mandatory in Nepal but government in
recent days has become more aware of it and now in
new Industrial Enterprise Act, industries with annual
turnover of Rs 150 million or more will have to
separate 1% of its profit for CSR activities
 Legal provisions governing CSR in Nepal
There is no specific legal provision regarding CSR ;
various legal provisions in respect of corporate
governance has prescribed the concept of CSR in Nepal
1.Constitution of Nepal
Provision of fundamental rights directly or indirectly
related to the corporate social responsibility are right to
environment, health, right to employment, social
security, right to social justice, right against exploitation
2. The Companies Act 2063 (2006)
There is no direct provision regarding CSR, but certain
provisions are related with CSR
Legal provisions governing CSR in Nepal
Article no. 166 of The Companies Act
Establishment of company not distributing profits:
(1)Notwithstanding anything contained elsewhere in
this Act, any company may be incorporated to
develop and promote any profession or occupation or to
protect the collective rights and interests of the persons
engaged in any specific profession or occupation or to
carry on any enterprise for the attainment of any
scientific, academic, social, benevolent or public
utility or welfare objective on the condition of not
distributing dividends
Legal provisions governing CSR in Nepal
Article no. 166 of The Companies Act
Establishment of company not distributing profits:
(2) Any person or trustee of a public trust registered
pursuant to the prevailing law or any other
corporate body incorporated pursuant to the
prevailing law who wishes to register a company
for the attainment or the objective mentioned in
Sub-section(1) may make an application to the
Office
(3) The number of promoters promoting a company
pursuant to sub- section (1) shall be at least five;
and after the incorporation such company, it may
have any number of its members, with a minimum
of five members
Legal provisions governing CSR in Nepal
Article no. 166 of The Companies Act
Establishment of company not distributing profits:
(4) The membership of a company incorporated
pursuant to Sub-section (1) shall not be
transferable in any manner
(5) Except with the prior approval of the Office, a
company incorporated pursuant to Sub-section (1)
shall not add words such "company", "limited"
or "private limited" at the end of its name.
(6) A company registered pursuant to Sub-section (1)
shall obtain approval of the Office to expand its
branch
 Legal provisions governing CSR in Nepal
Article no. 167 of The Companies Act
Special provisions relating to company not distributing profits
(1)There shall not be required share capital to incorporate a
company not distributing profits. Provided, however, that
the company may receive membership fees from its
members and receive any donation, gift pursuant to law
for the accomplishment of its objectives
(2) No member of the company shall be liable for the debts
and liabilities of the company except in the case where
any member accepts such liability in writing the liability of
the company, with specification of the limit of such
liability; his/her liability shall be limited to the extent of
that limit
 Legal provisions governing CSR in Nepal
Article no. 167 of The Companies Act
(3) The company shall not distribute dividend, bonus or
any other amount, from the profits earned by it, to its
members or employees; and the profits earned by the
company shall be used to increase the capital of the
company or for the attainment of its objectives.
(4) The company of the Office shall obtain prior approval
to change objectives
(5) The members of a company incorporated under this
Chapter shall elect the directors from amongst
themselves in such number as fixed in the articles of
association, on the basis of one member one vote
 Legal provisions governing CSR in Nepal
Article no. 167 of The Companies Act
(6) The meeting allowance, salary, facility receivable by
the officers or a company incorporated under this
Chapter and the incorporation and operational
expenses of the company shall not exceed the
amount as specified by the Office in so specifying
expenses, the Office shall have regard to the capital
situation and profits of such company
(7) Office may cancel the registration of the company
committing such violation.
(8) While canceling the registration Office shall appoint a
liquidator and an auditor to complete the
liquidation proceedings
 Legal provisions governing CSR in Nepal
3. Income Tax Act
Prescribes the exemption for the corporate bodies
from paying tax for the conservation or donations of the
social welfare activities
4. Industrial Enterprise Act
Industries with annual turnover of Rs 150 million or
more will have to separate 1% of its profit for CSR
activities
5. Labour Act:
Consists various legal provisions to maintain internal
CSR of the employees it incorporates provisions like
Health and Safety that ensures clean and safe
environments and also incorporate provisions of Welfare
Fund
 Legal provisions governing CSR in Nepal
6. Environment Protection Act
Incorporates provision for conducting Environment
Impact Assessment before establishment of Industries
in order to minimize any harm caused towards the
environment by establishment of the industries
7. Trade Union Act
Settles disputes through collective bargaining
8. Competition Promotion and Market Protection Act
To further make national economy more open, liberal,
market-oriented and competitive by maintaining fair
competition between or among the persons or enterprises
producing or distributing goods
 Legal provisions governing CSR in Nepal
-To enhance national productivity by developing the
business capacity of producers or distributors by
way of competition
- To protect markets against undesirable interference,
to encourage to make the produced goods and services
available to the consumers at a competitive price by
enhancing the quality of goods or services by way of
controlling monopoly and restrictive trade practices,
and to maintain the economic interests and decency of
the general public
9. Food Act
-To make legal provisions to maintain proper
standard
 Legal provisions governing CSR in Nepal
adulteration in foodstuffs or prevent from reducing in,
or extracting, any natural quality or utility from
foodstuffs in order to maintain health and convenience
of the general public
10. Consumer Protection Act
To protect consumers from irregularities concerning
quality quantity and prices of the consumer goods and
services
11. NRB Regulations
Deprived sector lending must of 5% of total and within
that also 2% should directly go to deprived ones and
other lending to microfinance can be considered as
deprived sector lending
Corporate governance system in Nepalese
Organizations
•For development-oriented economies like Nepal, improving
corporate governance can serve a number of important public
policy objectives
• Good corporate governance reduces emerging market
vulnerability to financial crises, reinforces property rights,
reduces transaction costs and the cost of capital, and leads to
capital market development
• Weak corporate governance frameworks, on the other hand,
reduce investor confidence, and can discourage outside
investment
• Studies have also shown that good corporate governance
practices have led to significant increases in economic value
added of firms, higher productivity, and lower risk of systemic
financial failures for countries
Corporate governance system in Nepalese Organizations

•Nepal is passing through a transitional phase of institutional

and governance reform
•Many Nepalese companies have their flag of success flying
high in the sky due to good corporate governance
•And today even the laws has a great part to play in a
successful and growing economy
• Corporate bodies have their aims, values, mottos, ethics and
principles that guide them
•Stakeholders are given more importance as contrasted to
shareholders, they even get chance to attend at general
meetings, make observations and comments on the
performance of the company
Corporate governance system in Nepalese
Organizations
• High concentration of corporate ownership structure and
dominance of family business groups in corporate affairs
have become major constraints in exercising good
corporate governance
• Boards and management under family control and
directors have limited guidance on their duties and power
• Central bank has introduced higher corporate governance
standards for banks and financial companies
• Legal framework contains large and significant gaps and
critical institutions including Securities Exchange Board of
Nepal (SEBON), Company Registrar Office have few
resources and authority
Corporate governance system in Nepalese
Organizations
• Transparency of a business firms has been a matter of
primary concern for promoting corporate governance.
• Information on listed companies is often difficult to
obtain. This reflects both poor compliance with filling
requirements, but also the limitations of the OCR. Certain
information provided to NEPSE is not shared with the
public
• Disclosure is poor especially for non-financial companies
and ownership disclosure is limited
• Standards for auditing and accounting is not standardized
and is being developed
• Basic rules on conflicts in place, but enforcement is
limited
Corporate governance system in Nepalese
Organizations
• There are a number of weaknesses in the corporate
governance framework that limit investor confidence
• Equity is considered by many to be a relatively good
investment in Nepal, and new issues are regularly
oversubscribed. Shareholders are also not as “passive” as
in some other countries
•Shareholders can and do participate in the general
meeting. They have standard powers to approve changes to
company’s articles, and authorize dividends, capital
increases, and mergers as well as appoint the company’s
auditor
Corporate governance system in Nepalese
Organizations
•However, many shareholders attend shareholder meetings
not to participate in fundamental corporate decisions but
instead to receive food money or other gifts from the
company.
•Shareholders spreading their shares over a number of
family members, the amount paid out in kind or cash can
become significant. There is also a cadre of “VIP”
shareholders that demand additional special treatment, such
as dinner the night before the general meeting
• Transparency and Accountability are major explanatory
factors in promoting corporate governance in the banking
sector of Nepal
Corporate governance system in Nepalese
Organizations
• Discipline in the paper takes into account the focus of
firms on their core business.
•Discipline exerts reasonably strong positive influence in
promoting corporate governance in the sample institutions.
•Other explanatory factors like fairness, responsibility,
independence and social awareness have non-significant
effect on the corporate governance
•The classification policy in case of banks and financial
institutions has contributed positively in promoting good
governance.
Ethical business practices and issues in Nepal
• Reforms in the government regulations, increasing
scrutiny by media and mounting stress of different
stakeholders have brought business ethics on strategic
agenda of all sections of society
• Business breaking the laws in Nepal is rampant, tax
evasions and corrupt practices are commonly seen from
individual citizens to businesses of all kinds and scale
• Public in Nepal has developed a cynicism about business
ethics, especially in big business
• Majority of business in Nepal are small business and one
feature of small business operations is that it faces
extensive competitive pressure which could pre-dispose or
entice such businesses to participate in unethical business
Ethical business practices and issues in Nepal
• Nepal lack awareness and understanding of business ethics
and its importance in advancing one`s business prospects
• Nepal culture is collectivistic that put greater emphasis on
Corporate Social Responsibility and culture is immersed in
spirituality and religion is focused
• Nepal is democratic country and business environment is
highly bureaucratic and non-participatory & government act
as gatekeeper rather than an enabler of business transaction
• Common phenomenon in Nepal for business to be
established in cooperation and networking of relatives and
friends & with such relationship business rely on verbal
agreements and mutual trust of relevant parties without
signing any formal contracts
Ethical business practices and issues in Nepal
•Current situation in Nepal is marked with many uncertainties,
arising from political deadlock, corruption, unfriendly and
unhealthy business environment, rigid and unclear policies,
unseen/ hidden problems and lack of rule of law
•Rampant corruption, adulteration, cartels and syndicates and tax
evasion, among others, often make the headline in the press and
top radio and television news
• Unethical practices tend to increase when the economy is in a
downturn and economic opportunities are constrained
• At present, private sector’s reputation is not at its best in Nepal,
but the good thing is the business community is becoming
increasingly aware of the implications of such a perception &
given this scenario, the need to adopt and implement better
business practices and engage the private sector in minimizing
business malpractice becomes of paramount importance
Ethical business practices and issues in Nepal
International conventions relevant to ethical business practices singed or ratified
by GoN, corresponding government policies and related institutions
Issues International Corresponding policy Related institutions
instruments
Consum- United Nations Consumer Protection Act 2054 Ministry of Commerce and Supplies;
er Guidelines for (1997); Essential Commodities Consumer Protection Council; Various
Protection Consumer Act Standard Measurement and consumer forums Nepal; Council of
Protection Weight Act 2025 (1968); Standards; Department of Quality and
Nepal Standards (Certification Metrology
Mark) Act 2037 (1980) ;
Black-marketing and Some
Other Social Offences and
Punishment Act 2032 (1975)

Anti- UN Convention Prevention of Corruption Act CIAA; National Vigilance Centre;

Corrup- Against 2059 (2002) Money Department of Revenue Investigation;
tion Corruption Laundering Prevention Act Department for Crime Investigation;
(2000) 2063 (2008) Public Nepal Investigation Department;
Procurement Act 2063 (2007) Financial Information Unit ;Department
of Money Laundering Investigation
Ethical business practices and issues in Nepal
Issues International instruments Corresponding Related institutions
policy
Free UN’s Set of Principles and Rules on Competition Promotion Ministry of Industry Competition
Competit- Competition (2000) ; WIPO’s Paris and Market Protection Promotion and Market Protection
ion and Convention for the Protection of Act 2063 (2006) ; Board The Commercial Bench of
Market Industrial Property (1979) ; WTO’s Patent, Design and the prescribed court Department
Protection Agreement on Trade Related Aspects Trademark Act 2022 of Industry
of Intellectual Property Rights (1965)
(TRIPS) (1996) South Asian Free
Trade Area (2004)

Tax and Income Tax Act 2002 Ministry of Finance ;

Financial Value Added Tax 2052 Department of Inland Revenue ;
Accounta- (1996) Audit Act 1991 Office of the Auditor General;
bility Chartered Accountants Accounting Standard Board ;
Act 1997 Auditing Standard Board ;
Institute of Chartered
Accountants of Nepal
Environ- Convention on International Trade in Protection of Environment Protection Council
ment Endangered Species of Wild Fauna Environment Act 2053
and Flora (1997) ; Nepal Mines
Act National Parks and
Wildlife Conservation
Act; Nepal Electricity
Ethical business practices and issues in Nepal
Issues International instruments Corresponding Related institutions
policy
Labour ILO’s Declaration on Fundamental Labour Act 1992 Ministry of Industry
Principles and Rights at Work Trade Union Act 1992 Competition Promotion and
(1998); Forced Labour Convention Bonus Act 1974 Market Protection Board
(1930) ; Right to Organise and Foreign Employment The Commercial Bench of the
Collective Bargaining Convention Act 1985 prescribed court Department of
(1949); Equal Remuneration Social Security Act Industry
Convention (1951); Abolition of
Forced Labour Convention (1957)
Discrimination (Employment and
Occupation) Convention (1958) ;
Minimum Wage Fixing Convention
(1970) ; Minimum Age Convention
(1973) ; Tripartite Consultation
(International Labour Standards)
Convention (1976) ; Worst Forms of
Child Labour Convention 1999
Ethical business practices and issues in Nepal
• A number of policies as well as institutions are in place to
cover a wide range of business ethics issues, the enforcement
of these policies is far from being effective due to lack of
coordinated actions. Despite the legal framework, there is
general apathy among businesses that malpractice will persist
given the lack of rule of law, severe corruption and weak
governance
• Recognizing the need for private sector initiative to combat
widespread corruption in the country, FNCCI’s Corporate
Ethics Forum (CEF) initiated an Anti-Corruption project in
2002. The overall objective of the project was to tackle
corruption in Nepal by targeting the supply side of the
transaction–the private sector
Ethical business practices and issues in Nepal
• Output of the FNCCI-led initiative include
- Adoption of a code of conduct in all district Chamber
offices
- Set up of a Complaint Handling Unit (CHU) to deal
with complaints and grievances against business-related
corruption
- Launch of anti-corruption media campaigns
- Training, workshops and seminars on business ethics
and CSR during the project
• Business ethics is often understood as involving scandalous
events such as tax evasion or embezzlement, and businesses fail to
realize the smaller day-today management decisions that add up to
make good business practices, such as maintaining transparent
financial records, discouraging child labour, avoiding situations of
conflict of interest, and providing fair employment opportunities.
Ethical business practices and issues in Nepal
Issues and Challenges of Business Ethics in Nepal
• Private sector’s failure to acknowledge their side of the problem
when it comes to promoting good business practices
• High level of corruption in business transactions
• Lack of proper in-depth understanding among businesses
regarding what is meant by business ethics
• Lack of well-coordinated platforms, such as UN Global
Compact, at the national level initiation to take up the business
ethics agenda
•Those losing the most from unethical practices, mostly SMEs, do

not have the resource or capacity to adopt ethical practices

•Lack of clear articulation on the business case to fight against
malpractice
•Very few companies have a code of conduct
Ethical business practices and issues in Nepal
Issues and Challenges of Business Ethics in Nepal
• Nepali values and cultures
- Nepali society has placed great emphasis on loyalty to the
collective, be it`s one caste, village or family. This drives a
culture of favours, friendship, and clanship of clashes with the
Western concepts of conflict of interests and meritocracy
• Transparency
- Like in other developing countries, transparency in decision
making is limited
• Tax evasion
-Tax evasions continues to be rampant at the personal as well
as business level
• Nepotism
-It is the practice of showing favoritism to relatives and close
friends
Ethical business practices and issues in Nepal
Issues and Challenges of Business Ethics in Nepal
• Consumer Protection
- Lack of code of conduct to address the issue of consumer
protection
- Unhealthy competition on promotion of products and services -
Lack of standard certified testing laboratories to ensure
quality product and service.
•Tax and Financial Accountability
- Discriminatory policies and tax officers’ unethical demands -
Imposition of high tax rate for basic consumable products
- Unscientific and lack of clarity on tax policy and its scope
- Lack of a clear vision
-Long and difficult paperwork and lack of transparency
-Lack of appreciation and recognition for taxpayers who are
transparent and regular on tax compliance
- Rampant corruption in all sectors
Ethical business practices and issues in Nepal
Issues and Challenges of Business Ethics in Nepal
• Labour
- Lack of a well-defined labour management policy;
- Lack of competent skills to manage and address the issues of
human resource in ethical background
- Political interference through labour and trade unions
- High turnover rate, foreign deployment of skilled human
resource
- Dispute among labour and with management
•Environment
-Lack of information on the policy on environment protection
and preservation
-High increase in urbanization in industrial areas, leading to
forced displacement
-Lack of awareness and innovation to introduce the concept of
eco-friendly products and services and bring about new
recycling schemes
Ethical business practices and issues in Nepal
Issues and Challenges of Business Ethics in Nepal
•Anti-corruption
- Deeply-rooted sectoral corruption prevails at all levels
- Obligation to entertain demand for bribes from government
officials during business transactions
-High level of corruption in all administrative process leading to
high cost of doing business resulting in low product standards and
quality
-Lack of impunity and disciplinary actions for unethical demands
and practices.
•Free competition and market protection
-Unhealthy competition driven by various consumer demands,
supply of products from open border and unauthorized channels,
uneven price, etc.
-Lack of a clear concept of policy related to competition and
promotion on product and service
-Lack of effective monitoring of informal markets
Suggestions for improving existing ethical practices and
corporate governance system in Nepal
Suggestions for improving Corporate Governance
• Long run business needs to have corporate culture and value based
corporate culture is good practice for corporate governance
• Disclosure, transparency and accountability are important aspect for
good governance
• Nepal`s judicial system though having performed salutary role for all
these years needs a good reform
• Strengthen Capital Market Institutions
• In conjunction with the new legislation, priority must be given to
strengthening those institutions charged with enforcing it.
• Comprehensive reform is needed for the Office of Company Registrar
(OCR) that includes technical upgrade to modernize systems, filing and
documentation
•Additional resources and authority are also essential for SEBON to
become a serious capital markets regulator
Suggestions for improving existing ethical practices and
corporate governance system in Nepal
Suggestions for improving Corporate Governance
•Strengthen Capital Market Institutions
•This authority should include sole power to approve the prospectus and
license brokers
• SEBON should be capable of taking the lead when working with the
NEPSE, the OCR and ICAN to enforce relevant requirements regarding
insider trading, major and related party transactions, disclosure of
ownership, and financial reporting
•Better Protect Shareholder's Right
• Ensure the AGM is about the governance of the company, not getting
gifts
• Establish transparent procedures for major and related party
transactions - These procedures should include adequate notice,
equitable means of valuation, and direct shareholder approval for the
most significant transactions.
Suggestions for improving existing ethical practices and
corporate governance system in Nepal
Suggestions for improving Corporate Governance
•Enhance Transparency
•Mandate that all listed companies follow national standards for
accounting and auditing
• Ensure that high standards are introduced and implemented-
Regulatory bodies like Nepal Rastra Bank must come up with higher
corporate governance standards
• Improve disclosure of ownership and control- Important steps include
requiring shareholders to disclose significant ownership, and companies
to provide ownership information in the annual report
•Increase the Effectiveness and Objectivity of Boards
• Increase the effectiveness of board- The board has a central role to
play in ensuring transparency and vetting major transactions as part of
its broader mandate to oversee the governance and strategy of the
company
Suggestions for improving existing ethical practices and
corporate governance system in Nepal
Suggestions for improving Corporate Governance
•Increase the Effectiveness and Objectivity of Boards
• Specify the director`s duties of loyalty and care
• Establish the role of the board in major and related party transactions
• The law must also make clear that the board has authority over
major and related party transactions, with directors declaring their
interest and abstaining from voting if conflicted
•Encourage the development of independent directors
• To be effective and capable of objective judgment, boards and
especially audit committees need a minimum number of
independent directors
•To develop independent directors, and ease understanding of their
new duties, current training for board members should be expanded
and augmented
 Suggestions for improving existing ethical practices and
corporate governance system in Nepal
Suggestions for improving Ethical Practices
• FNCCI’s Code of Conduct was adopted by all chambers in
different districts of Nepal. Future actions can be built based
on this initiative while making changes as demanded by the
changed context.
• Although the number of active representatives in the local
UN Global Compact is small, there is an opportunity for
bringing these companies on board as ‘champions’
• The current scenario indicates that businesses lack crucial
information, such as the financial cost of engaging in
corruption and procedure of collection of tax. There is room
for positive action if the business case can be communicated
effectively
 Suggestions for improving existing ethical practices and
corporate governance system in Nepal
Suggestions for improving Ethical Practices
•A handful of multi-national companies (MNCs) and joint
ventures (JVs) operate in Nepal. Their expertise in
implementing good business practices will be an invaluable
resource
• There is willingness in individual companies to formulate
code of code and implement them into business action
• De-motivate the hidden politics showcased under consumer
rights
• Bring government and private business sectors together in a
joint/common forum for proper and effective implementation
for broadening the clarity and scope of tax
 Suggestions for improving existing ethical practices and
corporate governance system in Nepal
Suggestions for improving Ethical Practices
•Create a clear and understandable information platform on all
policies and acts under labour issues and management and
conduct awareness programmes to practice ethical business
approaches while managing labour issues
• Use of information technology (IT)
• This can bring in great transparency in system and can
lower corruption in many levels
•Report breaches
• Duty of every employee to ensure that they speak up
against any breach of law, regulations or code of ethics by
themselves or by any other member of their orgasnization
so that matter can be reviewed, investigated, and the
damage contained
 Suggestions for improving existing ethical practices and
corporate governance system in Nepal
Suggestions for improving Ethical Practices
•Reject bribery and corruption
• Any kind of illegal offer or payment to the government,
third party vendors, regulators, existing or potential
customers- or acceptance of the same from them- must be
subject to prosecution
• Education
• Education should not only ne improved, buts also
adapted in order to prepare students for participation as
responsible and caring members in their communities
• Comply with local laws