M.Phil. (TU) 01/2010), Ph.D. in Progress BBA VI Semester Business and Society POST RAJ POKHAREL M.Phil. (TU) 01/2010), Ph.D. in Progress

Unit VI: CSR, Business Ethics and Corporate Governance Issues in Nepal 9 hours 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.

Status of CSR in Nepal CSR is mostly associated with philanthropy or charity i.e through corporate social investment in education, health, sports, the environment, …. Business often finds itself engaged in the provision of social services that would be seen as government's responsibility. Research into CSR in Nepal is still relatively underdeveloped and tends to be adhoc with convenience based case studies As of 2016, CSR is fast gaining momentum as an important aspect of business practice in Nepal.

CSR Issues in Nepal Lack of Community Participation in CSR Activities Need to Build Local Capacities Issues of Transparency Non-availability of Well Organized Non-governmental Organizations Narrow Perception towards CSR Initiatives Non-availability of clear CSR guidelines Lack of consensus on Implementing CSR Issues

The role of Government in promoting CSR in Nepal Legal Provision Monitoring and evaluation Mechanism Minimum CSR investment ( …% for CSR) Legal compliance on all defined respect of business, its evaluation and perfect monitoring

Legal status of governing CG in Nepal Companies Act 2063 (i) Conflict of Interest and Transparency Requirement to give beneficial interest on the shares(s.47) Information required to be given on becoming substantial shareholder (s.50) Shareholders having conflict are not qualified to vote in general meetings(s.70) Director required to give information about transaction between company and him/her or close relatives (s. 92) Approval of general meeting required to enter transaction between company and director/its close relatives (s.93) Restriction on power of board to enter certain transaction (s. 105) Restriction to give loans to directors and officers (s.101) Financial disclosures to the shareholders (s.109) (ii) Directors Directors are made personally liable for any breach of the Act Directors have fiduciary duty to act in the best interest of the company (s.99) Directors are specific duty not to exceed their powers (s.103) Requirement to appoint independent directors by public companies (s. 86) Directors who breach reporting requirement under the Act are disqualified to become director (s.89) (iii) Audit Listed companies having paid up capital of more than Rs. 3 crores need to have audit committee An auditor is disqualified to be appointed for three consecutive years.(111) A person working full time, or his/her partners are disqualified to be appointed as auditor (112) (iv) Shareholders’ Protection. Shareholder have right to inspect books of the company Shareholders can sue on behalf of the company.(s.140) Shareholders can request to appoint investigation officer (s.121) Can prevent directors from exceeding their powers.(s.138)

Legal status of governing CSR in Nepal Constitution of Nepal 2072: Provision of fundamental rights (Employment, health, social security, social justice, ..) Consumer protection act, 2054: Consumers' right , quality of food Income tax Act, 2058: Labor Act, 2048: Minimum Pay, Dashin Bonus, Gratuity, Leave compensation, Health and security, social security, Environmental protection Act, 2053: EIA before establishment of company Children's Act 2048: International standard for child right Food Act, 2063: Prohibition of distributing harmful foods

Ethical business practices and issues in Nepal Its really a matter of question Perfect judgment, monitoring, evaluation of business activities, business movement, their advertisement, claimed on specifications… matter of question Public consent on looking after actual content on the product, expiry evaluation, …. Nominal Quality testing only in Medicine…. Food grade product, drinking water, daily consumable goods, vegetables… quality issues Quality of construction materials, …

Corporate governance system in Nepalese organizations Banks have attempted to maintain CG as per NRB guidelines and standards. Industries have made legal attempt as per the norms of Company Registrar office and their relevant governing bodies Judiciary has also helped in great way by enacting several laws and regulations NEPSE listed companies are publishing their annual reports and activities Organizations have made open information disseminating system Public awaring institutions have given priority on CG activities to the organizations

Business Ethics Issues Corruption: main ethical challenges (Global Integrity report 2006, corruption consumes 3 to 4% of the country's GDP) Nepali values and culture: loyalty and clean activities. Transparency Tax evasion (Tax avoiding): Tax evasion should be considered as theft Nepotism and favoritism

Suggestions for improving existing ethical practices and corporate governance system in Nepal Use of IT: for great tranparency in system that can eliminate corruption Comply with local laws: for employee and employers Report Breaches: Speak against any breach of laws, regulations and code of conduct Reject Bribery and corruption: Education: NRB should come with higher CG standards for Banks Company Registrar office, Ministry of Industry have to play key role on establishing CG standards Transparency on activities, online reporting system and report presentation have to made in practice There is need to create awareness about CG Partnership among all stakeholders including private sector, employees, local communities, government is not effective Very few corporate houses are involved CG and CSR activities