BBA VI Semester Business and Society

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

2. 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.

3. 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.

4. 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

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

6. 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)

7. 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

8. 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, …

9. 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

10. 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

11. 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