Unit-6 CSR, Business Ethics and Corporate Governance in Nepal

Management and Status of CSR in Nepal

CSR in Nepal commonly associated with charity (Social Investment in Education, health, sport
Development, the environment and other community services). Business in Nepal often finds itself
engaged in the provision of social services that would be seen as government responsibility in developed
countries, for e.g. investment in infrastructure, schools, hospital and housing.
i. In Nepal business is engaged in the provision of social services that would be seen as
government responsibility in developed countries.
ii. The spirit of CSR is strongly related with traditional values and religious Hindu concept.
iii. CSR issues in Nepal present themselves as tradeoff between (Development and Environment)
iv. Research in CSR in Nepal is in relatively under developed.
Challenge to CSR in Nepal
There are number of challenges to the implementation of CSR in Nepal, which are presented as below.
1. Maintaining continuous improvement in safety performance throughout the organization
2. Building more safety culture
3. Reducing waste
4. Improving recycling rate
5. Integration of environmental consideration
6. Strengthen of people mgmt. Framework
7. Develop a positive and productive working environment
8. To achieve greater consistency in the mgmt. of people process
9. Communicating organization goal and direction
10. Improve the employee attitude
11. Build the relationship with business in the community and with local authorities
12. Integrate environmental and social issues
CSR issues in Nepal
Following are the CSR issues in Nepal
1. Lack of Community Participation in CSR Activities: There is a lack of interest of the local
community in participating and contributing to CSR activities in Nepal. There exist little or no
knowledge about CSR within the local community.
2. Need to Build Local Capacities: There is a need of capacity building of non-governmental
organization, there is the lack of trained and efficient organization that can efficiently contribute
to the CSR.
3. Issues of Transparency: The lack of transparency impact the process of trust building between
companies and local communities.
4. Non-availability of Well Organized Non-governmental Organizations: There is a lack of such
organization which can assess and identify the real need of the community.
5. Visibility Factor: The role of media is not good
6. Narrow Perception towards CSR: Organization perceive the CSR as donation given to the
society.
7. Non-availability of CSR Guidelines
8. Lack of Agreement on implementing CSR Issues
Role of Govt. in promoting in CSR Nepal
As we have known that CSR in Nepal is in very initial stage but as Govt. it has certain role to perform
which are as follows:
1. Increase of community participation in CSR activities
2. Need to build local capabilities
3. Increase Transparency
4. Developing well organized NGO.
5. Visibility factor (increasing media role)
6. Increasing perception toward CSR initiative
7. Increasing clear CSR guidelines
8. Increasing consensus on implementing CSR issues.
Legal Provision Governing the CSR in Nepal
There is no specific legal provision regarding CSR. Various legal provision in respect of corporate
governance have prescribed the concept of CSR in Nepal.
1. Constitution of Nepal, 2072
The provision of fundamental right directly or indirectly related to the CSR mentioned in the
Constitution of Nepal, 2072 are as follows.
 Right to environment and health
 Right to employment
 Right to social security
 Right to social justice
2. Company Act, 2063
Certain legal provision made by company act related to the CSR are as follow.
i. Establishment of company not distributing the profit: Any companies may be incorporated
to develop any occupation or to protect collective rights and interest of the person involved
in it
ii. Social provision relating to company not distributing the profit: There shall not be required
the share capital to incorporate a company not distributing profit. However, company may
receive membership fee from its members.
 The company shall not distribute the dividend or bonus, it shall be used for the
capital of the company.
 Any company not distributing the profit shall not be merged with the company
distributing the profit.
3. Other related laws
 Consumer Protection Act, 2054- several provision about the consumer’s right, quality of
food etc.
 Income Tax Act, 2058- prescribes the tax for the corporate body for the conservation or
donation of social welfare activities.
 Labor Act, 2048- contains various legal provision to maintain internal CSR such as
remuneration, working hour etc.
 Children Act, 2048- International standard for child right.
 Trade Union Act, 2049- resolves disputes through collective bargaining.
Ethical Business practice in Nepal
Business ethics refers to the moral demand regarding the business and is based on the theory of
relationship between business and society.
Followings are the ethical business practice in Nepal
 Tax evasion and corrupt practice are commonly seen from individual citizens to business of all
kinds and scale.
 The public of Nepal has developed skepticism about business ethics, especially in big business.
 Business sector often faces extensive competitive pressure which lead the business to unethical
practice.
 Ethical perception are normally situational and vary with culture.
 Business rely on verbal agreement rather than formal contract which brings many unethical
practice.
Business Ethics issues in Nepal
Hinduism is the dominant religion in Nepal, and it places a strong emphasis on justice, morality,
harmony on the workplace.
Following are the business ethics issues in Nepal
1. Corruption: Corruption is one of the main ethical challenges facing business people in Nepal.
According to the Global Integrity 2006 report, corruption consumer 3 percent of country’s GDP.
2. Nepali Values and Culture: Nepali society has placed great emphasis on loyalty to the collective,
be it one’s caste, village or family. This drives the culture of favors and clanship
3. Transparency: Transparency on decision making is limited in Nepali Business
4. Tax evasion: Tax evasion and corrupt practice are commonly seen from individual citizens to
business of all kinds and scale.
5. Nepotism: It is the practice of showing the favoritism to relatives and close friendship in the
business practice.
Corporate Government System in Nepalese Organization
Many Nepali Companies have their flag of success flying high in the sky due to good corporate
governance. The system are as follows.
 Judiciary have enacted several laws and regulations.
 Judiciary have solved several corporate disputes.
 Corporate bodies have their own values, ethics.
 Big and small organization publish their annual reports.
 Companies have shown their interest on the awareness of environmental protection.
 Stakeholders are given more importance.
Suggestion for improving existing corporate governance in Nepal
Political uncertainty and the current security situation must be improved for good governance. Few
suggestion in improving existing corporate governance system in Nepal can be presented as below.
 There should be value based corporate culture
 Companies should obey relevant Nepali laws
 Corporate body have certain policies which if goes as a failure they need to learn from it.

End of Chapter
End of Syllabus