CORPORATE GOVERNANCE and its importance.

Corporate governance in MBA Course

1. CORPORATE GOVERNANCE AND CORPORATE CORRUPTION PRESENTED BY: Pabitra Thapa Saroj Sah Sunil Basnet Group 8

2. Corruption Corruption is the misuse of public power (by elected politician or appointed civil servant) for private gain. Transparency International-corruption as “the abuse of entrusted power for private gain”.

3. C orruption

4. A ct of giving money, goods or other forms of recompense to a recipient in exchange for an alteration of their behavior (to the benefit/interest of the giver) that the recipient would otherwise not alter

5. Dishonestly using influence

6. Fraud - The crime of using dishonest methods to take something valuable from another person A fraudulent practice is any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation

7. Corruption Theft Embezzlement- The fraudulent conversion of another's property by a person who is in a position of trust, such as an agent or employee. Embezzlement is a type of financial fraud

8. Siphoning-This is accomplished by the people that we see working on the front line in stores or restaurants. They devise a way to pocketing money from the register without creating discrepancies between what the computer shows and what the drawer shows. They do not enter the item into the computer part of the register, but need to keep track of how much money they get after their shift is ove Kickbacks-Any people involved in purchasing activities in any organization could be prospective embezzlers through kickbacks. This involves a vendor, from whom the company purchases materials in their course of business, agrees to give that employee money, directly to them, if they continue to buy a certain product from that vendor. Often times these situations involve inflated prices, since the vendor agent is possibly trying to make some personal profit as well. Overtime-Another way that people can commit embezzlement is through the falsification of overtime records. An hourly-paid manager for the local branch office of the bank could do this. If he punched in his card at the beginning of his shift, and then left at the end of his regular shift, say eight hours later, without punching his card out. Suppose he comes back in two hours later, pretending to have forgotten his wallet, and secretly punches his card out then. If the manager is continuing to do this over time, he is guilty of embezzlement by falsifying his overtime records

9. Misuse of information Nepotism - the unfair practice by a powerful person of giving jobs and other favors to relatives. Nepotism is favoritism granted to relatives

10. Level of corruption . 1. Grand level of corruption consists of acts committed at a high level of government that distort policies or the central functioning of the state, enabling leaders to benefit at the expense of the public good Petty level of corruption. refers to everyday abuse of entrusted power by low- and mid-level public officials in their interactions with ordinary citizens, who often are trying to access basic goods or services in places like hospitals, schools, police departments and other agencies. 3. Political corruption is a manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth.

11. Levels  of corruption in the different sectors indicate where corruption can be encountered. The levels are defined as follows: Individual Corruption : Corruption that takes place primarily in relations between individual citizens and public officials and authorities. Business Corruption : Corruption that takes place primarily in relations between enterprises/companies and public officials and authorities. Political Corruption : Corruption that takes place in the higher echelons of public administration and on a political level.

12. Impact of corruption Corruption impacts societies in a multitude of ways. In the worst cases, it costs lives. The cost of corruption can be divided into four main categories: political, economic, social and environmental. Political Corruption . corruption is a major obstacle to democracy and the rule of law. In a democratic system, offices and institutions lose their legitimacy when they’re misused for private advantage. This is harmful in established democracies, but even more so in newly emerging ones. It is extremely challenging to develop accountable political leadership in a corrupt climate.

13. Impact of corruption Economical Corruption depletes national wealth. Corrupt politicians invest scarce public resources in projects that will line their pockets rather than benefit communities, and prioritise high-profile projects such as dams, power plants, pipelines and refineries over less spectacular but more urgent infrastructure projects such as schools, hospitals and roads. Corruption also hinders the development of fair market structures and distorts competition, which in turn deters investment.

14. Impact of corruption Social Corruption Corruption corrodes the social fabric of society. It undermines people's trust in the political system, in its institutions and its leadership. A distrustful or apathetic public can then become yet another hurdle to challenging corruption.

15. Impact of corruption Environmental degradation is another consequence of corrupt systems. The lack of, or non-enforcement of, environmental regulations and legislation means that precious natural resources are carelessly exploited, and entire ecological systems are ravaged. From mining, to logging, to carbon offsets, companies across the globe continue to pay bribes in return for unrestricted destruction.

16. NATIONAL SITUATIONS Both bribe receiver and bribe offerer are enemies of the nation ( Prithivi Narayan Shah) Corruption is recognized as one of the main causes of Nepal’s underdevelopment. It is very widespread, has different manifestations, and is practiced at all levels of society in Nepal. The Nepali bureaucracy, politician, and the business sector are most seriously affected by, and inextricably involved in corruption. Bribery, embezzlement, fraud and extortion are main forms of corruption. Nepotism and favoritism are deeply-rooted in Nepalese culture.

17. Corruption in South Asia,2002 Most three Corrupt Sectors in Nepal Land administration(50%) Customs(41%) Police(24%) Other sectors Education Hospital Power Service J udiciary Across all sectors, extortion was quite common and a lack of accountability was identified as the major reason for corruption.

18. The latest global survey by TI shows that Nepal slipped three positions in 2015 compared to 2014. In 2014, Nepal was at the 126th position with a score of 29 points (a scale in which ‘0’ stands for highly corrupt and ‘100’ for very clean) , while the 2015 result placed the country on the 130th position with a score of 27 points . The continuous decrease in the score signals a deepening crisis of integrity in Nepal, particularly in the public sector .

19. INTERNATIONAL CORRUPTION STUDY Less than 50= Serious Corruption Problem 2 in 3 countries worldwide score below 50 53 % of G20 countries score less than 50 100% of BRICS C ountries score less than 50 6 Billion+ People live in countries within a serious corruption problem

20. Score Good Bad What needs to happen Americas Average score: 40/100 Top scorer: Canada (83) Lowest scorer: Haiti, Venezuela (17) 81% of countries score less than 50 Honduras’s elite Rosenthal charged with money laundering. Guatemala’s president was jailed Argentina, Mexico or oil-rich Venezuela, the region’s lowest scorer – yet long-standing corruption has led to a desperate lack of investment in security, education and health. Ensure Real and systemic reform. pressure on leaders, and demand the accountable Asia Pacific Average score: 43/100 Top scorer: New Zealand (88) Lowest scorer: North Korea (8) 67% of countries score less than 50 a host of governments coming to power on anti-corruption platforms(India, Sri Lanka ). Increasing interest(Media Coverage) The Malaysian prime minister’s inability to answer questions on the US$700million(Malaysia’s 1MBD scandal). In India and Sri Lanka leaders falling. Governments in Bangladesh and Cambodia are exacerbating Corruption. In Afghanistan and Pakistan a failure to tackle corruption Leaders revisit the genuineness of their efforts and propel the region beyond stagnation. Anti-corruption commissions

21. Score Good Bad What needs to happen Europe and Central Asia Average score: 54/100 Top scorer: Denmark (91) Lowest scorer: Turkmenistan (18) 44% of countries score less than 50 13 Danish public employees arrested in a corporate bribery case; The mayor of Bergen charged with bribery; TeliaSonera exiting Eurasian markets amid huge bribery allegations in Uzbekistan; In low-scorers Hungary, Poland and Turkey politicians and their cronies are increasingly hijacking state institutions to shore up power, a worrying trend also affecting the Balkans. Deutsche Bank paid the largest Libor fine in history in a market-rigging scandal. Governments must tackle political corruption and reform the financial sector Middle East and North Africa Average score: 39/100 Top scorer: Qatar (71) Lowest scorer: Sudan (12) 68% of countries score less than 50 Kuwait, Jordan and Saudi Arabia all improved slightly. Egypt, Libya, Morocco, Syria and Tunisia have deteriorated slightly. Political corruption. The rise of ISIS and the ensuing fight against terrorism have been used by many governments as an excuse to crack down on civil liberties and civil society. Far from helping, such an approach means that entrenched corrupt networks go unchallenged, often serving as yet further Financial fodder for terrorism. Development and anti-corruption must be interlinked. Civil society must have the space to be a serious partner in the fight against corruption.

22. Score Good Bad What needs to happen Sub-Saharan Africa Average score: 33/100 Top scorer: Botswana (63) Lowest scorer: Somalia (8) 87% of countries score less than 50 Improvement around transparency in Financial Management. Notably Senegal, which has risen significantly since the government introduced a series of anti-corruption measures. Conflict-ridden Somalia lands at the bottom of the index again. Angola, Burundi and Uganda, a failure to prosecute corrupt public officials on the one hand, and intimidation of citizens who speak out against corruption on the other. Governments need to take bold steps to ensure rule of law is the reality for everyone. Transparency and accountability must go hand in hand when tackling corruption

23. CG, Management Ethics and Corporate Corruption Presenters: Manjur Rain Raj Singh Pujara Shishir Pangeni

24. Sector Perceived To Be The Most Corrupt – The Regional Picture Countries Three Most Corrupt Sectors Bangladesh Police (39%) Health (25%) Land Administration (18%) India Police Health Power Nepal Land Administration (50%) Customs (41%) Police (24%) Pakistan Police (28%) Power (15%) Taxation (13%) Sri Lanka Police (39%) Health (5%) Education (4%) Source: Regional Survey Report on Corruption in South Asia, Transparency International, Dec 2002

25. Anti-Corruption Agencies Type Major Focus 1 Commission for the Investigation of Abuse of Authority (CIAA) Constitutional body Investigation and prosecution of cases of corruption and improper conduct 2 National Vigilance Centre (NVC) Prime Minister’s Office Awareness raising and corruption prevention 3 Special Court Judiciary Adjudication of corruption cases 4 Office of Attorney General Constitutional Public prosecutor 5 Judicial Council Constitutional Combating corruption in judiciary 6. Revenue Investigation Department Ministry of Finance Detection of revenue leakage 7 Independent Review Committee Committee under Public Procurement Act Corruption related to public procurement over Rs30 million. 8 Collection Office Financial Comptroller/Ministry of Finance Collection of government dues and arrears 9 Parliamentary Committees including Public Accounts Committee and State Affairs Committee Parliament Parliament oversight agencies 10 Office of Auditor General Constitutional Auditing of books of accounts 11 Offices of Regional Administrators (5 offices) and Chief District Officers (75) Ministry of Home Handling regional and district-level corruption cases remaining within the authorities delegated by CIAA 12 Office of Financial Comptroller Ministry of Finance Government budgetary control

26. ANTI -CORRUPTION LEGAL FRAMEWORK IN NEPAL Constitutional Arrangement The Interim Constitution of Nepal sets up the Commission for Investigation of Abuse of Authority (CIAA) as constitutional body. All arrangements for its independence and competency are also managed by the Constitution. CIAA consists of the Chief Commissioner and such number of other Commissioners as may be required. They are appointed by President on the recommendation of the Constitutional Council after a parliamentary hearing.

27. B. Anti-Corruption Law Corruption Prevention Act, 2002 Commission For Investigation of Abuse of Authority Act, 1991 Judicial Council Act, 1991 Special Court Act, 2002 Revenue Leakage (Investigation and Control) Act, 1995 Good Governance (Management and Operation) Act, 2007 Anti-Money Laundering Act, 2008 Rights to Information Act, 2007 Public Procurement Act, 2007 Army Act, 2006

28. C. Anti-Corruption Strategy Three Year Plan (2012/13-2015/16) Strategic Action Plan of Nepal Government Institution-wise Action Plan of Nepal Government Three Year Strategic Plan of the CIAA (2012/13-2015/16) Five Year Strategic Plan of the Office of teh Attorney General (OAG) (2011/12 - 2015/16) Five Year Strategic Plan of the Judiciary (2013/14-2018/19)

29. Relation with CG strong relationship exist between the level of corruption in rapidly developing economies and corporate governance processes therein. in countries with high levels of corruption, firms lack efficient corporate governance practices . Similarly, countries with deficient corporate governance practices and low levels of compliance to these standards breed corruption leading to a wide range of transparency dilemmas enforcing disclosure and reporting requirements in a continuous and consistent manner will be the only way to fight against corruption

30. Relation with CG Cont.. disclosure not only increases transparency, but also increases firm value which in turn increases stock prices and reduces agency costs. Therefore increased disclosure levels may lead to increased credibility and less corruption

31. C onclusion Even though corruption control agencies have important roles to play in combating corruption, good governance and management ethics with a serious commitment to root out corruption, is necessary to stimulate economic growth and employment opportunities, without which it is difficult to achieve a corruption free society. The challenge to the society is to tackle the problem of corruption emanating mostly from the political patronization of corrupt and criminal elements. The civil society can play a constructive role in the prevention of corruption and make the people aware of nature and extent of corruption, its consequences in the social and economic fabric of the society, and its negative impact on the moral values of the humanity .

32. THANK YOU!!