Reasons for Bad Governance

Lack of awareness among the board members : Board members are not being aware of the importance of the corporate governance and they have not been able to put the best practices in place.

Inappropriate board structure : The structure of the board of the banking industry is not appropriate. The board members do not possess the necessary knowledge of different discipline of the banking industry and as a result they are not been able to oversee the banking operations in details.

Lack of board evaluation : We do not have any measure or criteria to measure the performance of the board. As a result, the board members’ performance is not measured and there is not much of performance pressure on performance.

Lack of policies and procedures : Most of the banks and financial institutions do not have policies and procedures in place to comply with the corporate governance practices.

Excessive focus on short term: Because the banks and financial institutions have put much effort on short term growth and profit, there have been many incidences where they have compromised with the best practices.

Performance pressure: CEOs in Nepalese banking are very highly paid and as a result they are under tremendous performance pressure to deliver the results to the shareholders. This encourages them to take undue risks.

Centralized power : Most of the financial institutions having governance problems had one thing in common, they had executive chairman. This meant that the  power was centralized and no check and balance was in place.

Ill intention : The breach of corporate governance is also the result of ill intention of the management and the board. They have put their interest first ahead of the interests of the shareholders.