Avoiding real or perceived conflicts of interest is something our politicians and businessmen find hard to practice. On the other side, when we, as consumers, come across instances of conflict of interest, in government or in the private sector, we don't make a fuss as persistently as we should.

Keeping quiet on small matters thus emboldens leaders to take more liberties to do what they wish, and their cumulative actions over time lead to a failure of governance â€" both in the political and the business sphere.
How then should we understand the constituencies of conflicts of interest?

Mistaking governance for management: in Nepal, this is the most common form of governance abuse. The press reports it, but nothing happens because we confuse governance with management.

No sooner does a new minister come on board than he starts transferring civil servants. Like Home Minister Bijaya Kumar Gachedar. Some even publicly promise not to transfer bureaucrats, only to break their own promise to fill the top ministerial positions with cronies.

Nobody tells the minister that his task is not to manage the ministry. Nor is it to meddle with its day-to-day affairs. His task is to govern the ministry so that it strives to meet the objectives set in various national plans and policy documents which set the directions for development for several years. But plans and policies be damned when the minister thinks that he can make impulsive changes.

Private sector companies are not immune from this disease of mistaking governance for management. Look at any feuding board at a bank. The nub of the problem often boils down to board members' imagining themselves as super-managers, and undermining the importance of salaried professional staff to interfere into the daily activities of the bank. Micro-managed institutions are rarely well-governed.

Treating institution as personal fiefdom: no minister thinks of himself as the steward of public trust about his ministry. Given the state of Nepali politics, wherein the same incompetent politician gets elected and selected no matter how many times elections are held, the minister does not fear voter backlash. He fears others from his party usurping power from his hands.

He thus has little incentive to do things that his voters appreciate. Instead he uses his stint to amass a war-chest which can be used to win the next election, whenever that will be. He thus treats the ministry as his personal piggy-bank, from which he will extract as much money as possible.

Private companies fare no better, though, in the banking sector, Nepal Rastra Bank's regulations are making it harder for bank boards to treat their institutions as extensions of their personal offices. Still, the tales of board members abusing their institutions' assets for their personal benefits are boringly numerous.

What, then, is the antidote? Constant vigilance and increased competition. Increasing civil society's vigilance in the form of investigative press reports, lawsuits and shareholder activism keep the errant politicians and the businessmen on their toes. To a large extent, it is already happening in the political sphere: voters know that most politicians they elected in April 2008 to draft the constitution have let them down. But as of now, they do not have credibly democratic alternatives to those that they elected.

With regard to governance of private sector companies, regulations can only go so far, and there have been cases of regulators held captive by the interests of the entities under regulation. Making it easier to both open up companies and allow foreign companies to set up offices in Nepal is likely to lead to greater competition, which, in turn, is likely to reduce conflict of interest issues in Nepali companies.