But the agencies are also paying significant attention to broader corporate governance issues, including internal controls and internal audit. Corporate governance is more than effective risk management. Corporate governance is the framework by which the different constituencies within an institution--owners, management, and staff-interact with each other to make sure that any actions taken are in the best interests of the corporation and its shareholders.
The rules of governance established by the company determine the presence and effectiveness of internal controls, as well as the incentives for behavior within the organization. The choices banks make when they establish their risk management and corporate governance systems have important ramifications for the institution and its well-being, and not just because of regulators.