The term "corporate governance" is a general term that refers to the oversight of daily business activities. Specifically, the board of directors should be actively and attentively looking over the performance of senior executives to ensure daily operations are performed within the adopted policies and objectives of the institution.
Ultimately, the board of directors is responsible for the organization's performance. When delegating authority to senior management team members for day-to-day activities and decisions, the board should also require feedback and monitoring reports to assess executive performance. For the directors, it becomes a matter of setting high standards and ensuring they are maintained.
The process whereby governance directs auditing programs is essential to effective risk management and internal control systems. Effective internal and external audit programs are also a critical defense against fraud and provide vital information to the board of directors about the effectiveness of internal control, among other things.
Here's a generalized three-step process involved in corporate governance: