Survey results show that companies are "not taking proactive steps to determine what it is that customers want over and above the minimum standards laid down by regulators and thereby giving themselves a strategic advantage," PWC said.

In the study a, 69 percent agreed that they now had a more systematic process of managing risk in place; three-quarters felt that the tone at the top of their organization had changed to reflect a greater emphasis on governance and that, by implication, executives were taking greater responsibility for their actions.

But PWC found a noticeably lower proportion of respondents agreed that the board had access to more forward-looking information than before and that there had been a substantive change in the quality of data and metrics available to management. What change has occurred, it appears has come from a desire to comply with regulations, rather than to improve the institution's management tools, according to PWC.

Among the executives surveyed, 51 percent believed that among customers "expectations of standards of corporate governance" are increasing. Forty-six percent said there had been no change and 3 percent thought there was a decrease.

Seventy-four percent of those polled said their firms planned increased investment in "governance-related resources in the next 12 months, but the largest segment of companies, 30 percent, said the increase would be in the 0-5 percent range.

The main areas that will receive resources to improve governance are: compliance function, risk management function and instilling a culture of compliance throughout the organization, according to executives responding to the survey.

PWC's researchers were told by executives that, in the light of governance scandals, rising directors and officers insurance premiums and increased board responsibilities, that most companies find more difficulty recruiting good non-executive board members. Twenty-six percent said it was "significantly more difficult" and 51 percent "somewhat more difficult." Twenty-two percent saw no change and 1 percent said it was less difficult.

Dan DiFilippo, partner, PricewaterhouseCoopers, said, "The governance challenge is not simply to keep pace with the regulators and ensure compliance with the rulebook. What is needed is a new and integrated approach to governance that does not limit an institution's ambitions to avoiding trouble with regulators or other authorities, but strives to improve the quality of its management and to reap the benefits of being seen to be at the leading edge of good governance."

"Confidence stems from competence not compliance," he said.

PWC said that based on its study, financial institutions do not appear to have improved the quality of their dialogue with the stakeholders PWC picked out as critical--customers and shareholders. Respondents identified auditors and regulators as the two groups where improvements have been most significant, reflecting increasing activity by those two stakeholders.

Half of respondents, PWC said, admitted that their dialogue with customers had not improved over the two years, and "a staggering 43 percent of respondents did not regard their employees as critical stakeholders."

PricewaterhouseCoopers said to reap the strategic advantages of corporate governance, companies need to drive an awareness of governance "deep into the organization's DNA" with all members of the organization understanding their roles in managing risk, providing high quality information to managers, being alert to risk to company reputation and dealing fairly with each other and with customers.

The study found no real consensus among executives as to what governance-related area will be next to come under the public's microscope. Reporting and disclosure head the respondents' list, followed by executive compensation and then accounting standards.

PWC commented that implementing good corporate governance is a better alternative to waiting for the next crisis to break. Companies are less likely to end up with damaged reputations when their independent directors take the trouble to understand what management is doing and why.

Those firms whose governance processes enable them to anticipate emergent risks, spot underperforming products and engage with their key stakeholders stand to reap advantages to their reputations in the marketplace, PWC said.

The firm recommended that companies communicate with all stakeholders noting that good governance is about anticipating the needs of critical stakeholders, managing their expectations and communicating actively with them. Regulators are important partners but a well-governed institution will be communicating effectively with customers, employees and shareholders too, PWC suggested.

Miles Everson, PWC partner, said, "Governance is about improving the quality of management at all levels of a company, about making the best use of a company's assets and intellectual capital and about understanding and managing risk. By improving their governance, their businesses will be better run and by improving the way they run their businesses, they can take steps to rebuild some of the trust that financial institutions have lost."