US institutional investors and experts have banded together to offer lawmakers a list of "do's and don'ts" in governance reforms as the Senate Banking Committee mulls over a bill by chairman Christopher Dodd to plug regulatory gaps exposed by the GFC.

The group, led by the Council of Institutional Investors, urged lawmakers to restore confidence and integrity in the markets by backing laws that are in the best interests of business, investors and taxpayers - commenting that "it's about Main Street, not just Wall Street."

In a press statement, Joe Dear, Council of Institutional Investors chair and chief investment officer of the California Public Employees' Retirement System (CalPERS), was joined by five speakers who proposed what the government should and shouldn't do.

Ira Millstein, senior associate dean for corporate governance at Yale and for many years corporate counsel to top US companies, commented that Dodd's corporate governance provisions were key.

"Do have confidence in long-term shareholders to act like the owners of the company - to improve boards, and performance."

"Don't be fearful that the legislation will lead to an SEC proxy access proposal that would upset board cohesion and lead to ‘bomb throwers' populating the board room. The job of the SEC is to monitor this process and it has demonstrated caution and reflection."

Richard Breeden, former SEC chairman who introduced reforms 20 years ago said: "Do remember that a common element in the failure of Lehman Brothers, AIG, Fannie Mae, and other firms was that their boards of directors did not control excessive risk-taking, did not prevent compensation systems from encouraging a ‘bet the ranch' mentality, and did not hold management sufficiently accountable.

Anne Sheehan, director corporate governance, California State Teachers' Retirement System (CalSTRS) said "Do empower owners - regulators can only do so much."

Meanwhile Anne Simpson, senior portfolio manager, head of CalPERS Corporate Governance said "don't let credit ratings agencies and other critical intermediaries in the market evade regulation."

Lastly Greg Smith, general counsel, Public Employees' Retirement Association of Colorado, said "remember where investments come from … every penny lost in the financial crisis hurt a family."