A new report looking at the roles and responsibilities of corporate boards and shareholders calls on policy makers to keep those roles in mind as they mull corporate governance reforms as part of the regulatory overhaul underway in Washington.

"Returning to solid economic growth over the long term will depend in part on the ability of policy makers to respond to concerns over corporate governance as a factor in the present crisis while avoiding reforms that are insensitive to positive aspects of the present legal ordering of decision rights and responsibilities within the corporation," states an Aug. 1 report of an American Bar Association Task Force.

The 25-member task force was formed by the Corporate Governance Committee of the ABA's Business Law section last summer to look at pressures on the apportionment of governance roles and responsibilities between shareholders and boards of directors.

As shareholders and boards have become increasingly active over the last twenty-five years, tensions have arisen over the boundaries of their roles, notes Holly Gregory, chair of the task force and a partner in the law firm Weil Gotshal & Manges. Assessment of proposed reforms should take into account these changes.

Gregory tells Compliance Week that while the group didn't agree on whether or which governance reforms are needed, there was consensus that, "There's value in the way those roles and responsibilities are defined under corporate law."

In other words, she says, "We're saying, don't throw out the baby with the bathwater."

The report includes recommendations for directors, shareholders, and policy makers.

As the decision-making body charged with the long-term best interests of the corporation, "Most boards need to do a better job engaging with their shareholders and understanding their viewpoints broadly, not just the vocal ones who have an issue," says Gregory.

She says boards also need to be prepared to explain their decisions in cases when they appear at odds with shareholder wishes.

At the same time, the report calls on shareholders to avoid rigid "check the box" approaches to governance issues and to "act on an informed basis with respect to their governance-related rights in the corporation, and form company-specific judgments ... while taking into account their own investment goals."

The full text of the report is available here.