The reversal last year of the long trend of rising executive pay came about in part because of growing activism by institutional investors, experts say.
But even if you're a small-time investor, you can make your voice heard regarding how the companies you own shares in are run. And with the help of others like you, your portfolio can benefit, corporate governance activists say.
"If you stand on the sidelines, thinking you are just one investor, you have to realize that there are hundreds of thousands of people who are like you," said Daniel Pedrotty, director of investment at the AFL-CIO. "If the majority of people are like you, you leave the governance of the company in the hands of people who want to preserve the status quo."
In fact, if you own stock through index funds, you may not have the option to do the "Wall Street walk" -- sell your shares in a company -- if you don't like its management or directors, said Michael Garland, director of value strategies at CtW Investment Group, which advocates for better corporate governance on behalf of the labor federation Change to Win.
"For us, demanding better governance is the only way to protect and create value," Garland said.
Here are answers to questions about taking a role in the companies in your portfolio:
How do I know whether a company is well-governed?
You can buy a report from Corporate Library ( www.thecorporatelibrary.com), a research firm that grades companies on an A-F scale. But with each report going for $495, individual investors may need to take a cheaper approach.
The do-it-yourself research method requires a copy of the company's proxy statement -- the document sent to investors before the annual shareholder meeting. You can get a copy of the proxy statement from the company or the Securities and Exchange Commission's database of filings at www.sec.gov/edgar.shtml. (Click on Search for Company Filings and then on Historical EDGAR Archives. When you get to the search bar, type in the company's name and "14a," which is the SEC's term for the proxy statement.)
What do I look for in the proxy statement?
The proxy includes a list of board members, a biography of each director, charts indicating how much stock company managers and directors own and charts showing the pay of the company's five most highly compensated officers.
Look for signs of bad governance, such as:
