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New Efforts Push Investors to Take a Stand

WASHINGTON ( TheStreet) -- Companies are meant to be small-scale democracies. Chief executives may be perceived as kingly, but boards and shareholders are supposed to be the ultimate rulers.

As government regulation decreased in the 1980s, this system of checks and balances was touted as being a better way to ensure responsible profitability. The conflicts of interest, excessive compensation and Ponzi-like securitization schemes that took root proved that approach to be naive.

"We were taking too much risk," Ethics Resource Center Chairman Michael Oxley (co-author of the Sarbanes-Oxley law) said at the group's conference in January. "Nobody cared as long as the cash register kept ringing, because nobody shoots the bartender when the drinks are on the house."

In pursuing short-term profits over long-term prosperity, many companies were gambling with house money -- as in your house and your money. Government bailouts may have saved some of the endangered "too big to fail" institutions on Wall Street, even propelling some to record earnings, but on Main Street the fallout was toxic.

Household assets, after peaking at $81 trillion in the summer of 2007, dropped by nearly $15 trillion by the end of 2008. Unemployment rose to 10.2%, a 26-year high. Americans' retirement plans lost as much as $2 trillion and, according to Hewitt Associates (HEW), the average plan shrank by $10,000.

As most American's continue to be nickel and dimed, CEO pay at the nation's 500 largest firms still averages nearly $11 million a year. The Institute for Policy Studies says the average CEO earned about 319 times more than the average worker in 2008.

The spike in compensation may stem from an effort to curb it. A 1992 move by the Securities and Exchange Commission required detailed disclosures of executive pay. Shedding light on these practices didn't shame companies into backtracking. Instead, armed with knowledge of what their peers were pulling down, CEOs demanded more.

In theory, shareholders should keep executives and their often hand-picked directors in line. But even when they have the power to effect change, they usually don't. Less than 20% of individual shareholders voted in annual elections last year, according to Broadridge Financial Solutions (BR), which builds the infrastructure underpinning proxy services for over 90% of public companies and mutual funds in North America.

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