This spring will serve as a litmus test of shareholder outrage, kicking off the first season of annual meetings since investors learned of stunningly big executive payouts at the likes of

GE

(GE) - Get Report

and

Tyco

(TYC)

. Such revelations have sparked growing indignation against the backdrop of a three-year stock slump, prompting shareowners to brandish a record number of reform proposals.

As of the end of March, with another two months to go in the main proxy season, U.S. shareholders had already filed 912 proposals with public companies, the most seen by the Investor Research Responsibility Center. To put that in perspective, shareholders filed 802 measures in all of 2002.

Big institutional investors such as pension funds and labor unions are homing in on outsized corporate pay. They've already scored high-profile victories at Tyco and

Hewlett-Packard

(HPQ) - Get Report

, where shareowners passed measures to make executive severance packages subject to their approval. Under law, such proposals are advisory only. But boards that ignore rising investor anger could themselves become targets in future elections.

Compensation reform is the "No. 1 issue this year," says Ann Yerger, a spokesperson for the Council of Institutional Investors. Yerger says the new focus on compensation "reflects deep-seated and persistent concerns about executive pay abuses and excesses. It's been a remarkable year for corporate scandals and disasters. I think shareholders are shocked and distressed and I think really wrestling with what to do."

Adds William Patterson, director of the AFL-CIO's office of investment, "I think the high-profile failures of the capital markets have been governance failures. Behind every collapsed CEO and company and incompetent or corrupt CEO has been a board that has been at best inattentive, at worst, co-opted and bought off."

Aiming to clean up their tarnished image, a few companies have proactively curbed some benefits. Following negotiations with the AFL-CIO,

General Electric

(GE) - Get Report

and

Coca-Cola

(KO) - Get Report

said in February that they would end certain perks. GE, which was excoriated for the benefits it showered on former CEO Jack Welch, axed a deferred salary plan available to five top managers. Coke said it would phase out a retirement plan offered to a trio of the highest-paid executives, including its chief executive.

Along similar lines,

Delta

(DAL) - Get Report

CEO Leo Mullin said earlier this month that he would voluntarily slash his compensation by $9.1 million this year, taking a 25% pay cut and forgoing any bonus. Mullin took home nearly $13 million in compensation last year, a period in which the company lost $1.27 billion. Last year it announced layoffs of 8,000 people, out of a staff of about 76,000.

While those reforms are welcome, they may not be enough to satisfy angry investors. All three companies face a slate of other proposals on compensation at their annual meetings. Others in the hot seat on pay include

Boeing

(BA) - Get Report

and

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Citigroup

(C) - Get Report

.

Meanwhile, some companies are bluntly resisting reform efforts. "It's become more common for companies to go to the

SEC

and ask to omit proposals from their proxies," says Elizabeth Fender, managing director of corporate governance for TIAA-CREF. "They

point to rules that say shareholders can't ask about things that are ordinary business, that a proposal is vague and misleading, that it doesn't have the power to implement a proposal, that it contains false and misleading statements."

SBC

(SBC)

initially balked on a resolution to tie options grants to performance and impose holding periods, though it later added the measure to its proxy.

Siebel

(SEBL)

has opposed a similar resolution.

At the Corporate Library, Nell Minow recalls a time one company,

Stone & Webster

(SWBIQ)

, rejected her shareholder proposal on the grounds that it was "misleading" because it described one of the directors as having been on the board for half a century.

The company protested that the director had only been on the board for 49 and a half years. (It finally relented to shareholder pressure and replaced eight of its directors.)

For that matter, submitting proposals for a vote is only the first step; winning approval from shareowners is even more difficult. Typically, investors have voted in line with corporate boards, which invariably oppose reforms.

But support for shareowner proposals was slowly inching up even before the barrage of press over corporate scandals. In 1999, only 21% of shareowner proposals received more than 50% of votes cast, according to the Investor Responsibility Research Center. By 2001, that figure had increased to 24%; by last year, fully a third of proposals won a majority vote.

There's reason to think the number of measures approved could continue to rise. Unlike in the late '90s, few CEOs today can justify big rewards on the grounds that they're enriching shareholders. And amid widespread layoffs at many companies, generous payouts increasingly look unseemly. Last October, Federal Reserve President William McDonough

called for executive pay to be reined in to "more reasonable and justifiable levels," noting that CEO pay has soared to 400 times that of production workers on average, up from 42 times two decades ago.

Investors can claim some notable successes this season. Shareowners of Hewlett-Packard approved a resolution to make large severance packages subject to their approval, following criticism of former president Michael Capellas' $26 million severance payout. The company declined to release the vote tally, but said it was close. In March, Tyco shareholders voted by a 58% to 42% margin to approve a similar measure.

In a few cases, peeved shareholders have sought far more sweeping changes.

Citigroup

(C) - Get Report

shareholder Thomas Gavitt argued in his shareowner proposal, which appears on the company's proxy, that Citigroup's reputation has suffered because of "acts of fraud and collusion by senior managers." His proposal demands that managers who took home bonuses or exercised options anytime between 1998 and 2002 forfeit the money and pay triple damages back to the company.

Though Gavitt's measure holds little hope of passage, it underscores the degree of shareholder anger over corporate governance lapses.

Granted, because shareowner proposals are nonbinding, corporate boards could simply ignore them. But board members would be putting their own jobs at risk, since annoyed shareholders could replace them with a more responsive lineup at the next annual meeting.

"Anyone who ignores a strong shareholder vote does so at their peril," says Minow.