Shareholders will be more willing to vote down executive compensation plans during say-on-pay votes next year, says Robin Ferracone, chairman of executive compensation consulting firm Farient Advisors.They will also pursue by-law changes at many companies to allow shareholders to directly nominate board candidates, she predicts.

“Last year, they [institutional investors] said they'd give companies the benefit of the doubt as it was the first year the say-on-pay vote was carried out. In the upcoming year, however, they are going to be more liberal with their no-vote,” she says.

Although companies have continued to reduce their perks and benefits offered to top management in an attempt to gain shareholder approval, the focus next year will continue to be on pay-for-performance practices, Ferracone says. Add to the mix the volatile stock market during the past year and the fact that just one-third of companies adopted the triennial vote policy, and it leaves more room for investors to put the remaining two-thirds of companies under the microscope, she says.

According to Ferracone, an informal survey of investors at the Council of Institutional Investors conference in Boston last month found that shareholders are planning to vote against compensation plans at higher rates in 2012. Much of the negative sentiment is based on declining performance among companies this year. The bottom line, notes Ferracone, is that investors want to see an increase in their total shareholder return. “Stock price and dividends are the most important indicators to investors,” she says.

Another potential issue companies will have to deal with is proxy access through shareholder proposals, coming next year. “Investors are disappointed that the proxy access rule did not materialize. However, they have confirmed that they will be putting in the shareholder nomination platforms company-by-company,” she says.

Ferracone is referring to the shareholder proposal access rule put into effect by the Securities and Exchange Commission in September. Shareholders who own $2,000 in stock or more for at least one year can submit proposals on changes to a company's bylaws relating to governance issues. In effect, the rule allows shareholders to procure proxy access at individual companies by first getting a resolution on the proxy statement and then winning a majority vote on it.