Every new year, it seems, governance Cassandras like us warn of fresh shareowner uprisings aimed at skyrocketing executive compensation. And of course, at each year-end, we wind up tallying a handful of serious rebellions but another market-wide record for payouts—even at companies inching toward collapse.

This year, though, could break the pattern. Sure, we predict the usual battery of protests where packages are egregious. But unlike years past, 2007 is shaping up as the year where the powers that be are poised to impose a market-wide solution. Welcome to the era of “say on pay.”

More than 50 shareowner-proposed resolutions are heading to proxies; asking companies to put their compensation-committee report to an annual vote of confidence. It’s not as outrageous an idea as it may sound. In Britain, Australia, the Netherlands, and Sweden, every publicly traded corporation has to do the same. Alongside the usual proposals to elect directors and approve the auditors are “say on pay” resolutions. Paychecks don’t suddenly get frozen if a majority votes against them; proposals in Britain are non-binding and designed to test investor support for overall remuneration policy, rather than serve as an up-or-down vote on individual contracts. But high opposition usually compels a board to rework the compensation framework, including performance targets that trigger incentive pay for top executives.

“Say on pay” originated in the United Kingdom where, early in the decade, Tony Blair’s government was getting mauled in daily headlines attacking ‘fat cat’ chief executive officer salaries. Downing Street wanted a market-based response that could navigate between traditional political poles: conservatives’ instinctive laissez-faire and socialists’ knee-jerk fondness for government intervention. Blair’s ‘third way’ solution—introduced in 2002—involved giving shareowners voice to fix the problem themselves. Every company had to put its compensation report to a vote of confidence.

Effects were immediate and, in some cases, dramatic. GlaxoSmithKline, for instance, reformed performance triggers after the board saw its pay resolution go down to a very public defeat in 2003. Since then, a flood of companies annually checks pay packages with investors before preparing final policies. Blair’s trick neatly got the fat cat pay monkey off the government’s back.

Not surprisingly, other countries facing similar public fury over outsized CEO wages quickly took up the idea. More are in the queue: Bills in France and Switzerland could further spread the procedure.

Often ideas so distant from typical U.S. practice stay well offshore. But this one has landed suddenly and grown legs in the United States. Why? For one, investors led by Taft-Hartley funds have run into roadblocks using homegrown strategies to tie CEO pay to shareowner value. Yes, the Securities and Exchange Commission mandated historic new disclosure of executive pay details. But at the same time the agency has denied investors tools they could use to do anything about problems they detect when sifting through the fresh data. Plurality election rules at most companies still allow directors—including those serving on compensation committees—to win office even if they face overwhelming opposition. And the SEC remains deadlocked on measures that could ease investor rights to nominate challengers to boards with, for instance, flawed pay policies. Meanwhile, scandals over backdated options have spread as figures continue to show wide gaps between compensation and performance. No wonder funds have been frustrated and prowling for antidotes. Importing U.K.-style say-on-pay looked appealing.

In 2006, the American Federation of State, County and Municipal Employees pension funds filed four trial proposals calling for advisory votes on the compensation-committee report. Results were stunning for a first-ever resolution: Totals averaged 40 percent at Countrywide Financial, Home Depot, Merrill Lynch, and US Bancorp, according to Institutional Shareholder Services. AFSCME and others have now mobilized a barrage of more than 50 resolutions for 2007. If the initiatives go to a vote, they will transform say-on-pay from an outsider idea into one of the top governance issues of the year at U.S. companies.

There is a second powerful force behind the proposal: Congress. U.S. Rep. Barney Frank of Massachusetts, incoming Democratic chairman of the House Financial Services Committee, introduced a bill last year that would have required say-on-pay votes at listed companies. Under a Republican Congress, it went nowhere. With this new Congress, however, expect Frank to re-file—and to schedule his own hearings on the measure. Perhaps seeing the writing on the wall, the semi-official Paulson Committee—charged by Treasury Secretary Hank Paulson to design a framework for capital market reform—spotlighted the practice in its Nov. 30 interim report: “One new proposal for increasing shareholder rights in this [compensation] area is for Compensation Committees to issue a report to shareholders for an advisory vote, a practice now followed in the United Kingdom.”

Shareowners will want to make “say on pay” work, and early scrutiny of British trends suggests that the measure has played an important part in sparking dialogue and curbing excesses.

That’s hardly the condemnation you’d expect from a business-heavy panel. In this, the Committee may be recognizing that it’s hard to demonize say-on-pay as an overreach or some kind of special interest agenda when companies like Unilever and British Petroleum live very comfortably in say-on-pay jurisdictions.

So here is what to expect. This spring, House hearings could spotlight the idea at the same time that annual meeting results expose widespread investor support for say-on-pay. Meanwhile, Yale University’s Millstein Center on Corporate Governance and Performance, which is part of the School of Management, will issue a white paper analyzing the U.K. experience and outlining policy options for the United States. By year end, we could see a handful of companies introducing the practice in advance of a requirement.

Say-on-pay, if it takes hold, will scarcely solve all investor gripes over CEO compensation. After all, votes will remain advisory and board accountability to shareowners will stay feeble, thanks to plurality voting and other features. Moreover, it could take a while for investors to gain the expertise necessary to wield unfamiliar ballots on pay to good effect. But shareowners will want to make the idea work. Early scrutiny of British trends suggests that the measure has played an important part in sparking dialogue and curbing excesses.

Compliance managers at corporations can prepare by taking several prudent steps. First, study meeting notices and annual reports published by vanguard U.K. companies to see how boards have written and formatted compensation policies to win investor support. Second, contact counterparts in Britain to check how they have managed outreach to investors and influential proxy services. Third, learn from the mistakes made by companies (such as Glaxo in Britain and Novogen in Australia) that have seen investor uprisings reject compensation reports. That way, when boards ask what actions to take, you’ll be ready, not with generalities, but with hard details.

Editor’s note: Stephen Davis, co-author of this column, is also a fellow at the Millstein Center and leading the white-paper project analyzing British say-on-pay policies mentioned above.