WASHINGTON (MarketWatch) -- Bolstered by new federal disclosure rules and a slate of news about outsized pay packages, lawmakers and fed-up investors are coming out swinging ahead of this year's corporate proxy season and promising to press companies harder than ever about spiraling levels of CEO pay.

Packages like the $210 million given to former Home Depot Inc. CEO Bob Nardelli have helped to reignite outrage in Washington and among investors' advocates over huge executive pay, and the combination of likely legislative proposals in Congress and shareholder initiatives at upcoming annual meetings may force companies to rethink the way they pay top executives.

New House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, is planning hearings on CEO pay this year, and wants to give shareholders more of a say in approving compensation. Last year, he introduced a bill that would've given shareholders a vote about pay and "golden parachute" packages for CEOs.

It's unclear if Frank will reintroduce the bill or write a new one--Frank's spokesman, Steven Adamske, says the congressman hasn't decided what course to take this year. But one way or another, analysts say, sentiment is moving toward an even tighter process for approving corporate chiefs' salaries and benefits.

One such way to raise the bar is by requiring shareholder approval of pay packages, a right already enjoyed in the United Kingdom.

"I think that there's large shareholder momentum behind the concept," says Richard Ferlauto, the director of pension and benefit policy for the American Federation of State, County and Municipal Employees. "Given the continued revelations about egregious pay packages...it'll be difficult to vote against something like this," Ferlauto predicts. His group has called for non-binding votes by shareholders on pay packages.

Investors have seen a growing number of CEOs step down with big compensation deals. Nardelli walked away with $210 million after battling with Home Depot Inc. (HD) shareholders. Ex-Pfizer Inc. (PFE) chief Henry McKinnell got a $200 million retirement package in spite of presiding over a 49% slide in the value of the pharmaceutical giant's stock between 2000 and 2005. ExxonMobil (XOM) leader Lee Raymond left with $357 million.

With proxy season approaching, more revelations are expected, thanks to new Securities and Exchange Commission rules about pay disclosure.

"It's going to be one of the, if not the, hottest issues this proxy season," said Amy Borrus, deputy director of the Council of Institutional Investors, a pension group that focuses on shareholder rights. Most companies hold annual meetings in March, April and May.

Observers say there are several avenues to reining in pay and benefits packages, including congressional legislation, new federal rules and shareholder proxy initiatives.

Congressional hurdle

But congressional legislation will almost certainly be complicated by the narrowly divided House and Senate. Democrats enjoy only a 31-seat majority in the House, and the Senate is evenly split, though its two independents vote with Democrats. Still, it's likely that any Democratic initiative about executive pay will need Republican support.

Michael Townsend, a vice president with Charles Schwab & Co., Inc. (SCHW), isn't predicting a big push toward legislation. Rather, he says, Frank and other Democrats will use their majority to convince regulators more needs to be done about the issue.

"My sense is that that is more about maintaining pressure" on the Securities and Exchange Commission, Townsend said in an interview. "When Frank talks, [SEC Chairman Christopher] Cox hears it."

SEC rules approved last summer direct companies to publish a table showing executives' total compensation, a move designed to bring better disclosure to shareholders. Companies must also detail stock-option grants. But instead of showing options' value in the year granted, a controversial revision just before Christmas allows companies to spread the value of options over several years.

Neither the SEC nor Frank has aimed to cap executive pay.

Shareholder activism

But shareholders may not have to wait for Congress or regulators to act. The AFSCME Employee Pension Plan, for one, is planning to file resolutions this year that would give shareholders a vote about approving CEO pay. Last year, the plan filed such resolutions at companies including US Bancorp (USB), Merrill Lynch (MER), Sara Lee (SLE) and Home Depot. Ferlauto says more are coming this year.

Meanwhile, outplacement firm Challenger, Gray & Christmas, Inc. is predicting more shareholder discontent about spiraling levels of pay.

"With new regulations about full disclosure of CEO compensation we will undoubtedly see more instances of shareholder outcry on this issue," said John Challenger, the consultancy's CEO, in a statement. "Chief executives will have to prove day in and day out that they are worthy of such rewards," Challenger said Monday.

In a survey released Monday, Challenger's firm said CEO departures were up 12% last year, particularly in the health care, financial and computer industries.

"There is more transparency, more scrutiny and more pressure than ever," Challenger said. "It is coming from all sides--board members, shareholders, industry analysts, government agencies and the media. The CEO's ivory tower has been razed."

Borrus of the Council of Institutional Investors agreed. In real estate, she said, it's location, location, location. In the corporate world this year, "it's CEO pay, CEO pay, CEO pay."

Robert Schroeder is a reporter for MarketWatch in Washington.