It was not supposed to end like this: with three former Wall Street titans sitting glumly in a Washington hearing room being accused by members of Congress of having enjoyed fat pay packages while their shareholders were losing money.

Yet, as Chuck Prince, former chief executive of Citi, Stanley O'Neal, his hitherto counterpart at Merrill Lynch, and Angelo Mozilo, who heads Countrywide Financial, were castigated as the poster boys of excessive executive compensation, corporate America was keeping a nervous watch.

When Henry Waxman, the feisty Democratic chairman of the Congressional committee that convened the hearing earlier this month, fulminated: "It seems like everybody is hurting, except for the CEOs who had the most responsibility," he highlighted a fundamental shift in the US debate over corporate remuneration.

As years of solid economic growth and booming capital markets gave way to credit woes and financial turmoil, the issue of executive pay moved from the tight confines of boardrooms and shareholder meetings into a much broader arena.

With the backlash against rising income inequalities gathering pace - and the serious prospect of a Democrat in the White House next year - US companies have been forced to justify the multi-million dollar rewards of their leaders to an increasingly sceptical public.

"Executive compensation is the major topic on companies' and investors' agendas at present," says Jim Melican, chairman of Proxy Governance, which advises fund managers on how to vote in annual shareholder meetings.

The stakes are high. Unless US companies can convince investors and other constituencies that their bosses' pay is fair and linked to performance, there is a big chance that Congress and other regulatory authorities will step in with radical measures of their own.

In many ways, the challenges faced by corporate America mirror those undergone by their European counterparts in the past few years.

Ever since 1994, when Cedric, a 280lb pig, was produced at British Gas's annual meeting by shareholders protesting at the pay of the then chief executive Cedric Brown, UK corporate leaders have tried to avoid the label of "fat cats".

In countries such as Germany, France and Italy, there have also been grumblings of discontent about the transparency and size of corporate remuneration.

But in America, the debate has assumed a wider resonance for three main reasons.

First, US corporate chieftains tend to be paid a lot more than their European counterparts. On average, the chief executive of an S&P 500 company received total compensation, including stock options and other benefits, of $11.5m last year, according to Reuters Estimates.

That is more than the £4.6m ($9.1m) earned by Sir Terry Leahy, one of Britain's most respected chief executives, whose company, the supermarket chain Tesco, grew profits by more than 20 per cent in 2007.

Second, the link between US executives' pay and their companies' performance has been weak. Last year, for example, the median income of an S&P 500 chief executive nearly doubled while the average profit of their companies rose by just 12 per cent.

In the words of the billionaire investor Warren Buffett, whose annual salary is just $100,000: "Too often, executive compensation in the US is ridiculously out of line with performance."

To make matters even trickier, over the past few decades US executives' pay has been ballooning while workers' wages have stagnated.

Experts estimate that US executives make more than 400 times the average wage for a production worker - a potentially explosive gap at a time when many Americans are fearful of losing their jobs and struggling to pay their mortgages.

These factors, coupled with US companies' recent troubles with the credit squeeze, have emboldened activist investors to turn executive pay into a significant battleground.

Following the example of the UK, where shareholders have an annual non-binding vote on executive compensation, a coalition of union-backed pension funds, religious groups and other "socially-responsible" investors, have launched a campaign for a "say on pay".

More than 100 companies, including blue-chips such as Citi, Morgan Stanley and General Electric, are facing calls for "advisory votes" on pay in the upcoming season of shareholder meetings.

And although investors' proposals to change corporate behaviour rarely gather many votes, last year's "say on pay" requests won a majority of the vote in eight of the 50 companies targeted by campaigners.

According to supporters of greater shareholder involvement in pay decisions, those victories, which included high-profile names such as the telecommunications groups Verizon and Motorola, underline investors' growing interest in the issue.

"We expect that shareholders will be even more concerned this year," says Richard Ferlauto, director of pension and benefit policy at the American Federation of State, County and Municipal Employees - one of the masterminds of the campaign. "When everybody is making money it is fine for the CEO to make lots of money, but when things change, so does shareholder sentiment."

These feelings appear to be spreading to the boardroom. Eight out of 10 outside directors polled by the National Association of Corporate Directors said chief executives were overpaid.

Opponents of such arguments maintain that forcing companies to submit to an annual referendum on executive pay flies in the face of the principle that it is the board's responsibility to decide how to remunerate the top managers.

Some argue that the vibrancy of US capitalism has been underpinned by an entrepreneurial spirit that can be nurtured only by promising large rewards to the winners of the corporate race.

Proponents of this view argue the "say on pay" campaign is just an attempt by left-wing investors to advance their causes at the expense of management and other investors.

In a recent memo to clients, lawyers at Wachtell, Lipton, Rosen & Katz, a firm famous for its prestigious roster of corporate clients, urged companies to fight back against the rising tide of discontent against executive compensation.

"Compensation committees will need to weigh pay-for-performance principles against the need to attract and retain employees," they wrote.

But the issue has caught the attention of influential politicians such as Barney Frank, the Massachussets Democrat who chairs the House Financial Services Committee. Last year, the US House of Representatives passed a bill requiring companies to hold advisory votes on executive compensation.

The measure was never ratified by the Senate, but many in the corporate world fear a Democratic landslide in the November elections could bring executive pay back to on to the legislative agenda.

"The last thing we need is Sarbanes Oxley-style legislation on executive compensation," says a senior executive at a large US company.

But even if Congress refrains from launching into diatribe on compensation, America's bosses are unlikely to be able to enjoy their rewards in the same way as in the past.

As their pay becomes a matter of public interest, executives will be increasingly required to make a positive case for their salaries and bonuses. Keeping quiet about executive pay is, as Mr Prince and Mr O'Neal would testify, no longer an option.

This Forum program is open, free of charge, to all shareholders of the invited corporate participants, and to any fiduciaries or professionals concerned with the investment decisions of those shareholders, according to the posted Conditions of Participation.  The Forum's purpose is to provide shareholders with access to information and a free exchange of views on issues relating to their investment interests described in the Forum Summary.  As stated in the Conditions, all Forum participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

This Forum program has been organized with the support of Hermes Equity Ownership Services, Ltd.  It is the first in an expected series that will be managed by a not-for-profit “Institute” to be established for the purpose of continuing the Forum programs conducted by Gary Lutin.