(FORTUNE Magazine) – Come 2003 proxy season, CEOs may be in for some "capital punishment." In a down market, stories of Tyco-type excesses and anger at the sky-high levels of CEO pay (an average of $11.6 million in 2001, according to compensation firm Pearl Meyer) have helped put executive compensation at the top of the list of shareholder concerns. "It's all big money managers have been talking to us about for the last couple of months," says Patrick McGurn, director of corporate programs for Institutional Shareholder Services. "The focus on pay is unprecedented." McGurn says he wouldn't be surprised to see as many as 100 equity plans voted down, as opposed to the usual handful in any given year.

So, CEOs, if you want shareholders to sign off on your pay packages, these are just some of the changes that institutional investors and organizations such as the AFL-CIO want you to adopt.

--Pay for performance. In 2001, according to Pearl Meyer, median CEO pay for 163 companies grew by 1% (the average was down less than 1%), compared with an 18% median decline in corporate profits (the average was down 118%, thanks to a number of corporate disasters). If your company's earnings are down, don't even think about asking for a raise; in fact, start off by asking for a double-digit percentage decline. That's what you're probably going to get anyway, so you might as well earn some brownie points with your board by graciously suggesting it.

--Stop the pump and dump. Shareholders want to see options plans that keep you in the game for the long haul. Bank One, for instance, requires execs to hang on to 75% of their equity compensation. That way you aren't tempted to make short-term business decisions that temporarily inflate the stock price enough to unload your shares.

--Expense options. It's no longer a matter of if you should expense, but when--so you might as well account for options on your books. At last count, 162 companies are now doing it; investors want yours to do it too.

--Reinvent how options work. Fed up with traditional options, where everybody wins in a bull market, investors want to see options indexed to peer companies. That way you have to outperform your competitors to get the payoff.

Institutional investors are busy zeroing in on companies they consider egregious abusers of compensation. The AFL-CIO is preparing a list, starting with the recent FORTUNE story "You Bought, They Sold." (Some early clues might be found on its PayWatch site, www.paywatch.org, where Coca-Cola, Kmart, and AT&T are among the companies mentioned.) TIAA-CREF is also taking notes on which companies it will try to engage in quiet dialogue. And mutual funds (which vote 21% of all proxies) such as Fidelity and Vanguard are flexing their muscles behind the scenes.

What if the companies don't listen? It depends, says Paul Hodgson, a specialist in CEO compensation at the Corporate Library, a corporate-governance research group. "If they start to pick up, a few things will be forgotten and forgiven. But if they're floundering and nothing has been done, there will be some serious battles."