The number of lawsuits brought by shareholders challenging executive compensation has soared in recent years. Like other types of shareholder litigation, challenges to executive compensation have increased as plaintiffs' lawyers look for lawsuits to replace the financial crisis litigation as it winds down. But more importantly, such challenges have increased as shareholders' mistrust of large companies has swelled, while at the same time Dodd-Frank has provided shareholders of publicly traded companies with tools to express their suspicion, including "say-on-pay" votes.

Rules mandated by Dodd-Frank require companies to put their pay practices to a shareholder vote at least every three years. Most companies with publicly traded stock held "say-on-pay" votes in 2011, although companies with less than $75 million in publicly traded stock were exempted from holding these votes until 2013. These shareholder votes are non-binding, which means that boards can choose to ignore them. But they do so at their own risk as doing so is increasingly leading to legal challenges.

The recent shareholder litigation filed against Vikram Pandit and the directors of Citigroup is one such example. The filing of the lawsuit followed on the heals of a failed "say-on-pay" vote in which 55 percent of Citibank's shareholders voted against Vikram Pandit's compensation for 2011.

Last year, 41 of the 3,000 companies in the Russell 3000 Index had failed "say-on-pay" votes, according to ISS Proxy Advisory Services. Unlike Citibank, many companies that have failed "say-on-pay" votes respond with supplemental proxy statements. For example, after 48 percent of the shares voted against Stanley Black & Decker's proposed pay practices, the company made a number of changes, including ending its practice of staggering terms for directors, raising the minimum stock ownership requirement for its executive officers, ending the practice of grossing up executive severance agreements, and cutting the C.E.O.'s pay by an estimated 63 percent.

Companies can continue to expect heightened shareholder scrutiny of their executive compensation practices, including shareholder litigation. The one bright spot is that such challenges remain difficult to pursue, particularly for those companies that are incorporated in Delaware. Assuming that the board's compensation committee was sufficiently independent and followed the appropriate practices and procedures in arriving at its compensation policies and amounts, it will be difficult for plaintiffs to survive motions to dismiss or overcome the business judgment rule.