Last year, CEOs at the biggest American companies made better money than they did in 2007, despite the intervening economic havoc. Why did executives enjoy such a cushy payday? Because their biggest shareholders did nothing to stop it.

Ka-ching!

According to executive compensation research firm Equilar, the typical CEO made $9 million in 2010, a 24% increase over last year. In 2007, before the housing bubble burst and the financial crisis hit, the median pay for CEOs was $8.4 million. Although CEO pay did clock two years of declines, major CEOs have apparently quickly regained lost ground in pay levels.

Sadly, they seem to be among the few groups of individuals who have regained much at all in the last couple of years. While some of these CEOs undoubtedly deserve pay hikes for great performance, many don't.

Who are the biggest enablers?

To a certain extent, we investors can blame ourselves for this pay-performance disconnect. Outsized CEO pay triggers less outrage when the economy's humming along nicely, and most investors have historically zoned out on this issue in general. Perhaps it's time we all started paying more attention.

However, the biggest enablers of disproportionate pay may also be these companies' biggest shareholders. The American Federation of State, County, and Municipal Employees (AFSCME) recently blamed the largest mutual funds for doing the least to rein in CEO compensation.

The AFSCME report implicates Vanguard, BlackRock (NYSE: BLK) , ING (NYSE: ING) , and Lord Abbett among the fund families least likely to use proxy voting to properly align pay and performance at public companies.

Interestingly, Vanguard founder Jack Bogle has been known to criticize the mutual fund industry, often saying that it has abandoned its stewardship role in areas like this one. Maybe some people at Vanguard haven't gotten the memo?

Celebrating constrainers

Fortunately, the report indicated that smaller mutual funds are more likely to use their proxy-voting power prudently. AFSCME pointed to Dimensional, Dreyfus, Oppenheimer, and Wells Fargo as the fund families with a higher likelihood of constraining pay. And even though these smaller funds don't exert as much influence, they're joined by a growing proportion of shareholders who've voted to rebuke their companies' compensation plans.

RiskMetrics Group just reported yesterday that five more companies, including Hercules Offshore (Nasdaq: HERO) , Intersil (Nasdaq: ISIL) , and Helix Energy (NYSE: HLX) , have failed to receive majority support for their compensation plans. Cincinnati Bell (NYSE: CBB) has the dubious honor of receiving the lowest compensation support so far this year, with just 29.8% approval.

ISS data shows that most companies do enjoy support for their pay policies, but even the relatively few rejections rolling in show that at least some shareholders are taking note of disconnects between pay and performance, and trying to remedy the situation.

Restarting stewardship

Mutual funds's role in enabling outsized pay is no breaking news flash. We dealt with the same theme this time last year, too. From the Foolish comments I've seen, I believe many individual investors feel frustrated at the power these big players wield (or fail to wield, as the case may be).

Still, shareholders now pay more attention than ever to CEO pay in relation to operational performance. Hopefully, more large institutional shareholders will remember their own stewardship role, since they represent an important part of so many Americans' financial future. Using their shareholder power to keep corporations prudently run, and CEO pay commensurate with long-term performance, is a good place to start.

Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.