When David Batchelder of Relational Investors pulls up his chair to the boardroom table as Home Depots (Charts) newest director, it will no doubt be a decorous and polite occasion. Yet not so many years ago it would have been simply unthinkable - a 1 percent shareholder, loudly opposed to managements strategy, being welcomed onto the board of one of Americas largest companies.

Its the latest, most dramatic example of one of the great power shifts in U.S. business: Owners are taking back control of big, publicly traded corporations, and theyre just getting started.

As proxy season 2007 gets underway, its worth thinking about what has really happened and whats next, because this is a case of many small changes - some virtually unnoticed by most businesspeople - adding up to a major long-term downsizing of CEO power.

For example, until 1993 institutional shareholders could not legally pick up the phone and talk to more than ten others about a company in which they all held shares unless they first filed voluminous SEC forms, thus alerting management. The rule was changed, the phone lines buzzed and a few weeks later Westinghouse CEO Paul Lego was out, followed within days by IBMs John Akers, American Expresss James Robinson and others.
Are todays CEOs batting a thousand?
Another new rule forced more detailed disclosure of CEO pay, sparking public outrage and a law restricting the corporate tax deductibility of CEO salaries. Bam, bam - two hits to CEO power.

Then the Enron/WorldCom/etc. scandals prompted the NYSE and Nasdaq to impose new listing requirements that sap CEO power further. Boards must consist mostly of independent directors (independent is strictly defined) and must meet regularly in so-called executive sessions - that is, without management. The NYSE (Charts) is explicit as to the reason: To empower non-management directors to serve as a more effective check on management. Another hit.