USA Today printed a story Thursday that brought a hearty "Here! Here!" from me. Ten pension funds from the U.S., Canada, and Europe that manage almost $1 trillion in assets have sent a confidential letter to the Securities and Exchange Commission urging it to look at pay for performance among top executives.

And it looks like the SEC might oblige them. It's expected to present a proposal, which will probably only cover how executive pay is disclosed to shareholders, in January.

Runaway CEO compensation has been a hot topic. Yes, there is a story Thursday about a small shareholder asking the board of ExxonMobil (NYSE:XOM) to reconsider executive compensation after paying its CEO $81 million last year, mostly from the CEO exercising stock options. But let's at least acknowledge that ExxonMobil is producing excellent results.

What got my attention and support today was that these fund managers are looking at underperforming Russell 3000 companies and asking why these CEOs were so highly paid. How high, you ask? USA Today reported: "At 60 of the worst-performing companies in that group, which lost $769 billion in market value over the past five years, the aggregate pay for the top five executives of those 60 companies over the same period was $12 billion." Yikes! Imagine how much they would have been paid for actually increasing value.

New SEC Chairman Christopher Cox said last month that the commission would develop rules regarding executive compensation. That was probably the impetus for the fund letter.

About the proposal, will it stop deals like the $140 million Disney (NYSE:DIS) paid to Michael Ovitz after a failed 14 months on the job? Only if shareholders get a chance to vote on gilded offers like that and then vote to stop them -- and that's not a given.

USA Today notes that Honeywell's (NYSE:HON) top five executives earned a total of $223 million over the past five years and erased $4.3 billion in economic value (defined as net operating profits minus the total cost of capital used). Time Warner (NYSE:TWX) executives lost $41.4 billion in economic value (and $59.8 billion in market value) while collecting $1.3 billion in pay.

The Motley Fool has noted when CEO pay was up in a down year for the stock market. We have questioned why there hasn't been an outcry about massive pay packages for executives. But let me add this: The executive mantra in many cases is for outsourcing and cutting costs to the bone (including cutting employee medical costs), yet CEO and top executive pay packages are generous to a fault. The ethics of this are questionable.

It is encouraging to see these fund managers and the SEC taking action, but don't get too happy. I have yet to see the shareholders of any group of funds targeting board members for removal based on their generous pay package proposals -- and that's what it will to take to bring executives' pay more in line with performance. Fools should also realize that the SEC is a political beast. It's unlikely to propose true pay for performance (with some hard metrics). Instead, it will probably limit itself to proposing better disclosure.

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Fool contributor W.D. Crotty owns shares in Disney. Click here to see The Motley Fool's disclosure policy.