Bosses' pay should have to be approved by votes among shareholders as part of efforts to restrain rising inequality, Prime Minister David Cameron was quoted as saying in an interview with the Sunday Telegraph.
High executive pay has become a growing concern for all Britain's political parties as public anger turns against the widening gap between rich and poor.
Most Britons' pay packets have seen little increase during the past few years while leaders of the biggest companies have continued to receive lavish pay rises, even when the performance of share prices has been poor.
Britons are also struggling with rising prices, unemployment and government austerity measures to reduce a record peacetime budget deficit.
Business Secretary Vince Cable is expected to publish the results of a consultation on bosses' pay this month, including shareholders' powers.
Cameron pre-empted that report by outlining his plans for reforms, including giving shareholders more powers to influence pay.
The market for top people isn't working, it needs to be sorted out, Cameron was quoted as saying on the paper's website late on Saturday.
Let's empower the shareholders by having a straight, shareholder vote on top pay packages. Shareholders would have to approve salary packages and pay-offs instead of simply having advisory votes.
He also called for an end to the merry-go-round or so-called crony capitalism where remuneration committee members sit on each others boards, patting each other's backs, and handing out each other's pay rises.
We need to get to grips with that, he was quoted as saying.
The paper said the comments come as a new analysis by the IPPR think tank shows that chief executives in 87 of the FTSE 100 companies took home 5.1 million pounds in basic pay, bonuses, share incentives and pension contributions in 2010-11.
(Reporting by Avril Ormsby)