David Cameron has indicated he will back plans for shareholders to have a veto on executives’ pay amid growing demands to curb lavish salaries and bonuses.
Until now shareholder votes on pay deals have not been binding so they have been unable to block large payouts to bosses.
But Mr Cameron says he is determined to end the “merry-go-round” of super-rich bosses rubber-stamping each other’s enormous salaries and being rewarded for failure.
The Prime Minister has said he wants to make changes this year to correct the problem.
“We have a Queen’s Speech coming up in the spring this year,” he told the BBC’s Andrew Marr Show.
“I don’t want to pre-empt it but it is very likely to include legislation on companies and on banking and things like that, so there is room to make legislative changes if that is necessary.”
He said Business Secretary Vince Cable would be leading work on the subject and insisted “everything was on the table”, including a law requiring shareholders to vote on pay and severance packages.
Mr Cameron said there needed to be “clear transparency” to really see what people are being paid and then binding shareholder votes on pay levels – as well as “dismissal packages and payments for failure”.
Earlier, he told The Sunday Telegraph: “The market for top people isn’t working, it needs to be sorted out.
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“Let’s empower the shareholders by having a straight, shareholder vote on top paid packages.”
Mr Cable will be leading work on the subject and is set to publish the results of a wide-ranging consultation on the issue later this month.
All three main party leaders have attacked spiralling pay in recent days as they attempt to tap into voter anger over the issue.
Deputy Prime Minister Nick Clegg has lambasted what he called “crony capitalism”.
Chief Secretary to the Treasury Danny Alexander told Sky’s Dermot Murnaghan new legislation on the matter is something the Liberal Democrats have argued for “for a very long time”.
“It’s very important now that the mood is for change in this area and it’s something you can do something about by making the system more transparent by giving shareholders – who after all are the owners of these companies – binding votes.
Labour leader Ed Miliband has also attacked directors’ pay
“You can stop the merry-go-round that exists within many remuneration committees where you have got members of one company’s board scratching the backs of another.”
The Labour Party have also put forward a series of changes, including a place for employees on remuneration boards, to create what it called a “more responsible and better capitalism”.
Opposition leader Ed Miliband challenged the Government to match his promises and claimed voters would not believe Mr Cameron was serious about reforming big business.