David Cameron backed powers for shareholders to veto executive pay packages as political pressure to curb vast salaries and bonuses gathered pace.
The Prime Minister said he was determined to end the "merry go round" of super-rich bosses rubber stamping each others' inflated deals and being rewarded for failure.
"The market for top people isn't working, it needs to be sorted out," he told The Sunday Telegraph.
"Let's empower the shareholders by having a straight, shareholder vote on top paid packages."
No details have been agreed on how the new arrangements would work, but the move could form part of a package of reforms being worked on by Business Secretary Vince Cable.
Downing Street sources indicated that the vote could operate when senior executives join a firm and after being sacked - to prevent people walking away with huge payoffs despite having failed.
Mr Cable is due to publish the results later this month of a wide-ranging consultation on the issue which has united political parties keen to show austerity is being extended to the boardroom.
All three main party leaders have spoken out against spiralling pay over recent days as they bid to tap into voter anger at the lack of restraint at the top.
Deputy Prime Minister Nick Clegg, whose Liberal Democrat party have been pushing within the coalition for radical reforms, attacked what he called "crony capitalism".
Labour have put forward a detailed package of changes - including a place for employees on remuneration boards - to create what it called a "more responsible and better capitalism".
Challenging the Government to match its promises, Opposition leader Ed Miliband poured scorn on Mr Cameron's stance - saying voters would not believe he was serious about reforming big business.
But in his interview, Mr Cameron struck a firm tone about boardroom cronies helping each other "fill their boots" while the rest of the country was being forced to tighten its belt.
"We've got to deal with the merry-go-round where there's too many cases of remuneration committee members sitting on each other's boards, patting each other's backs, and handing out each other's pay rises. I think we need to get to grips with that," he said.
He went on: "We need to redefine the word fair. We need to try to give people a sense that we have a vision at the end of this, of a fairer, better economy, a fairer, better society, where if you work hard and do the right thing you get rewarded."
Labour's proposals include simplifying remuneration packages into salary and one performance-related element and publishing a league table of how much more bosses earn than employees.
It also wants an obligation on investors and pension fund managers to disclose how they vote on remuneration packages and a repeat of the bank bonus tax.
In an interview on Friday, Mr Miliband said: "Does anyone really believe that David Cameron came into politics to create a more responsible capitalism? The public are not going to buy it.
Urging the premier to adopt all of Labour's proposals, he said: "There can't be any more foot-dragging and backsliding.
"If David Cameron wants a more responsible capitalism - responsibility at the top and the bottom - then this would be a start."
Shadow business secretary Chuka Umunna said: "Labour has called on the Government to show that it is serious on this issue and to take the action needed to stop rewards for failure - yet again it has fallen short.
"David Cameron is failing to meet the three tests of greater accountability, transparency and fairness which Labour has set to end the 'something for nothing' culture in our boardrooms and the City. When the country has been looking for him to finally take a lead and stand up to vested interests.
"The Prime Minister is dragging his feet and has not given any indication that he will implement the recommendations of the independent High Pay Commission in full.
"There is no point giving shareholders a vote on executive pay without the greater transparency needed so they can discern the aggregate remuneration executives receive under the complex arrangements currently in place - David Cameron has shown he is simply out of touch."
Meanwhile, new research showed that chief executives in 87 of the FTSE 100 companies took home £5.1 million in basic pay, bonuses, share incentives and pension contributions in 2010-11.
But there was no corresponding rise in the value of their companies, according to the Institute for Public Policy Research (IPPR), which carried out the analysis.
Total remuneration of chief executives increased by 33%, while the average increase in company value was 24%, the think tank said.
The IPPR said reforms to tackle "excessive" boardroom pay should go beyond "shareholder activism".
Nick Pearce, director of IPPR, said: "This new analysis confirms that boardroom pay is running far ahead of company performance in many of the UK's major businesses.
"Attempts to link pay to performance haven't worked well because it's hard for shareholders to monitor the performance of individual executives.
"Instead, pay deals for top earners have become increasingly complex as well as increasingly generous.
"Tackling excessive top pay should include steps to ensure that employees get a fairer share of rewards.
"To reflect the contribution that all employees make to company success, we should make sure that employee representatives sit on remuneration committees and that boards report to all staff annually on pay levels across the company."Suggest a correction