The Institute of Directors (IoD) says that if at least 30% of shareholders vote against a company's executive pay policy, a second vote should be held.
Shareholders should have greater influence when it comes to executive pay at Britain's largest companies, the IoD says.
It warned that public trust in big business was in need of rebuilding and should be run in the long-term interests of investors and employees rather than the short-term interests of managers.
In its second business manifesto paper – the first being on corporate governance at large unlisted companies – the IoD seeks to engage the government that emerges victorious after the 8 June election on the challenges facing the UK economy and industry.
It says if that rejection by 30% of investors at a company annual general meeting (AGM) should trigger a revision of the pay policy and a vote on the revised proposal.
The focus on shareholder pressure comes after a series of pay rebellions at a number of companies in recent months including construction group Carillion and household products manufacturer Reckitt Benckiser.
Meanwhile, shareholders at Royal Bank of Scotland are being urged by investor advisory group Institutional Shareholder Services to vote against a 175% rise in the long-term pay award to chief executive Ross McEwan at its AGM on Thursday, 11 May.
Last month, the business, energy and industrial strategy select committee said businesses must address excessive pay and bonuses for executives and recommended an end to multi-year pay deals.
Crisis of confidence
Currently shareholders have a binding vote on future pay policy once every three years.
Despite many high-profile rebellions executive pay policy is normally waived through at AGMs, the IoD said.
Oliver Parry, head of corporate Governance at the IoD, said: “Business has been facing a crisis of public confidence since the financial crisis, and the political impetus to intervene will not disappear, whoever is elected.”
He added: “Now is the time for sensible reforms which increase transparency and draw more engagement from shareholders.”