Executive pay has spiralled to "stratospheric levels" in some of the top companies that the UK now has a divide between rich and poor that rivals some developing countries, said the High Pay Commission on Monday following a year-long review.
The argument used by British business leaders that executive salaries must rise in order to attract the best talent "is a myth", said Deborah Hargreaves, chair of the High Pay Commission.
"Our own evidence shows that global mobility is limited, with only one successful FTSE 100 chief executive officer poached in five years – and even this person was poached by a British company," Hargreaves said in the report – Cheques With Balances: why tackling high pay is in the national interest.
The final report from the Commission offered 12 recommendations to address what it sees as a "crisis at the top of British business" urging business leaders to act to "build transparency, accountability and fairness".
Some of the recommendations include simplifying pay structures, publishing pay packages, standardising remuneration reports and requiring fund managers and investors to disclose how they vote on pay.
Hargreaves said "excessive pay is deeply damaging to the UK as a whole" and that "we must now break open the closed shop that sets pay for our top directors".
As the coalition government's austerity drive takes effect this year and thousands of employees face unemployment the focus on so-called fat cat pay has returned to haunt the country's leading directors.
A number of studies this year reported little evidence of a link between payout and performance as director pay continues to rise.
In 1980 the report said the UK's top bosses were well rewarded but since then pay has escalated so much that some executives have seen salary increases of over 4000 percent.
The pay gap between executives and employees has widened so that in the past year executive pay in the FTSE 100 rose on average by 49 percent compared with just 2.7 percent for the average employee.
The top earner at BP took home 63 times (£4.5 million) the amount of the average employee this year but in 1979 the multiple was 16.5.
At Barclays top pay is now 75 times that of the average worker. In 1979 it was 14.5. In just over the past 30 years the pay of Barclays top boss has risen by 4,899.4 percent from £87,323 to £4.4 million.
This month David Cameron said more women on boards would curb excessive pay outs to the country's top directors after a report by Data Income Services revealed that directors' pay had increased by 49 percent in the last financial year.
In September business secretary Vince Cable launched a consultation over reporting and executive pay to bring boardroom pay levels closer into line with company performance.