The DTI's consultation on the remuneration of directors closes on Tuesday.

Bosses leaving failing companies would have their compensation restricted to six months of their salary under the government's plans.

The consultation document also recommends that directors' pay be linked more closely to the performance of their companies.

Forum Response: Association of Chartered Certified Accountants

Paul Moxey, ACCA's head of corporate governance, said: "Concerns over 'fat cat pay' are part of the current lack of trust in capital markets. Solutions are needed which include measures to ensure ethical awareness and greater transparency - issues which, unfortunately, the Financial Reporting Council (FRC) failed to make explicit in its new Combined Code on Corporate Governance.

"Board members themselves must start displaying more sensitivity to the relative balance of their pay and others in their company - CEOs in the top 100 UK companies are typically paid 80 times as much as the average worker.

"The stated purpose of this consultation is too narrow. It only seeks views on whether compensation reflects performance at the point when directors' contracts are terminated. But 'rewards for failure' potentially arise at the time they come into employment.

"The problem should be considered as part of the wider subject of directors' remuneration. If directors' original terms and conditions are seen to be fair and reasonable then problem issues on termination should be dealt with transparently and, hopefully, to the satisfaction of all concerned.

"Improving communication between shareholders and companies and empowering smaller, individual shareholders on matters relating to directors' pay is the key to ensuring that board remuneration policies are subject to less criticism in the future.

"With the exception of the standard measure to track the relationship of board pay to employee pay and Return On Capital Employed, this should not be achieved, however, by further legislation.

"The new Combined Code requirement for board appraisal and the Company Law Review recommendations for enhanced disclosure in the Operating Financial Review on performance should enhance transparency.

"These, in conjunction with a remuneration and severance policy and employment contracts which link pay to long term performance, will help to ensure that under-performance is addressed appropriately."

Forum Response: Institute of Directors

Ruth Lea, head of the policy unit at the IoD, said: "We have made clear on a number of occasions, we see directors' remuneration as a matter for shareholders and not further legislation.

"Shareholders are now more aware of their responsibilities to the firms they own and we would like to see the recently demonstrated shareholder activism given the opportunity to take effect."