He said many CEOs were "mysterious" and "invisible" to their employees and the public. Workers, he added, were beginning to find a voice and, unless organisations change, employees at the bottom will "pull down the big glass towers" in which board members operate.
Handy, who in 2011 entered HR magazine's Most Influential hall of fame for his lifetime of achievement in the HR arena, was speaking at the 10th anniversary of WorkTech in London, a two-day event examining workplace innovations and future of work.
"A 21st century democracy will not stand for continually rewarding 1% of the company while the other 99% continue to suffer," Handy said. "You only have to look at the Arab Spring and Occupy Movement to see the power of people's voice.
"We need employees at the bottom of the organisation to have more of a voice. This takes power away from the people at the top, which will pull down the glass towers."
Handy said the way people view work is changing. He said people want more control of how they work and big organisations are moving too slowly to match the modern worker's ambitions.
To the public, he said, the typical CEO was invisible. "The only one [who is visible] is Richard Branson and he lives on an island."
He added it was wrong that CEO remuneration was fixed by others who were also "grossly rewarded".
What he wanted, he said, was a capitalist economy where companies did not just think "how to make that one more pound", but how to improve culturally and ethically for their customers and workers.
"If you make money the point, you are missing the point," he said. "I love to see businesses grow, but they should be growing better not bigger. Think of them as an orchestra. Once you have the right number of musicians you practise to improve; you don't just add another violinist."
