Speaking to the House of Commons yesterday, Cable also said the Government would make remuneration reports easier to understand, increase transparency of directors' salaries, encourage a more diverse range of people onto company boards and require all companies to introduce "clawback" policies, allowing them to recoup bonuses in cases where they are later shown to be unwarranted.
Sean O'Hare, remuneration partner at PwC, said: "The measures represent the most significant recasting of executive pay rules for a decade. Anyone who thinks pay does not reflect what shareholders want should feel satisfied - shareholders now clearly have all of the information and tools at their disposal to hold Remuneration Committees to account. Nowhere else in the world will executives see their pay subject to such rigorous checks and scrutiny.
"The most significant change is the binding vote for shareholders on future pay. This will force much greater engagement between corporates and shareholders, as no one will want the figures subject to vote to come as a surprise. It's true shareholders will be loathe to use the binding vote but for this reason they'll want to be involved beforehand in the decision.
"In strengthening the hand of institutional shareholders, the binding vote will put the spotlight on the proxy agencies who advise them. These mainly US entities sit outside UK regulation so there could be questions around accountability if they're to have much more influence on UK PLC. We may see their role examined as part of the Kay review.
"Requiring remuneration committees to justify the link between pay and performance is no bad thing. But given the varying timeframes and performance periods of executive pay programmes, a single figure for executive pay may end up creating more confusion than clarity.
"It is no surprise that claw-back will become compulsory for all companies following the adoption of this measure by regulators in the financial services sector.
"Given the current political environment, business really can't complain about what's on the table. The Government has listened to the main concerns and there's nothing onerous enough to affect a company's willingness to list in the UK. However, there's much work afoot for corporates in simplifying and communicating the information required.
"Whether the changes have any impact on actual pay levels is another matter. Certainly anyone expecting to see a dramatic drop in pay levels is likely to be disappointed. but the measures should help build public confidence that executive pay decisions are subject to proper scrutiny and transparent."
Joanne Segars, NAPF chief executive, said: "As major institutional investors, the NAPF welcomes today's announcement from Vince Cable, which is in line with much of what we have been arguing for.
"Greater transparency and simpler pay structures are a must. Boiling all the pay awards and bonus options down to a single figure will help shareholders hold executive pay up to the light.
"We echo the call for more diversity among decision makers. There has long been a need for a wider mix of people on company boards and remuneration committees. Fresh perspectives and experiences are invaluable in securing the long-term health of a business.
"But the introduction of a binding vote needs to be handled very carefully, and shareholders need to know more about what it means. A vote must not impede the effective management of businesses, or the constructive dialogue between shareholders and boards."
And Jonathan Exten-Wright, employment partner at DLA Piper added:
"Whilst The UK Government will legislate to give company shareholders a binding vote over executive compensation, it could prove cumbersome and in particular if the package is rejected and has to be renegotiated and could even lead to deadlock. Existing contracts will need to be changed to reflect this new requirement, unless legislation is introduced to trump existing terms.
"While certain companies' remuneration reports can be complex, it remains to be seen whether improved clarification and explanation would encourage greater shareholder activism in the setting of executive pay levels. It may invite some to adopt more simplified pay structures which could reopen the debate of how aligned these are with shareholder interests by virtue of their design. It could also mean in that case renegotiating terms.
"A key aspect of Vince Cable's announcement today is that the corporate governance code is to be revised to include a bonus clawback mechanism of executive bonuses. In reality it is it is difficult to see these as applying except in the most extreme circumstances, since it means taking back pay, and in practice actual recovery is bound to lead to disputes as to whether the claw back has been triggered and difficulties in achieving recovery of the sums paid over."
But Unite general secretary Len McCluskey said: "If Cable was really serious about tackling the boardroom abuses, he should have included the legal requirement for an employee representative on the remuneration committees as part of his proposals. Instead, he spoke vaguely about boardroom 'diversity'.
"An employee representative on the board by law would have sent a clear message to the millions of working people, who have seen their living standards slashed by the coalition's callous austerity programme, that ministers are serious about their 'We are all in this together' mantra.'
McCluskey said that the coalition, that had been in power for nearly two years, had been 'dragged kicking and screaming' to this point - and that much more needed to be done to stop boardroom abuses that had seen directors of FTSE 100 companies receiving 49% pay rises.
He added: "The key to this problem is the 'you scratch my back' remuneration committees made up of the same old clique of corporate high-rollers - the mandatory introduction of employee representatives would have diluted this 'old boy' network.
"It is a disgrace that Unilever's CEO earns 285 times that of his average staff. Yet, a whole swathe of middle earners are facing an income drop for the next eight years, according to the Resolution Foundation.
"Ministers trot out the concept of 'shareholder power' - but this is mere lip service when so many shareholders are institutions or are based overseas.'
"Vince Cable has made a start on tackling the problem of excessive pay, but he needs to go much further and much faster.
Last year, a survey by Income Data Services (IDS) revealed that directors of FTSE 100 companies had received a 49% pay rise in the previous 12 months.