The Business, Energy and Industrial Strategy Select Committee is demanding radical measures - including worker representation on the committees which set executive pay - following a series of bruising battles between blue-chip companies including BP, the oil giant, and Thomas Cook (Frankfurt: A0MR3W - news) , the tour operator.
In their report, the MPs argue that the practice of awarding huge sums in long-term share awards is flawed and outdated, and should be scrapped from the beginning of 2018.
It also calls for a new code of corporate governance for major privately owned companies - such as Sir Philip Green's Arcadia Group, which owns TopShop - and a traffic light ranking system to assess boards' corporate governance standards.
Iain Wright, the Labour MP who chairs the BEIS committee, said: "The rise of 'ownerless companies', where no single investor has a sufficiently large stake in the business to act as a responsible owner, checking performance and behaviour, provides a significant challenge to sound corporate governance.
"Successful, productive and profitable companies cannot be disconnected from society," he added.
"Businesses have wider responsibilities than short-term profits; they have a responsibility to their employees, their suppliers, and to the communities in which they operate."
Mr Wright said the escalation in bosses' pay was particularly unacceptable during a period of stagnating wages for many ordinary workers.
The MPs' inquiry was launched in the wake of the scandal over the collapse of BHS, which recently resulted in Sir Philip paying up to £363m to former pensioners , and the row over working conditions at a warehouse owned by Mike Ashley, the Sports Direct tycoon.
Carolyn Fairbairn, director-general of the CBI, the UK's most influential business lobbying group, said that most companies behaved honourably, but nevertheless welcomed the broad thrust of the report.
She (Munich: SOQ.MU - news) said: ""It is very clear that it recognises that there are many aspects of British corporate governance that are excellent, and it's something I see as I go around the world.
"They do however recognise some issues with the existing system that we would agree with … I think some of these proposals need to be put through the lens of proportionality, or burden at a time of great uncertainty for business, and to make sure we get the balance right."
A number of blistering revolts over boardroom pay have also erupted despite moves by the former business secretary Sir Vince Cable to give shareholders in listed companies binding votes on pay policies every three years.
This week, Sky News revealed that BP was aiming to avert a further rebellion at next month's AGM by cutting the potential maximum payout to chief executive Bob Dudley by several million pounds.
Tom Gosling, a partner in the remuneration practice at PricewaterhouseCoopers, welcomed many of the report's recommendations, saying: "I would agree that there's too much complexity in executive pay.
"In fact, listed company executives aren't overpaid by comparison to their private counterparts.
"But I think it is fair to say that some of the complexity in listed company schemes does make it difficult for everyone to understand what the value of them is."
As part of their wider governance inquiry, the MPs also recommend handing tougher powers of sanction to the accountancy watchdog, the Financial Reporting Council, funded through a levy on the biggest British companies.