Vince Cable has issued a stark warning to Britain’s leading boardrooms that they need to crack down on bonuses to restore public trust and avert the threat of fresh legislation to limit executive pay.

The business secretary fired off a warning to the 100 biggest UK-listed companies about the damage big pay deals can have on their image, before Barclays’ annual meeting on Thursday, where protests about the bank’s £2.4bn bonus pot are expected to be registered by disgruntled shareholders.

Cable told the BBC that bankers’ pay was still “extraordinarily large”.  Bankers’ pay is also subject to scrutiny because of the EU’s cap on bonuses.

RBS, which is 81% owned by the taxpayer, is expected to ask for permission to pay bigger bonuses and has yet to disclose if it also intends to hand out “allowances” to senior executives to maintain their pay levels. Cable said the government had not yet seen any proposals by RBS, which needs to outline its pay policies by the end of the month.

“Getting pay wrong damages popular trust in business and undermines the duty to promote the long-term success of the company,” Cable said, in a letter to directors who chair the remuneration committees that set senior pay at the UK’s largest companies.

“I therefore think it vitally important that remuneration committees consider how remuneration policies can genuinely support sustainable value creation and avoid creating unwelcome incentives to focus excessively on short-term goals.”

He added: “At a time when every part of the economy is striving to get more from less, I hope you find yourselves animated by the same spirit.”

His letter is being sent as the annual general meeting season of leading companies gets into full swing, allowing shareholders to vote on the pay deals of directors. Two years ago, a record number of remuneration reports was voted down by investors. “There is now an opportunity for companies to make peace with the public,” Cable said in a BBC interview.

These are the first annual meetings since Cable introduced rules requiring companies to give shareholders a binding vote on pay policies for coming years, in addition to the requirement for an advisory vote on the remuneration report that outlines pay deals for the last year.

Cable told the heads of the remuneration committees that shareholders had shown their willingness to reject excessive pay deals. “I hope you agree that we need remuneration committees that act in a similarly active, challenging way. It is, after all, how managers up and down an organisation are expected to behave: getting the very most out of employees, for the very best value for money, rather than trying to find ways of paying the most possible,” Cable said.

It is also the first time that banks are being forced to comply with the European Union’s cap on bankers’ bonuses, which limits bonuses to one times salary, or twice if shareholders give their approval. This presents a dilemma for the government, which owns stakes in Lloyds Banking Group and Royal Bank of Scotland.

Cable had warned FTSE 100 bosses in a speech last month, when he said that some remuneration committees were ignoring the spirit of a new law intended to improve transparency in the boardroom, that he planned to send the letter. At the time, he warned that he would consider tougher measures unless their behaviour improved, which he said included stricter regulatory oversight of pay reports and policies, forcing shareholders to disclose how they have voted on pay, or making companies consult their employees on pay.

In his letter, Cable warns of the risk of new rules on pay. “You will be conscious that this issue continues to be the focus of considerable public debate. Unless business is seen to act responsibly, pressure for further action will inevitably result,” Cable wrote. “Policies that reward executives out of proportion to the value they create are a clear dereliction of the duty to promote the success of the company for the long term,” he added.

His letter, though, is being sent after the pay deals of Britain’s top bosses have already been set and the remuneration committees have already met to discuss bonuses.

Barclays, which holds its annual meeting in the Royal Festival Hall in London on Thursday, is in focus as it increased its bonus pot by 10% for 2013 to £2.4bn despite reporting a 32% fall in profits. This appeared to break a pledge by the new boss, Antony Jenkins, to contain bonuses as part of his efforts to clean up the image of the bank following the Libor-rigging scandal.

Jenkins attempted to defend the need to raise bonuses by warning of a “death spiral” as its bankers left for higher paid jobs at rivals. He is under pressure to cut more costs at Barclays and will outline his plans at a strategy day on 8 May. In the meantime, Barclays confirmed to staff that it was scaling back its global commodities business.

“This decision is in line with Barclays’ stated objective to actively evaluate and manage our businesses, ensuring they meet strict economic and strategic criteria within the new regulatory environment,” Barclays said.

In response Chuka Umuna, Labour’s shadow business secretary, said: “After promising to introduce annual binding shareholder votes on remuneration, Vince Cable and the Tory-led government caved in and have failed to match their rhetoric with action.”