The federal government should ensure any policy decisions it makes about executive pay are tested before they are implemented, Productivity Commission chairman Gary Banks has said.

"It is a difficult issue and we should be cautious about government intervention. If it is a principles-based approach, and remuneration is linked to risk taking, it is unclear how this would be implemented," Banks said at a Financial Services Institute of Australia briefing on executive remuneration.

"Government intervention to promote fairness does not always work."

Banks said he was also concerned regulation of multiple appointments to boards might not work as the pool of potential board members could be too limited.

Rather than having an outlined set of rules, he recommended that remuneration reports to directors and shareholders be made less complex.

CGI Glass Lewis director Sandy Easterbrook agreed.

"You cannot legislate for people to do the right thing. The most important thing from a governance perspective is that shareholders do their jobs," Easterbrook said.

However, Regnan managing director Erik Mather said he did not believe the current system was working.

"The system that we have is actually underwritten by the ordinary worker through compulsory superannuation. Unless the alignment gets more reasonable, you are not going to fix the problem," Mather said.

Last week, the Australian Prudential Regulation Authority released a consultation paper on executive remuneration that proposed extending the regulator's existing governance standards to cover remuneration.

Banks is heading up a government inquiry on executive remuneration, with a report due by December.