Councillors should have to approve local authority salaries of more than £100,000, the government says.
Guidance is to be issued to English councils that any salaries above that should go to a vote of full council.
Communities Secretary Eric Pickles said it should not be agreed in private and all councillors should get a say.
But the Local Government Association said councils were "leading the way" in transparency and asked whether MPs would vote on civil servants' salaries.
Research done by pay analyst Incomes Data Services this week showed that 43% of council chiefs were paid more than £150,000 last year - more than the prime minister's salary of £142,000.
The Localism Bill currently going through Parliament includes plans to require councils, and fire and rescue authorities, to publish a statement setting out their policy on salaries and bonuses for chief officers, which must be approved by all councillors.
The Department for Communities and Local Government says ministers will issue new guidance on a "salary ceiling" of £100,000 above which pay decisions should be approved separately by the full council.
But it admits the guidance "cannot impose any absolute requirements on local authorities of fire and rescue authorities" as they set their own policies.
'Shake up power'
Mr Pickles told the BBC: "Instead of being discussed by just a small number of councillors in a closed room we think this should be done by all the council in open session, which the press and the public can attend."
He said a survey suggested that chief executive pay had increased within five years - including performance related pay and bonuses - by 78%: "I don't think that's a system we should be particularly proud of."
He said the plans would "give backbench councillors a say" and said he often got complaints from councillors that they did not have any real influence on executive pay.
Mr Pickles describes the Localism Bill, which aims to devolve more power to councils and communities, as "one of the most radical pieces of legislation to be debated in this chamber for decades" .
"It is important, given that we are giving more powers to local authorities this is really just part of the checks and balances to ensure when we are giving more power that that power is open to public scrutiny."
During Prime Minister's Questions Manchester Central Labour MP Tony Lloyd told Mr Cameron most of his constituents believed cuts to council grants were "cruel and politically motivated".
The PM responded by attacking Mr Lloyd's own, Labour-controlled, local authority: "Manchester City Council is having its grant cut by 15% - that's less than my council for instance being cut by 23% - and yet they are cutting services by 25%. But I notice they have still got £100m in the bank as balances and they have a chief executive paid over £200,000 a year."
The Local Government Association (LGA), which represents councils in England and Wales, said councils were "leading the way" in transparency.
Its chief executive John Ransford said people had to consider what being chief executive involved: "These are big jobs and if we're going to have transparency let's have it across the public sector, let's see civil servants who are paid more than £100,000 in Eric Pickles's department and other departments, have their pay examined by MPs in the same way."
The average pay for a senior local government manager, including chief executives, was £134,000, he said - for a complex job managing major services.
"The number of senior officers has been driven down dramatically as people have taken efficiency savings, combined functions. That means the jobs are more complex and you have to have people with the experience, knowledge and the expertise to give the public the value for money they deserve."
He said it was right that elected councillors "had knowledge of those decisions".
But he said even if chief executives' pay was cut by 50% - that would only save 0.3% of the £6.5bn needed to plug the gap between income and what councils had to spend on services.
Asked whether senior civil servants' pay would be debated by MPs, Mr Pickles told the BBC: "I don't see any reason why we shouldn't have this kind of debate in the House of Commons."
Shadow Communities Secretary Caroline Flint said pay transparency should "cut both ways".
"Labour has proposed changes to the Localism Bill which would require councils to openly discuss not only what is being paid to senior staff, consultants and contractors but also the lowest paid council staff," she said.
"The Tory-led government need to make clear whether they will back Labour's proposals to shine a light on good and bad practice at the top and the bottom, wherever taxpayer's money is being spent."
Councils have already been compelled to publish receipts for any expenditure over £500.
Last year Mr Pickles called for council chief executives earning more than £200,000 to take a 10% pay cut and those earning £150,000 to take a 5% pay cut.