New York Federal Reserve President William McDonough issued a strong denunciation of executive compensation, calling on top company officials to take pay cuts.

"Beginning with the strongest companies, CEOs and their boards should simply reach the conclusion that executive pay is excessive, and adjust it to more reasonable and justifiable levels," McDonough said in a speech Wednesday near the World Trade Center site.

McDonough said chief executive pay has risen in publicly traded companies to 400 times that of production workers on average, from 42 times two decades ago.

"Should there not be both economic and moral limitations on the gaps created by the market-driven reward system?" he asked in the speech near Wall Street in New York.

He added that voluntary pay cuts would benefit shareholders and strengthen the U.S. economy.

"We must recognize that the leadership of the American economy has made a large number of American citizens, and countless more around the world, question our judgment and/or our ethics," McDonough said. "It is hard to find somebody more convinced than I of the superiority of the American economic system, but I can find nothing in economic theory that justifies this development."

He said the policy of overwhelmingly boosting executive compensation was also "terribly bad social policy and perhaps even bad morals."