Water company executives should immediately lose their bonuses if the firm they run causes environmental damage, such as illegal sewage spills into rivers, campaigners say.
Regulator Ofwat is to consult later this year on whether plans to ban bonuses could be introduced.
Environment secretary Stephen Barclay said it was time water company bosses “took responsibility”.
But a campaign group said the policy should be implemented immediately.
“The issue here is black and white. Just ban these iniquitous rewards for wrecking the environment now,” said Charles Watson, chair and founder of River Action.
The UK’s water companies, which are in charge of managing water supply and waste water, have faced heavy criticism in recent times over leaks and sewage discharges into rivers. Pressure is growing on the UK’s water system, much of which was built decades ago, due to climate change and population growth.
There has also been backlash following the announcement that suppliers planned to put water bills up by around £156 a year by 2030 in a bid to modernise the UK’s ageing water infrastructure.
Ofwat first announced measures to ban future bonuses for bosses running companies found to have harmed the environment March last year, but is still to consult on whether the plan will go ahead, as well as what types of incidents would cost a water company executive their bonus.
Campaigners and government opposition parties have said they had long been calling for restrictions on water boss bonuses and that they did not go far enough.
River Action’s Mr Watson said it was “disappointing” the proposals were subject to consultation.
He said fixing leaks “must be the top priority of all water companies, not rewarding boardroom failure”.
Last year, senior executives from five of the 11 water companies that deal with sewage took bonuses. But at the other six, bosses opted to forgo them after pressure from campaigners.
The government hopes the policy will apply to bonuses for the next financial year beginning in April. If it does come into force, it would apply to water companies in England and Wales.
“In cases where companies have committed criminal breaches, there is no justification whatsoever for paying out bonuses. It needs to stop now,” said environment secretary Mr Barclay.
The Department for Environment, Food and Rural Affairs (DEFRA) said incidents that could cost executives their bonuses could include polluting a bathing site or conservation area, or a company being found guilty of serious management failings. The rules would apply to executives and board members.
Labour’s shadow environment secretary Steve Reed said his party had been calling for regulator Ofwat to be given the power to block bonuses since last year.
The Liberal Democrat’s environment spokesman Tim Farron said Mr Barclay’s proposals should include banning bonuses “regardless of criminal conviction”.
Meanwhile, Mark Lloyd, head of the Rivers Trust, added while a a ban on bosses’ bonuses “will grab some headlines in the run up to an election, they will not address the more fundamental structural issues in the water sector”.
Separately to the ban on bonuses, Ofwat was handed a range of other new tools designed to hold companies to account on Monday.
They include the ability to fine firms up to 10% of their turnover for providing poor customer service.
Ofwat has previously said it is looking for “a step change” in performance across the sector. Last year, the regulator ordered firms to pay back millions of pounds to households after they failed to meet key targets.
In its latest review into the industry, Ofwat said it found there were still too many instances where customers felt let down by their water company.
Ofwat chief executive David Black said: “Where we see failure, Ofwat can and will take action which could result in significant fines.”
The fines for poor levels of service were part of a range of new measures, including some around environmental protection, payouts to shareholders and executive pay, he said.
A spokesperson for Water UK, the body representing water companies, said firms were providing record levels of help for customers, including financial support with their bills for two million households.
“It is right that regulators have all the powers they feel they need to hold water companies to account,” the spokesperson said.
“Water companies are determined to provide the best possible service for their customers and are currently providing unprecedented levels of support.”