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CEO and executive director pay for performance in transition economies: evidence from Croatia

Pay for performance is among the most researched topics in executive compensation. At the same time existing knowledge on executive pay for performance in transition countries is limited, and methodologically inconsistent to be fully comparative. In this paper the explore pay for performance in Croatia. We show a statistically significant positive relationship among relative amount of variable compensation and performance measured in net profit, ROE, ROS, and EPS. Equity compensation, a crucial component of executive compensation packages in the Anglo-Saxon countries, is marginal as a component of executive compensation in Croatia thus not being related to performance. There is a statistically significant difference in firm performance measured in ROE, depending upon the relative amount of fixed compensation (base pay) among different firm groups segmented by performance (non-profitable or poor profitability, low profitability, moderate profitability).

executive compensation; transitional economy; pay for performance

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