Top management remuneration in a post-transition economy: does company ownership make a difference?

Abstract

Executive remuneration is considered among most important mechanisms to align interests of managers and company owners. This paper examines the role of company ownership as a determinant of top management compensation. The aim of the research was to determine the impact of ownership origin, domestic or foreign, on top management remuneration practices in a post-transition economy country. The research is based on a survey of top management remuneration practices among 60 medium and large sized Croatian companies. Research results indicate that foreign owned companies provide more annual bonuses, long-term compensation and additional benefits to higher percentages of top managers than domestically owned companies. Companies with domestic owners provide annual bonuses at higher ratios of base pay compared to foreign owned companies and position managerial pay at higher levels relative to comparative firms in the sector with foreign owners. Top managers, investors and firm owners should be aware that in post-transition economies compensation practices greatly differ between domestic and foreign owned companies.