EXECUTIVE COMPENSATION AND PAY STRUCTURES IN CROATIA: EXPLORING SECTORAL DIFFERENCES BETWEEN HOSPITALITY AND OTHER …

Summary

This research paper, "Executive Compensation and Pay Structures in Croatia: Exploring Sectoral Differences Between Hospitality and Other Industries," by Golja, Galant, and Kukurin, aims to comprehensively analyze executive compensation dynamics in Croatian listed companies from 2020 to 2024. The study particularly investigates the sensitivity of executive pay to firm performance, its alignment with employee compensation, and the evolution of vertical pay disparities within these firms. A significant focus is placed on uncovering sectoral differences, especially comparing hospitality firms with companies in other industries. The paper seeks to contribute to the existing literature by providing firm-level analysis on this topic within a post-transition economy like Croatia, which experienced the economic shocks of the COVID-19 pandemic and increased regulatory attention to pay transparency following the EU Pay Transparency Directive (2023/970). The methodology involves analyzing a balanced panel of ten major firms listed on the Zagreb Stock Exchange. To understand the compensation patterns, the researchers apply fixed- and random-effects regressions. Robustness checks are also incorporated to account for time effects and sectoral differences. The findings indicate a distinct dual pay structure operating within these Croatian companies. Employee compensation is primarily influenced by firm size and other structural characteristics of the company. In contrast, executive pay is more closely linked to profitability, demonstrating sensitivity to firm performance. The study also reveals that internal pay alignment is statistically significant across different sectors, and a notable trend observed is that pay dispersion tends to increase as firms expand. This suggests a gradual shift towards performance-based pay within Croatia's evolving corporate governance framework. The implications of these findings are significant for understanding corporate governance and human resource management in Croatia and potentially other post-transition economies. The observed dual pay structure suggests that different drivers underpin compensation strategies for executive and non-executive roles. The strong link between executive pay and profitability points towards an increasing adoption of performance-based incentives for top management, aligning with agency theory expectations. However, the rising pay dispersion as firms grow could have implications for internal equity and employee morale, necessitating further consideration for policymakers and corporate leaders. The study provides early, sector-specific evidence that can inform future research and policy discussions regarding fair and effective compensation practices in the Croatian business landscape, particularly in the context of its evolving economic and regulatory environment.