The release of the first tax reports for last year once again disrupted the Croatian public’s opinion: this shock came from information that stated that one manager from Zagreb earned more than 170,000 kunas monthly, an attorney from Split reported an annual income of 2,575,754 kunas, and the consulate reported 2,446,718 kunas. After all information is analyzed, these high-end reports will be incomparably more than the last few years. In earnings, Nacional discovered, the best Croatian managers lead: their earnings have began to resemble those of European businessmen and they are becoming equal to European standards. Franjo Luković, the President of Zagrebacka Bank’s Management Board which is owned by the Italian Bankers Group UniCredito, had a monthly income of 166,000 kunas last year. Božo Prka, the President of Privredna Bank’s Management Board owned by the Italian Bankers Group Banca Intesa reported a much smaller income: approximately 95,000 kunas. It is logical that Prka has smaller wages than Luković because Zagrebacka Bank is larger than Privredna. But that does not mean that Prka is way behind Luković in his earnings: several Croatian managers receive part of their wages in other countries, and with the foreign and domestic wages they enjoy a range of benefits and bonuses that are oftentimes larger than their salary. With the standard benefit such as the use of a company car, credit cards and cell phones, their children have free tuition at school, they receive free rent for their houses and apartments, they receive an all expense paid annual vacation, free professional enhancement, free courses for foreign languages, clothing and foreign literature allowances, special life and health care, they have the right to purchase shares by the conditions that they desire, they are active participants in the division of company earnings, and they are members of supervisory boards of other companies. Wages, surely, are not their only direct earnings and we definitely cannot determine the standard of living of Croatia’s most successful managers by wages alone. The monthly wages of leading bankers in Croatia, such as Zdenko Adrović from Raiffeisen Bank, Goran Gazivoda from HVB Croatia, and Petar Radaković from Erste & Steiermarkische Bank, averages between 70 and 90 thousand kunas according to financial experts.

The record salary for 2002 was 170,000 kuna per month, earned by Zagrebacka Bank's CEO, Franjo LukovićThis analysis shows that this year, alongside bankers, the highest recorded income goes to managers of financial and pension plans. The former President of the AZ Fund Board, Boris Galić, received 112,000 kunas monthly. The President of the Board at DOM Fund, which was recently renamed Korifej d.d., Damir Ostoja, had a monthly income of 87,000 kunas. Leading managers like Petar Vlaić from Plavo pension fund, Ljiljana Weissbarth from HA 1 Fund, Ivan Pavelić from Helios, Dubravko Štimac from PBZ Croatia insurance, Damir Lamza from Raiffeisen, Marko Čizmek from EURO Invest, Ivan Sladonja from PBZ Invest and Tomislav Tukić from TTinvest received an average monthly income between 60 and 100 thousand kunas, according to financial experts. But, according to all criteria, 2002 was the golden year for bankers and financial institutions in Croatia. Due to the decision made by the Croatian National Bank to limit the growth of bank loans, it is estimated that this year there will be indirect damage totaling between 15 and 20 billion kunas. Even funds were not left unharmed: the new measures could be an influence on the falling price of Government bonds, which could seriously lower the contributions to pension plans. Because of all of that, financial experts foresee that banks and pension funds might have to lower wages and even cut down on the number of employees this year.

The enormously large wages in banks and other financial institutions will assert numerous important questions. Among other things, are manager wages in proportion to the principles of modern operations or are they in fact an expression of special circumstances in a transitional market such as Croatia. It will be difficult, however, to defend the large wages that bankers receive while their banks relentlessly charge their clients the highest interest rates in Europe. How do you defend such enormously large wages in pension plans when hundreds of thousands of pensioners have been left with fewer than one thousand kunas a month?

The owner of Agrokor, Ivica Todorić, pays approximately 85,000 kunas in monthly wages to his employees. The President of the Board of Croatia Telecom, Ivica Mudrinić, reported only 35,000 kunas in average monthly income. The wages for the President of the Board at Ina, Tomislav Dragičević, amounted to an average of 17,000 kunas per month with additions based on his seniority. Similar wages were given to the directors of other companies that are under state ownership because their wages are limited to the amount of the five largest average monthly incomes in Croatia. That is, of course, extremely un-stimulating because companies that are in the state portfolio employ approximately 90,000 individuals and, because of successful managers, they were able to cut losses from 2.2 billion kunas to 338 million kunas.

On the list of managers that have an income between 60 and 140 thousand kunas, we can find the director of TDR, Ante Vlahović, the owner of Gavrilović, George Gavrilović, the director of Pliva, Željko Čović, the director of Podravka, Željko Marinac, the director of Lura, Željko Perić, the now former director of Franck, Milan Artuković, the director of Siemens, Mirko Barišić, the director of Koncar, Danijel Bago, the owner of Vindija, Dragutin Drk, the owner of HUP, Andjelko Leko, Žarko Kraljević from Diner’s Club, Dubravko Grgić, Mladen Kovačić from Medika, Pavo Zubak, Vjeko Gucić from Getro, and Goranko Fižulić from Magma.

These high managerial wages have become a significant source of income for the Government budget and funds for health and pension insurance. In Croatia, however, more or less there are between 55 and 60 thousand companies of which about thirty thousand are middle or large sized companies that employ two or three managers. Because of that, there are approximately 100,000 managers in Croatia with very high earnings. Because their income ranges from 15 to 177 thousand kunas per month, they have become the economic fillers for the Government budget and funds. With that, it is not strange that very young individuals want to gain positions as managers. Young members of the administration at financial institutions, insurance companies, and private funds are approximately 30 years old or have 8 or 9 years of seniority and earn, on average, between 40 and 80 thousand kunas per month. That is significantly more than doctors or engineers of the same age group.

Alongside managers in financial institutions, banks, and funds that have the top wages, directors and board members in numerous pharmaceutical companies, leading experts in companies that deal with the production of beer and cement, and experts in computer companies are also in the top income level.

The newest information in wages for Croatia’s business elite shows a range of new and interesting phenomena. Apart from the last several years, it is evident that Croatia is gradually becoming a legal and financial country. This year many tax reports with especially high tax liability arrived. That is evidence of a larger financial discipline, as well as the fact that the control services are doing their job much more effectively. It has not been like this in the past: many managers and other employees previously received pay in cash or through companies located outside of the country. That was common even in companies under state control: apparently leading employees at Ina received most of their pay from outside of the country until 2000; of course, no taxes or contributions were paid.

Even though most wages in Croatia are still strictly business secrets, the entire atmosphere is slowly changing: it is no longer shameful to have a large income; in fact, you are seen as more successful and competent. It is completely logical that a successful manager like Franjo Luković, who was the reason that the owners of his bank received hundreds of millions of kunas in profit, be adequately rewarded. All are satisfied: the owners because of high profits, the managers because of the rewards that they enjoy, and the Government because the legalization of income leads to a larger budget income. The best example of this is Luković. Due to the fact that he had monthly earnings of 166,000 kunas in 2002, Zagrebacka Bank paid approximately 234,000 kunas monthly into the Government accounts through various contributions, taxes, and surtax. Thanks to the high wages of Luković, the Government and city budgets as well as pension and health care funds were filled to the extent of one small company.

It is evident that there is a huge difference in managerial wages. Directors of foreign companies with several thousand employees have nearly ten times lower wages than their colleagues who work in incomparably smaller but privately owned companies. In the private sector, the wages firstly depend on the success of operation, but also on whether or not the owners are foreign or domestic entrepreneurs. In relation to the standards in their countries, foreigners are better employers. Even in domestic private companies, there is a huge gap in wages. Pliva, for example, is characterized as one of the companies with the highest wages in Croatia. On the other hand, over the past few years it is evident that there is a large drain of top Pliva managers. The reason is not difficult to spot. It is obvious, for example, that Drago Marinac would never leave Pliva for lower wages in Podravka. That surely was not the case with Željko Perić when he left the Board at Pliva and moved on to become the President of the Board at Lura Group. The range of wages between private companies is best shown but the operational course of Željko Vukina: first he was a member of the Board at Pliva, then he became the President of the Board at Lura Group, and recently he has become a member of TDR’s Board. At Pliva, Vukina apparently had wages of approximately ten thousand Euros a month, in Lura he made more, and it is unclear how much he makes at TDR but it is surely more than at Lura. Among other things, it has been recently shown that TDR is one of the most valuable Croatian companies and the director, Ante Vlahović, owns 12.74% of company shares worth 315 million kunas. Board member Plinio Cuccurin has access to 7.8% of company shares valued at approximately 190 million kunas. When Vlahović and Cuccurin earn the wealth that is shared by Ivica Todorić, Dragutin Drk, Pavo Zubak, Dubravko Grgić, Zvonko Zubak, Marijan Filipović, Žarko Kraljević, Dragutin Biondić, Andjelko Leko, Josip Kordić, Ninoslav Pavić, Ivan Ergović, Goranko Fižulić, Željko Žužić, Stipe Gabrić Jumbo, Emil Tedeschi, Robert Jezić, Branko Roglić and others, it becomes clear that Croatia has already formed a strong layer of entrepreneurs and managers that have large financial potential.

British Premier, Margaret Thatcher, was the first to reward the most successful managers. Alongside large wages, she ensured them numerous benefits and stimulation, among which were often rewards in the form of shares and proportional cooperation in the distribution of income. She claimed that it was impossible to expect that managers of large and successful companies that created hundreds of millions of dollars in profit would work without special stimulation or without much individual gain. With that, she ensured top wages for the best managers, which proved to be extremely stimulating. Behind that there hid a danger that was only recently discovered: many managers, in the aspirations of creating millions in earnings, showed false balance statements and based on these documents, they paid themselves huge incomes. Because of this reason, a range of American companies went bankrupt, among them was the energy giant Enron. Even in Croatia there are two well-known controversial cases: the former director of Splitska Bank, Tomo Bolotin, had to return his paid out income because it was determined that the operations of his bank were not nearly as successful as it was shown in the financial records, from which he paid himself millions in bonuses. The director of Rijecka Bank, Ivan Stokić, paid himself 2 million kunas in rewards between 2000 and 2002; because of this his bank nearly went bankrupt when it was confirmed that €50 million was missing.

In Croatia, there has not been an excess of luck for successful managers and entrepreneurs. Many of them that were praised by the media ended up completely infamous. Out of 12 winners of the reward for manager of the year, seven have ended up retired and several of them, such as Miroslav Kutle, have ended up in prison. Even during the past several days, the managerial career ended for the owner of the shipyard “Lenac”, Damir Vrhovnik, who was also the winner of the Crome award for manager of the year. A similarly infamous end was experienced both by director Mario Floričić and Istarska Bank. Josip Gucić, Antun Movalić, Marko Marcinko, Ante Jurjević, Nikša Giovanelli, Stipe Gabrić Jumbo, Ljerka Ercegović, Pavo Zubak, Ivan Jakopec are still under investigation.