Compensation Strategies That Support Commercial Banks’ Effective Risk Management Practices

Compensation Strategies That Support Commercial Banks’ Effective Risk Management Practices by Elias Kagumya MS, Makerere University, 2006 BS, Makerere University, 1999 Doctoral Study Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Business Administration Walden University December 2019 Abstract Compensation structures with relatively high levels of contingent pay encouraged managers to engage in excessive risk-taking behavior at financial institutions, which contributed to the global financial crisis of 2008. The purpose of this study, guided by the theory of the firm, was to explore compensation strategies that some executives in Uganda used to support effective risk-management practices. This multiple case studyCompensation structures with relatively high levels of contingent pay encouraged managers to engage in excessive risk-taking behavior at financial institutions, which contributed to the global financial crisis of 2008. The purpose of this study, guided by the theory of the firm, was to explore compensation strategies that some executives in Uganda used to support effective risk-management practices. This multiple case study was an in-depth inquiry into compensation strategies that encouraged prudent risk-taking behavior. The target population comprised 5 risk-management executives from 5 separate commercial banks who had successfully implemented compensation strategies that supported risk management practices. Data were collected through semistructured interviews and a review of company documents. Data were analyzed using Yin’s approach and involved data coding, sorting, filtering, identifying relationships, confirming and linking emerging themes to the research question. Methodological triangulation and member checking were applied to ensure the credibility, validity, accuracy, and transferability of the results. Four themes emerged from data analysis: compensation challenges, financial and nonfinancial compensation, the effectiveness of compensation, and effective implementation of compensation strategies. The findings from the study may contribute to positive social change by driving the adoption of compensation strategies that motivate leaders to focus on the long-term objectives of the firm, including investing in socially responsive projects that improve the welfare of the communities in which the banks operate. Compensation Strategies That Support Commercial Banks’ Effective Risk Management Practices by Elias Kagumya MS, Makerere University, 2006 BS, Makerere University, 1999 Doctoral Study Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Business Administration Walden University December 2019 Dedication I dedicate this study to my dear wife, Ann Nkwanzi Kagumya, and our lovely children, Aaron Kansiime Kagumya, Edwin Kaganzi Kagumya, Edith Kainembabazi Kagumya, and Elianah Kukundakwe Kagumya. I could never have achieved this dream without your selfless sacrifice and support. I will forever be indebted to you for your love, support, and encouragement. You have always been my source of strength and inspiration. May God richly bless you. Acknowledgments I thank the almighty God for his protection, favor, abundant grace, mercy, wisdom, and knowledge. Without God, this would never have been possible. To God, be the glory and the honor. I thank my chair, Dr. Jill Murray, and committee members Dr. Janet Booker and Dr. Patsy Kasen for your leadership, guidance, review feedback, and support. Special thanks go to my father, Mr. Jackson Begumisa, for believing in me and daring me always to aim higher. Your wise counsel kept me going. Finally, I would like to thank my siblings, Emma, Andrew, Erick, and Jackie, for all your love and support. It takes an entire clan to raise a doctor. May the almighty God bless you richly.