STARRS Letter to the Board of Directors of USAA:
Vice Admiral James M. Zortman, USN, Retired
Chairman of the Board, USAA
c/o Wayne Peacock
President and CEO, USAA
9800 Fredericksburg Rd.
San Antonio, TX 78288
Dear Admiral Zortman:
On June 29, 2023, members of Stand Together Against Racism and Radicalism in the Services, Inc. (STARRS), sent the attached letter regarding our concerns about USAA’s position regarding DEI, to strongly encourage you to stop supporting its underlying divisive ideology. We have not received an acknowledgment or response.
As the annual general membership meeting approaches on August 25, 2023, and as members of USAA, the purpose of this letter is to alert you and members of the Board of additional concerns. Please pass this letter to members of the Board.
USAA, now a reciprocal inter-insurance exchange owned by its members, was founded in 1922 for the purpose of providing competitively priced insurance to its members, at the time just U.S. Army officers. Today, through its various related entities, it ranks as one of America’s leading insurance and financial services companies, now serving present and former members of all branches of the U.S. military.
Many STARRS members are USAA members, and thus owners of the company. As owners, their interests extend well beyond their being consumers of insurance and financial services. They expect the company’s operations to reflect the culture and needs of the population it serves (our active duty and former military service members and their families), that is, its owners.
It was with deep concern, therefore, that STARRS leadership recently learned of certain developments at USAA. We hope the information was incorrect, but the circumstances under which the information was provided would suggest otherwise.
We thus ask the USAA Board of Directors to address the following:
1. Why did the company recently commence to change its culture, a culture that had served it well for over a century?
2. Did that cultural change include embrace of Diversity, Equity, and Inclusion (DEI), a Marxist-based, political philosophy the tenets of which include principles antithetical to equal opportunity, racial neutrality, meritocracy, the U.S. Constitution’s Equal Protection mandate, and the mandate of Title VII of the Civil Rights Act of 1964?
3. Is it true that pursuant to its reported embrace of DEI, and perhaps in anticipation of pushback from its employees, the Board of Directors approved policy changes whereby executives’ evaluations (for purposes of such things as compensation, bonuses and promotion) would no longer include a component that had been used to measure employee satisfaction?
4. Is it true that the Board of Directors also approved employment practices that included race-based hiring goals, including provisions whereby upper-level executives and managers would be evaluated in part based upon the achievement of such race-based employment practices goals?
5. Do such practices include, as reported, that the award of executives’/mangers’ compensation, bonuses and/or other financial incentives could depend upon the achievement of such race-based hiring goals?
6. Is it true that within the past two years at least one high level vice-president position was filled by a less-experienced employee who happened to be in an allegedly “underrepresented” group rather than by a well-respected and more experienced white male whose subordinates broadly had expected would be elevated to the position because his experience, knowledge and leadership was widely regarded as making him the best-qualified person for the position?
7. Is it true that the policy changes outlined in items 3-6, above, if they occurred, were concealed from most USAA employees? If so, why?
8. If any of the policy changes and practices described in items 3-7 occurred, why were we, as owners of USAA, not informed?
We understand that for the first time since 1923, and despite, during the interim, positive financial performance through the Great Depression, periods of two world wars and prolonged military conflict, economic downturns/recessions, double digit inflation, the 2008-09 economic crash, and a pandemic, USAA recently reported having operated at a financial loss in 2022.
Similarly, press reports include multiple rounds of layoffs, and anecdotal reports include widespread employee dissatisfaction.
What, that had not previously occurred, went wrong this time and that contributed to this poor financial performance?
What steps has the Board undertaken to investigate and consider, independently, whether the reported embrace of DEI as part of its reported cultural transformation, with its alleged loss of employee satisfaction and morale, and with the reported compromise of merit undiluted by identity preferences in employment practices, has played a role in its declining financial performance?
We believe that the use of employment practices described in items 3-7, above, if they have occurred, would clearly be detrimental to the financial wellbeing of USAA and thus its member-owners for a variety of reasons, both operationally and because they would increase USAA’s liability exposure for violation of Title VII (42 USC 2000e-2(a)).
As you are no doubt aware, on July 13, 2023, in the wake of the Supreme Court’s June 2023 decision in Students for Fair Admissions v. Harvard College and University of North Carolina, thirteen state attorneys general warned the Fortune 100 CEOs that if they did not reform their employment practices to conform to the letter and spirit of Title VII, enforcement action against those companies would ensue.
That warning applies with equal force to USAA (and USAA does business in each of those thirteen states).
Moreover, any concealment of such from USAA’s employees and member-owners would be wholly unacceptable and not in keeping with a culture that includes trust and transparency, which are integral to the culture upon which USAA was founded and that in part accounted for its success for a century.
As you know, USAA’s officers and directors have an obligation to the company (and derivatively to its member-owners) to act reasonably, in good faith and in USAA’s best interest at all times.
We respectfully ask you to fully and completely report to us and to all member-owners about whether the above reported practices have occurred, and if so what is being done to immediately bring USAA into full and unquestioned compliance with Title VII.
The Supreme Court said, in Harvard/UNC, that all race-based discrimination is “odious to a free people,” and “invidious in all contexts,” and that “it demeans the dignity and worth of a person to be judged by ancestry instead of by his or her own merit and essential qualities.”
USAA’s present and former members include many who have fought for, and some who died for, those principles, as well as many family members who have suffered the loss of or injury to loved ones for the protection of those ideals.
We certainly expect USAA to operate not only lawfully but clearly and transparently as an example of such principles as equal opportunity and protection from discrimination.
Employment practices that justify and reward race-based or gender-based discrimination would be antithetical to those core values.
Thank you. We look forward to your response.
Robert D. Bishop, Jr.
Lieutenant General, USAF, Retired
William “Dean” Lee
Vice Admiral, USCG, Retired
Joseph W. Arbuckle
Major General, USA, Retired
Vice Chairman, STARRS
Ronald J. Scott, Jr.
Colonel, USAF, Retired
President and CEO, STARRS
Letter in PDF format: Open Letter to USAA CEO and BOD 16AUG23 (pdf)
Attachment: STARRS June 29, 2023, Letter to USAA CEO
USAA eliminates 300 more employees in new round of job cuts (KSAT, 17 MAY 23)
San Antonio-based USAA is eliminating 300 employees in the latest rounds of layoffs this year. USAA has been one of San Antonio’s largest employees for years. The organization employed 19,000 local workers in 2022, according to the 2022 Annual Comprehensive Financial Report from the city of San Antonio.
However, another round of layoffs marks the third time the company has cut jobs this year, taking out another 300 employees from across the organization. . . .
. . . . In February, the company removed 130 employees, with most coming from the bank’s mortgage service department. Another 475 jobs were eliminated in April, which represented just over 1% of the the organization’s total workforce.
The latest round of layoffs brings the total of eliminated employees to just over 900 in 2023.
Earlier this month, USAA posted losses on its annual balance sheet the first time in its 100 years of operation. . . . .
USAA posts first loss in 100 years (San Antonio Business Journal, 3 MAY 23)
For the first time in over 100 years of operation, financial services giant USAA posted losses on its annual balance sheet. In an annual report published on Tuesday, the company, headquartered on San Antonio’s Northwest Side, reported just over $36 billion in revenue in 2022, a 3% decline from last year. . . . .
USAA slashes 300 more jobs after reporting its first annual financial loss in a century (San Antonio Current, 17 MAY 23)
Financial services firm USAA — one of the San Antonio’s largest employers — has jettisoned 300 more jobs, a belt-tightening move that comes two weeks after it posted its first annual loss since 1923, the Express-News reports.
Company officials told the daily that the firings were spread across most of its offices and business lines. The enterprise still has 37,000 workers, roughly half of them in the Alamo City, where it’s headquartered.
At the beginning of May, USAA reported a loss of $1.3 billion on sales of $36.3 billion for 2022. That compares to $3.3 billion profit on sales of $37.5 billion the prior year. . . .
USAA whistleblowers want to be heard—and now (Compliance Week, 16 JUNE 22)
In the 15 years I’ve been writing for Compliance Week, never have I covered a company that has evoked as much anger and palpable relief from so many current and former employees as USAA—anger toward its senior executives and management, and relief someone finally had the courage to come forward publicly.
Since Compliance Week published its three-part series on USAA’s “catastrophically mismanaged” compliance culture, more current and former USAA employees (nearly two dozen, to date) have shared with me their own experiences about reporting alleged violations of law internally to USAA’s management—some on numerous occasions and in documented emails—only to be retaliated against or let go in response.
For the sake of this specific column, Compliance Week has chosen to leave all names anonymous, including the allegedly culpable management. But what I will share is all the employees who came forward to me either worked or currently work in various departments at various levels of the organization—from the lower ranks to upper management. In any organization, that’s typically a sign of a systemically unhealthy culture. . . . . (read more)