How USAA fulfills its governance mission

USAA has a special mission: to ensure the financial wellbeing of millions of current or former members of the US military and their families. It also has a special structure, as a private holding company for a diversified group of financial services firms with members, not shareholders.

Although USAA is not obliged to do so, it voluntarily follows many of the corporate governance practices that are required of public companies. These include posting its corporate governance guidelines publicly online, having board committee charters, having an independent chair and an all-independent board of directors (other than the CEO), having a board-level risk committee and creating a board matrix.

During the course of the awards review period, the firm also engaged in a series of initiatives to ensure its governance practices were medal-worthy. For example, it conducted a comprehensive review, involving outside counsel, to ensure the board and its committees are meeting their responsibilities.

Along similar lines, the board conducted a major assessment of the financial and risk expertise of the board directors, using the criteria for qualifying as an audit committee financial expert under SEC rules for public companies, and rules and guidance on risk expertise issued by the Federal Reserve for major financial institutions.

‘We want to ensure directors have both the right technical expertise and military experience, so they can provide appropriate oversight and support our mission of facilitating the financial security of the military community and their families,’ Steven Driggers, USAA’s assistant vice president and assistant secretary for enterprise governance counsel, tells Corporate Secretary.

The company took a renewed look at how the board can oversee cyber-security issues most effectively, too, investigating and considering regulatory and case-law guidance on board-level oversight, survey data on best practices at other companies, and practical advice on boards’ oversight obligations.

Cyber-attacks represent one of the key risks facing all companies, and financial services firms are often high-profile targets. To address these risks, USAA is able to draw on relationships with both private sector and military cyber-security experts. ‘While we feel we are best in class, cyber-threats are continuously evolving, so our board and management are focused on ensuring we continue to stay ahead of those threats,’ Driggers says.

The company further reviewed and updated important corporate governance documents, such as its corporate governance guidelines and board committee charters, to ensure they remain subject to best practices and reflect current USAA practices.

The firm wants to ensure these documents are consistent with board and committee self-assessments, and benchmarks its materials against those used by large banks, Driggers adds.

This article originally appeared in the Winter issue of Corporate Secretary.