United Services Automobile Association Corporate Governance Guidelines
Last Updated: Aug. 2024
The Board of Directors (“Board”) of United Services Automobile Association (“USAA” or “Association”) has adopted these Corporate Governance Guidelines (“Guidelines”) to promote the effective functioning of the Board and its committees, and to set forth a common set of expectations as to how the Board should perform its functions. The principles and statements set out in these Guidelines are not intended to change or add to the requirements, responsibilities or authority granted or permitted by applicable laws, the USAA Bylaws (“Bylaws”) or other corporate documents. The Board will periodically review and reassess the adequacy of these Guidelines.1. BOARD RESPONSIBILITIES
The Board is the ultimate decision-making body of the Association except for matters reserved to the members. The Board's role is to set clear, aligned and consistent direction regarding the Association's strategy and risk tolerance, hold senior management accountable, and ensure the necessary financial, human, and other resources are in place for the Association to meet its objectives within a Board approved risk appetite and framework. The Board should uphold the Association's values and standards and ensure that it meets its obligations to its members and other stakeholders. The Board's primary responsibilities include oversight in the following areas: corporate governance, strategic and operational direction, risk management including operational and compliance risk management, management performance, Chief Executive Officer and executive succession planning, employee compensation and benefit programs philosophy, overall corporate performance, and membership eligibility.2. MANAGEMENT RESPONSIBILITIES
Day-to-day management and administration of the Association is the responsibility of the Chief Executive Officer. Management manages the Association in accordance with the strategic and operational plans approved by the Board and within the risk appetites approved by the Board.3. DIRECTOR RESPONSIBILITIES
The primary responsibility of the directors is to exercise their business judgment to act in a manner that they reasonably believe to be in the best interests of the Association, its members and its employees. In discharging that obligation, directors should be entitled to rely on the honesty and integrity of the Association's senior executives and its outside advisors, consultants and auditors. Directors are expected to be knowledgeable about the business of and the risks applicable to the Association, prepare for and regularly attend and participate in Board and committee meetings, and review information management deems to be important to meet the objectives of the Association within its Board approved risk appetite and framework. Directors must use reasonable efforts to determine whether information provided is complete, accurate, and adequate for purposes of making decisions on behalf of the Association, ask questions when circumstances require, and be deliberative in their decision making. Directors must support the independence and stature of the Association's independent risk management and internal audit functions. Directors are also required to bring to the attention of the Board any conflicts of interest or potential conflicts and to refrain from voting on matters where a conflict exists. Directors are expected to contribute skills and intellectual resources such as industry knowledge, financial expertise, and managerial experience that will benefit the Association in achieving its mission and plans.4. SELECTION OF BOARD CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The Board selects from among its members the Board Chairman, who shall also be the Chair of the Executive Committee as set forth in Article IX, Section 2 of the Bylaws. The Board also appoints the Chief Executive Officer and President of the Association (all references hereinafter to Chief Executive Officer should be understood to include reference to the role and title of President). It is the current practice of the Board to divide the roles of Board Chairman and Chief Executive Officer of the Association between different individuals.5. SELECTION OF BOARD VICE CHAIRMAN
The Board selects from among its members a Vice Chairman for such purposes as the Board may determine from time to time. In the event the Board Chairman is not independent, the Board Vice Chairman shall be selected from among the independent directors.6. BOARD AND COMMITTEE MEETINGS
Directors should spend the time necessary, and meet as frequently as necessary, to properly discharge their responsibilities, and additional time may be required of committee chairs and vice chairs. Board and committee meetings are generally held pursuant to a predetermined schedule, with additional meetings scheduled as necessary. The length of Board and committee meetings, and the time devoted to each item on a meeting agenda, depends upon the number and the nature of the items to be discussed at the meeting.7. AGENDA ITEMS FOR BOARD MEETINGS
The Board Chairman, in consultation with the Chief Executive Officer, Corporate Secretary and committee chairs, establishes the agenda for each Board meeting. The proposed agenda for each meeting is generally distributed to the members of the Board in advance of the meeting through a secure platform. Board members are also able to suggest items for inclusion on the agenda. During at least one Board meeting each year, the Board will review budgets for the next year, the USAA Strategic and Operating Plans, and related principal issues that the Association is expected to face.8. BOARD AND COMMITTEE MATERIALS DISTRIBUTED IN ADVANCE
Memoranda and other information useful to inform the Board and its committees regarding a particular agenda item are generally distributed to the members of the Board or committee, as applicable, in advance of a Board or committee meeting so that meeting time may be conserved and discussion time focused on questions that the Board or committee has about the material.9. OTHER INFORMATION
In addition to information provided to the Board and its committees in connection with their meetings, management regularly provides material and timely information to members of the Board and its committees with respect to the Association's businesses, financial condition and prospects, as well as matters relevant for each committee.10. ACCESS TO INDEPENDENT ADVISORS
The Board and its committees may engage independent legal, financial, and other advisors whenever they determine that doing so is necessary and appropriate in the circumstances. The Association shall pay the fees and expenses of such independent advisors retained by the Board and its committees.11. EXECUTIVE SESSIONS OF NONMANAGEMENT DIRECTORS
The nonmanagement directors of the Board shall meet in executive session as a full board at every regularly scheduled meeting and in committees as needed.12. BOARD ACCESS TO MANAGEMENT
Directors will be entitled to access members of management at any time to request relevant and additional information. Members of the Finance and Audit Committee meet with internal and external auditors without management present to request additional information and seek explanations. A director is entitled to rely on the information provided by management or auditors, absent knowledge of information that makes such reliance unreasonable.13. EVALUATION OF THE CHIEF EXECUTIVE OFFICER
The performance evaluation of the Chief Executive Officer is coordinated on an annual basis by the Compensation and Workforce Committee. The evaluation is based on performance against financial and nonfinancial objectives approved by the Board which objectives include, without limitation, the performance of the Association and the accomplishment of short-term operating and long-term strategic objectives. The Chief Executive Officer provides the Board annually with a report on such performance and accomplishments. The results of the evaluation are used by the Board in considering the compensation of the Chief Executive Officer. The consideration of Chief Executive Officer compensation is conducted at a meeting of the Board at which only the independent directors are present and the Board Chairman presides as chairman. The results of the evaluation are then communicated to the Chief Executive Officer by the Board Chairman.14. EVALUATION OF THE CHAIRMAN OF THE BOARD
The performance evaluation of the Board Chairman is coordinated on an annual basis by the Nominating and Governance Committee Chair so long as that position is not held by the Board Chairman; otherwise the Nominating and Governance Committee Vice Chairman shall coordinate the performance evaluation. The evaluation is based on criteria including, without limitation, the Board Chairman's management of interactions between the Chief Executive Officer and the Board as well as the Board Chairman's ongoing contact with the Committee Chairs. The results of the evaluation are used by the Board in considering the compensation of the Board Chairman. The consideration of Board Chairman compensation is conducted at a meeting of the Board at which only the directors not including the Board Chairman are present and the Board Vice Chairman presides as chairman. The results of the evaluation are then communicated to the Board Chairman by the Board Vice Chairman.15. EMPLOYEE AND SENIOR EXECUTIVE COMPENSATION
The Board will annually review employee compensation programs to ensure they are sufficiently competitive to attract and retain the top talent required to maintain both excellent member service and financial strength for the Association. The Board has delegated primary responsibility for such oversight to the Compensation and Workforce Committee, which will be composed solely of independent, nonmanagement directors. The Compensation and Workforce Committee may use independent, third party experts to conduct research and make recommendations on various matters, including but not limited to, senior executive compensation (“Compensation Consultant”). (Such Compensation Consultant may only be engaged by management to provide other products and services with prior approval of the Committee.) The Board as a whole will approve the Chief Executive Officer's compensation after reviewing the Compensation and Workforce Committee's recommendation, and after evaluating the performance of the Chief Executive Officer.16. BOARD COMPENSATION
Board Officer and Director compensation is established annually by the Board to enable the attraction and retention of the caliber of Director required to properly oversee and govern a complex financial services company, and to ensure that the Association remains true to its military heritage and mission. A Compensation Consultant, reporting to the Compensation and Workforce Committee, provides recommendations to the Committee based on external benchmarks. USAA's management may only engage the same third party, or its subsidiaries and affiliates, to provide other products or services with the prior approval of the Committee and with restrictions on the nature and extent of such work. Each nonmanagement Director receives a base retainer paid quarterly. Except for Directors who are employees, no Director participates in any incentive compensation program or other incentive plan or in any benefit programs. Directors who are employees receive no payment for Board service. Board compensation is not disclosed except as required by law.17. MANAGEMENT DEVELOPMENT AND SUCCESSION PLANNING
On a regular basis, Board members are made aware of the development of senior management. The members of the Board on an annual basis will discuss the Association's plans for succession of the Chief Executive Officer upon his retirement or in the event he is unable to serve in such capacity. The Board is also responsible for reviewing the succession plan for the Board Chairman and Chief Executive Officer, and through its Compensation and Workforce Committee, the Chief Executive Officer's succession plan for senior management.18. ETHICS AND STANDARDS OF CONDUCT
Each member of the Board shall adhere to the core values of service, loyalty, honesty and integrity, and comply with the USAA Board of Directors Code of Conduct.19. DIRECTOR EDUCATION POLICY
Each director has a responsibility to be adequately informed on matters relevant to participating on the Board. Management provides appropriate training in various ways and the Association will reimburse each director for expenses associated with their attendance at seminars on issues related to Board service or corporate governance in accordance with the Board's Director Orientation and Training Policy.20. BOARD COMPOSITION AND QUALIFICATIONS
The Board is responsible for maintaining a capable board composition and governance structure. With the exception of Directors serving in an ex officio capacity pursuant to Article VI, Section 2 of the Bylaws, nonmanagement Board members must meet the eligibility requirements specified in Article VI, Section 3 of the Bylaws and be independent. The Board has established director qualifications and guidelines for Board composition in the USAA Director Election Procedures and Performance Standards (the “Director Election Procedures”). While the Board will strive to achieve a composition that approximates the service demographics of membership, Board composition should be driven by the scope and risk profile of the Association, with an emphasis on diversity of skills, expertise and experience necessary for an effective board. The Board periodically aligns on the mix of skills, expertise and experience necessary for the Association's Board listed on the skills matrix categories attached to the Director Election Procedures (the “Skills Matrix Categories”). The Board recognizes the strength that comes from selecting directors with a variety of professional and personal backgrounds (including with respect to race, ethnicity, and gender), perspectives and beliefs and seeks to create an environment that encourages respect and trust. Diversity and inclusion are essential components of the Association's business strategy for competitive advantage, continued business growth and improved performance.
The Board will perform appropriate due diligence to determine the eligibility of military officers for Board service, considering the various conditions that may apply during the terminal leave and post-retirement periods; however, active military officers will not serve on the Board.
21. BOARD SIZE
Pursuant to Article VI, Section 1, of the Bylaws, there shall be not fewer than nine nor more than twenty directors. The Board considers 12-15 independent directors an optimal size for an association of the size and structure of USAA.22. DEFINITION OF DIRECTOR INDEPENDENCE
To determine director independence, the Board applies the standards for director independence set forth in the New York Stock Exchange Listed Company Manual ("NYSE rules"). The Board also applies heightened independence standards applicable to members of specific committees. With respect to members of the Finance and Audit Committee the Board applies the heightened independence standards applicable to members of audit committees as set forth in the Texas insurance audit rules and the Securities and Exchange Commission rules. With respect to members of the Compensation and Workforce Committee, the Board applies the heightened independence standards set forth in the NYSE rules applicable to members of compensation committees. With respect to members of the Risk and Compliance Committee, the Board applies the heightened independence standards applicable to risk committee chairs as set forth in the Federal Reserve rules.23. BOARD MEMBERSHIP CRITERIA
The Nominating and Governance Committee reviews candidates for Board membership on a regular basis and whether such nominees have the appropriate skills and characteristics required of Board members in the context of the current makeup of the Board. Pursuant to the Director Election Procedures, the Nominating and Governance Committee has established criteria for the selection of potential directors, taking into account the Skills Matrix Categories that identify the overall mix of director expertise, experience, independence, and diversity of professional and personal backgrounds (including with respect to race, ethnicity, and gender) that, taken as a whole, support effective Board oversight.24. SELECTION OF NEW DIRECTOR CANDIDATES
The Board is responsible for approving candidates for Board membership. The Board has delegated the screening and recruitment process to the Nominating and Governance Committee, in consultation with the Board Chairman and the Chief Executive Officer.25. EXTENDING THE INVITATION TO A POTENTIAL NEW DIRECTOR TO JOIN THE BOARD
Invitations to join the Board are extended by the Board Chairman and by the Chief Executive Officer.26. ORIENTATION OF PROSPECTIVE BOARD MEMBERS
Prospective Board members who will be presented to the membership for election to the Board, are provided with general materials and information regarding the Association and its operations; meet with members of senior management and other Board members; and have opportunities to tour facilities of the Association prior to beginning their service on the Board. The Nominating and Governance Committee periodically reviews and evaluates the orientation process to ensure its effectiveness.27. BOARD COMMITTEE AUTHORITY
Pursuant to the Bylaws, the Board may establish such committees and delegate such functions as it deems appropriate. A director is entitled to rely on the work of such committee, absent knowledge of information that makes such reliance unreasonable. Each director is expected to serve on at least one committee but should not serve on more than three committees at one time (excluding service on the Executive Committee).28. STANDING COMMITTEES AND CHARTERS
Pursuant to Article VIII, Sections 1 and 2 of the Bylaws, the Board may establish such committees as it shall determine to be necessary and appropriate, and may delegate various responsibilities to such committees. The Board is currently organized into the following committees:
- Nominating and Governance Committee
- Executive Committee
- Finance and Audit Committee
- Compensation and Workforce Committee
- Member and Technology Committee
- Risk and Compliance Committee
Each committee has a charter that defines its function and responsibilities. The composition and powers of the Executive Committee as described in its charter are prescribed and enabled by the Association's Bylaws, Article IX. Of the remaining committees, each reviews its own charter annually for effectiveness and any changes are approved by the Board. The selection process for chair and vice chair of the committees is set forth in the USAA Board of Directors Selection Process for Chair and Vice Chair of Committees. In addition to the standing committees, the Board may establish ad hoc committees as the Board deems appropriate.
29. ASSIGNMENT OF COMMITTEE MEMBERS
Each year, the Nominating and Governance Committee will recommend to the Board for its approval committee and chair assignments for the succeeding year. Directors may be rotated to serve on another committee, subject to each committee's legal requirements regarding “director independence” and to considerations the Board shall deem appropriate. Committee chairs also may be rotated.30. AGENDA ITEMS FOR COMMITTEE MEETINGS
The chair of each committee, in consultation with the Board Chairman, as well as the respective committee vice chairs, and appropriate members of management and staff, as needed, will develop an agenda consistent with its charter, which is distributed to all committee members for review and comment prior to the meeting. Committee members are also able to suggest items for inclusion on the committee agendas.An annual charter checklist of agenda subjects to be discussed, including policy approvals, during the ensuing year is maintained for each Committee. Such schedule will be modified as appropriate to accommodate new issues or changing circumstances.
Each committee chair, or the vice chair, reports to the full Board on committee actions at the next Board meeting after the committee has met.