USAA cut its annual bonus awarded to employees for the sixth year in a row after the company fell short of performance goals set by its board of directors.
The 10.1% salary bonus for 2020 was the lowest since the details of the annual perk for employees companywide were first made public in 2007. It also marks the biggest year-over-year decrease – and reportedly the last of its kind.
Going forward, companywide bonuses will be replaced with a bonus based more on individual and group performance, several employees told the San Antonio Report on condition of anonymity.
The San Antonio-based insurance and financial services giant is the city’s second largest private-sector employer. Roughly 19,000 of its 35,000 employees work in the San Antonio area.
Companywide bonuses are rare in the industry and across firms more broadly. The company’s board has determined the bonus against a “scorecard” of objectives it establishes a year in advance.
“2020 was an unprecedented year for everyone, including USAA members and employees. I am proud of our USAA teammates for remaining focused on our members and mission,” USAA CEO Wayne Peacock said in a released statement.
Goals for the year were set aggressively, said several of the employees speaking on the condition of anonymity. While the company did well in some regards, such as meeting its revenue targets, it fell short in other metrics, including compliance with banking regulations – an issue the rapidly growing company has grappled with in recent years.
Last October, the USAA Federal Savings Bank was slapped with an $85 million civil penalty for failures in its compliance risk management and IT risk programs.
The U.S. Treasury’s Office of the Comptroller of the Currency, USAA’s main banking regulator, said in a consent order that the firm had engaged in “unsafe or unsound practices” related to those programs, resulting in numerous violations of law.
The fine came just weeks after the regulator announced that it had dropped the bank’s rating on its most recent Community Reinvestment Act evaluation, from “satisfactory” to “needs to improve.” Some of the violations cited – specifically against the Military Lending Act and the Service Member Civil Relief Act – included wrongful repossessions of vehicles and the filing of inaccurate affidavits in default judgment cases.
“Simply put, we have fallen short of our high standards and those of our members and our regulators,” Peacock said in a statement at the time. “As we grew quickly over the last decade, we never wavered from our commitment to serve members. However, we did not sufficiently invest in the capabilities and expertise necessary to meet regulatory requirements and evolving business needs.”
The regulator said USAA has been “in the process of remediating these violations” under a related consent order from 2019.
To keep pace with the company’s growing membership and the regulatory requirements that accompany it, leadership has turned the pressure inward.
“Strengthening our risk and compliance programs is the top priority at every level of USAA, including senior management and the Board,” a fact sheet on the USAA webpage reads, which details some of the violations. “We will do what it takes to resolve our deficiencies.”
Employees said it had become clear over internal quarterly meetings that the company would not be able to meet the targets the board had set.
When the bonuses were announced at a companywide virtual meeting with the CEO and board members, some employees raised pointed questions, asking why they were being “penalized” for “unrealistic expectations” set by management, according to a description from one employee.
Another employee told the San Antonio Report that some in their department had begun to question whether USAA’s compensation was still competitive in light of the reduced bonuses.
The company awarded workers a 14.5 percent bonus in 2019, the lowest bonus since 2008. The highest bonus came in 2012, when workers were awarded 18.8% of their annual salary.
The company has told employees this will be the last year bonuses are done this way, several employees said. The change to performance-based bonuses follows a bonus structure implemented for executives two years ago and for many management positions last year.
The percentage-based bonus was not the only one given to non-executive employees.
The company is also providing additional $1,000 bonuses to certain workers, for whom they also gave $1,000 over the summer, “to help them manage the financial stress the pandemic placed on many Americans,” according to the press release. Employees told the San Antonio Report that these were given to staff making an annual salary below $100,000.
The company has by some measures done well during the pandemic, though some employees said that, like many companies, it struggled to adjust in the early months.
USAA’s net worth grew to more than $40 billion, up from more than $35 billion in 2019, according to the press release. “It is one measure of USAA’s financial health and strength as it indicates how well the association is prepared to meet the expected and unexpected needs of our membership today and for generations to follow.”
From this windfall, USAA returned more than $2 billion to members in the traditional form of distributions, dividends, and bank rebates and rewards. It also paid more than $1 billion in dividends to auto policy holders and $400 million in pandemic-related relief payments to members.
In charitable contributions, USAA and the USAA Foundation Inc. gave out more than $87 million, including $30 million toward its Military Family Relief Initiative, which supports military aid societies and other nonprofits serving military families.
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