SANTA ANA, Calif.–A long-time member of SchoolsFirst FCU here has published an opinion piece on a local news and community website claiming the CU’s board has created an “exclusive private club” and has made it “nearly impossible for anyone to serve.”
The piece further alleges the $19-billion CU’s board lacks any diversity, especially for a CU of its size.
In response, a letter from the credit union’s attorney provided to CUToday.info stressed SchoolsFirst safety and soundness, stated the op-ed lacked “understanding” about the credit union’s primary “mission,” and that it has recently added a statement to its website in support of diversity.
In the posting, under the headline “Schools First…Diversity Last,” Dr. Barry Resnick suggested that while the demographics of Orange County, Calif., have changed, the board of directors of its largest financial institution have not.
Resnick, who is a 40-year member of the credit union, pointed to the SchoolsFirst FCU’s annual report, stating that while the CU has grown to have more than 1.1-million members and the annual report states “your community is our community,” and it talks about its support for diversity, a photo in that same annual report “doesn’t seem to fit.”
Resnick has sent a link to the op-ed to all three members of the NCUA board and to SchoolsFirst CEO Bill Cheney.
Picture Tells a Story
“This first caught my eye when I got to the last page of the 2019 annual report. The photo seemed to contradict everything that appears before it,” wrote Resnick in the op-ed. “Believing it was an anomaly, I reviewed annual reports each year back to 2004. The board photos from 2004 to the most recent one in 2019…are nearly identical. In some years the board didn’t even take a new photo and in most years the only difference is where the directors are positioned. Seven of the directors who are in the 2019 photo appear yearly back to 2004.”
In his editorial, Resnick included the photo of the current board, shown at right.
Resnick goes on to write that while it’s true anyone can serve on the board, a nomination requires a petition signed by 500 members, an application packet—“with materials only available on request for a short period of time”—and approval of a nominating committee whose names are “cannot be disclosed.”
‘No Longer Represent Community’
“The nominating committee then determines the names to put ‘in nomination,’” Resnick wrote. “For years only one name per open seat has been recommended avoiding any elections. From 2004 through 2018 there were only three open seats. By creating a path riddled with obstacles with no term limits, the SchoolsFirst Board of Directors have created a culture of exclusion that ensures these same seven individuals will be able to continue sitting as directors for their lifetime while controlling the process for those who may serve alongside them.”
Resnick further stated the board members “no longer represent the team members or the communities served by Schools First. Demographics in the three counties predominantly served by SchoolsFirst, Orange, Riverside and Los Angeles, have drastically changed just in the past decade. Not one of the seven board members resides in Santa Ana, the most populous city in Orange County, where SchoolsFirst began and a significant presence remains with its headquarters. Instead they call cities like Corona del Mar and Newport Coast their homes.”
Resnick went on to write, “It’s time for this Board to realize their photo on the last page of each annual report does not reflect SchoolsFirst. The privileged, private country club culture of admission to the Board must end. The photo on the last page of future annual reports should be reflective of the credit union’s membership, team members and communities served. Volunteering for a board seat must be open, inclusive and certainly not for a lifetime.”
He then urged seven of the board members to “step down so a new and diverse board can begin to create a culture of inclusion providing an opportunity for any SchoolsFirst member wishing to serve.”
A ‘Lack of Understanding’
In response to the op-ed and for what was called an “escalating series of questions” by Resnick for more information from SchoolsFirst, Jonathan D. Joseph, an attorney with the San Francisco law firm Joseph & Cohen, said in a letter to Resnick provided to CUToday.info that his inquiries related to the credit union’s board are “not premised on the safety and soundness of SchoolsFirst or your financial interests in this organization.”
The two-page letter states Resnick’s opinion piece “reflected a lack of understanding about federal credit unions generally and SchoolsFirst’s primary mission, which is to serve teachers, school employees and the educational community across the state of California.”
The letter goes on to explain the credit union’s history, how it is regulated by NCUA, how FCUs are managed by a volunteer board of directors and how Consumer Reports recently ranked SchoolsFirst “best among all credit unions nationwide.”
“This achievement and the financial stability of SchoolsFirst would not be possible without the leadership and vision of the volunteer directors and professional management team of SchoolsFirst,” wrote Joseph. “For this reason, it should not surprise you that many of SchoolsFirst’s directors have significant management experience in the educational community and this is why they have dedicated their time and effort over many years to SchoolsFirst. Moreover, maintaining continuity and experience on the board of directors is a material benefit to SchoolsFirst and its members during these highly challenging times due to the COVID-19 pandemic and massive economic disruption gripping California and the nation. Further, it would not be prudent under the circumstances for SchoolsFirst, one of the largest and most complex credit unions in the country, to quickly replace all of its experienced directors and any such move would likely be criticized by the NCUA.”
Joseph said Resnick can “take heart,” however, in knowing the credit union has “published on its website its promise to continually advance and foster diversity, equity and inclusion throughout the organization in order to better be able to serve every Member with respect and empathy.”
‘Nothing to Do With Premise’
In response to the attorney’s letter, Resnick told Joseph that allegations his op-ed had been written with “little regard to accuracy” were not supported by any citations of such inaccuracy, and that Joseph had not responded to any of the questions around elections.
“My ‘lack of understanding about federal credit unions’ and statistics from Consumer Reports have nothing to do with the premise of the editorial,” said Resnick in response. “I made no reference to the management skills of the board and do not have an issue with their abilities. If you are going to make the argument that changing the board would be criticized by the NCUA, then it's important to acknowledge the board's failure to recognize that the NCUA's Diversity and Inclusion Strategic Plan applies to them could also elicit criticism. Below is an excerpt directly from the NCUA: ‘It makes good business serve to have board members, managers and employees reflect the community the credit union serves.’…Certainly among the 1.1 million members there are at least seven who reflect the communities served by SchoolsFirst and who can handle the job of a director.”
As for the posting of the “promise” in support of diversity that SchoolsFirst has placed on its website, Resnick said “the board needs to know they are not exempt and should be setting the example of the ‘promise,’ not just posting it.”
Five Questions
Resnick has asked the credit union’s legal counsel to respond to five questions:
- Do the current 13 members of the SchoolsFirst board of directors support diversifying their own board without adding additional seats?
- Can legal counsel confirm that 701.3 of the FCU Act does provide member inspection rights for the minute book(s)?
- What was the date nomination of board members from the floor ceased?
- Can information related to board expense reimbursements (i.e. conference trips) be provided?
- What is the manner in which each of the 11 board members serving in 2019 joined the board (appointment, election, petition, merger or nomination from the floor)?