All of us suspect financial institution executives are SOBs, but most of them have the decency to act dignified in public. Not San Jose, California-based Tech CU. The annual meeting on April 25, 2018 was a doozy, with Mical Atz Brenzel, the Chairman of the Board, getting angry while flubbing questions and President and CEO Todd M. Harris making comments that unknowingly contradicted his colleague.
I might have crossed a line by saying a "monkey" could have run a bank in the last four years because of record-low interest rates, but financial institutions, as stewards of our assets, are supposed to be conservative creatures able to withstand criticism, especially from their members. If you're part of an institution that refuses to stress-test its culture, you're going to have problems eventually. If you're part of a financial company so tone-deaf it decided to convert its member-based structure into a corporate banking entity without adequately vetting the move with its own members, humility ought to be your motto thereafter. Well, not if you're Tech CU.
Regarding the failed conversion: "'Our members have voted and overwhelmingly indicated their preference to remain a credit union' ... there are no plans for executive departures as a result of the vote..." [Emphasis added.] In a nutshell, the same failed managers at the helm of a debacle so bad it will be part of an MBA textbook someday are still guiding the ship. They also seem convinced cultural cracks in their hull concealed by consecutive years of ultra-low interest rates are evidence of their own deft maneuvering.
At least one of their own slides at the annual meeting indicates otherwise. One showed a loan-to-deposit ratio of 60% in 2013 that jumped to 87.79% in 2017. In other words, Tech CU, right after botching its conversion, might have taken a too-conservative approach with its loans, only to right its sails through low interest rates to a more balanced portfolio.
In another example of hubris gone wild, Todd Harris said he was pleased with Tech CU's solar loan program, which has "12% national market share." I'm not an expert on solar power, but I know many solar companies and consumers rely on direct or indirect subsidies, and those subsidies can change overnight. In other words, the loan portfolio CEO Harris highlighted as part of his successful management might be its most risky.
I was the only person at the meeting who asked questions or made comments. I mentioned being locked out of my ATM account while traveling internationally and being asked to call an American-based number, which anyone with travel experience knows is problematic. I suggested a simple solution involving secure email or secure messaging on the app. (How this team will screw up such a simple suggestion is an event I eagerly await.)
I also asked why publicly available quarterly reports aren't available on the credit union's own website. Here's where it got really interesting, and by interesting, I mean shameless. Todd Harris told me Tech CU wasn't a public company and follows laws applicable to credit unions, which don't require making reports more accessible to members by putting them on its own website.
Let's back up a minute. No one is disputing these quarterly financial reports are available on some strange government agency's website.
No one is disputing these documents are harder to find if not disclosed directly on Tech CU's own website. No one is disputing greater transparency helps build trust, or that trust is important when competing for customers giving you money for safekeeping. Everyone agrees complying with a minimum standard in ways that reduce transparency isn't helpful to gaining clients or confidence. And yet, here we are, with Tech CU's management fighting to do as little as possible when it comes to transparency and simple convenience for their members.
It gets even worse, especially if you, like me, believe banking culture is one factor in evaluating a country's ascent or descent. Most companies have rules relating to shareholder meetings that limit cranks, but they're written tastefully or at least in ways circumventing an accusation involving East German artillery. Here, Tech CU, blind to its cultural deficiencies, managed to outdo itself once again. Its rules for the meeting are so subjective and overbroad, they provide total control over any kind of direct questioning deemed unpleasant. From number 6 in "Rules of Procedure and Conduct of the Annual Meeting":
The Chancellor, er, Chair or the CEO will stop discussions that are:
* irrelevant to the business of the Credit Union or the conduct of the operations;
* derogatory references that are not in good taste;
* unduly prolonged (longer than two minutes);
* substantially repetitious of statements made by other members; or
* related to personal grievances.
Remember: we are discussing a client-facing institution. If a member had an issue with an employee at a specific branch and wanted to alert the board in person at the annual meeting--the one and only time a year any member may do so publicly--the board doesn't have to listen. It could deem the comment a "personal grievance." Or perhaps it's derogatory or not in good taste. Who knows? Anything goes, comrade.
After my final "monkey" and "low interest rates" comment, plus the fact the Bay Area had seen large inflows of private and public investment in the past four years, making it virtually impossible for Bay Area banks to fail, Mical Atz Brenzel launched into some angry gibberish. Still trying to temper her arrogance, I slipped in a question about whether any banks in the Bay Area had gone bankrupt in the last four years, to which she initially stood, jaw agape. After avoiding my question, she tried arguing banks don't really fail any more, they're absorbed into larger banks, which of course had nothing to do with my actual question. (I don't know of any Bay Area banks or credit unions requiring government intervention in the last four years to prevent bankruptcy, but if you do, please enlighten me.)
Not satisfied with looking like a loon, Brenzel then argued lower interest rates made it more difficult for Tech CU to do well. I asked, "Are you denying lower interest rates encourage banks [and CUs] to make more loans [and therefore higher profits]?" It took her a few seconds to accept this Economics 101 fact, after which she advanced a spiel about Tech CU having to compete with numerous financial institutions in the Bay Area and still doing well. I let her have the last word, saying, "We'll agree to disagree."
As I got up to exit the meeting room, a belligerent Todd Harris, a bowling ball of a man, approached and told me I was "frustrated." He continued trying to score points by telling me I mistakenly used the term "bank" instead of "credit union" in my comments. Pleased I'd gotten a Tech CU executive to mention a term relating to its largest management debacle without a sense of irony, I explained I wasn't frustrated, but we'd get to see how good he and the team really is over the next four years as interest rates rise. In addition, I told him his colleague can't argue that Tech CU's management did well because it successfully competed with numerous banking institutions, including public ones, while he favors a transparency standard far below all the public banks against which he's allegedly competing. As I left, I noticed employees bringing juices and mineral water into the meeting room, giving themselves a much better selection than offered to their own members.
Tech CU's management didn't listen to their members in 2012, and they're still not listening. Worse, they're getting upset at a member trying to remind them to do exactly what a bank or credit union ought to do in an era of rising interest rates: be humble.
 |
| The spread for members, which will be noteworthy later. |
Regarding the failed conversion: "'Our members have voted and overwhelmingly indicated their preference to remain a credit union' ... there are no plans for executive departures as a result of the vote..." [Emphasis added.] In a nutshell, the same failed managers at the helm of a debacle so bad it will be part of an MBA textbook someday are still guiding the ship. They also seem convinced cultural cracks in their hull concealed by consecutive years of ultra-low interest rates are evidence of their own deft maneuvering.
At least one of their own slides at the annual meeting indicates otherwise. One showed a loan-to-deposit ratio of 60% in 2013 that jumped to 87.79% in 2017. In other words, Tech CU, right after botching its conversion, might have taken a too-conservative approach with its loans, only to right its sails through low interest rates to a more balanced portfolio.
In another example of hubris gone wild, Todd Harris said he was pleased with Tech CU's solar loan program, which has "12% national market share." I'm not an expert on solar power, but I know many solar companies and consumers rely on direct or indirect subsidies, and those subsidies can change overnight. In other words, the loan portfolio CEO Harris highlighted as part of his successful management might be its most risky.
 |
| Update: seen in Singapore business newspaper, December 17, 2018 |
I also asked why publicly available quarterly reports aren't available on the credit union's own website. Here's where it got really interesting, and by interesting, I mean shameless. Todd Harris told me Tech CU wasn't a public company and follows laws applicable to credit unions, which don't require making reports more accessible to members by putting them on its own website.
 |
| No results found on gov website. It's a lil' clunky. |
 |
| Found it! |
It gets even worse, especially if you, like me, believe banking culture is one factor in evaluating a country's ascent or descent. Most companies have rules relating to shareholder meetings that limit cranks, but they're written tastefully or at least in ways circumventing an accusation involving East German artillery. Here, Tech CU, blind to its cultural deficiencies, managed to outdo itself once again. Its rules for the meeting are so subjective and overbroad, they provide total control over any kind of direct questioning deemed unpleasant. From number 6 in "Rules of Procedure and Conduct of the Annual Meeting":
The Chancellor, er, Chair or the CEO will stop discussions that are:
* irrelevant to the business of the Credit Union or the conduct of the operations;
* derogatory references that are not in good taste;
* unduly prolonged (longer than two minutes);
* substantially repetitious of statements made by other members; or
* related to personal grievances.
Remember: we are discussing a client-facing institution. If a member had an issue with an employee at a specific branch and wanted to alert the board in person at the annual meeting--the one and only time a year any member may do so publicly--the board doesn't have to listen. It could deem the comment a "personal grievance." Or perhaps it's derogatory or not in good taste. Who knows? Anything goes, comrade.
After my final "monkey" and "low interest rates" comment, plus the fact the Bay Area had seen large inflows of private and public investment in the past four years, making it virtually impossible for Bay Area banks to fail, Mical Atz Brenzel launched into some angry gibberish. Still trying to temper her arrogance, I slipped in a question about whether any banks in the Bay Area had gone bankrupt in the last four years, to which she initially stood, jaw agape. After avoiding my question, she tried arguing banks don't really fail any more, they're absorbed into larger banks, which of course had nothing to do with my actual question. (I don't know of any Bay Area banks or credit unions requiring government intervention in the last four years to prevent bankruptcy, but if you do, please enlighten me.)
Not satisfied with looking like a loon, Brenzel then argued lower interest rates made it more difficult for Tech CU to do well. I asked, "Are you denying lower interest rates encourage banks [and CUs] to make more loans [and therefore higher profits]?" It took her a few seconds to accept this Economics 101 fact, after which she advanced a spiel about Tech CU having to compete with numerous financial institutions in the Bay Area and still doing well. I let her have the last word, saying, "We'll agree to disagree."
As I got up to exit the meeting room, a belligerent Todd Harris, a bowling ball of a man, approached and told me I was "frustrated." He continued trying to score points by telling me I mistakenly used the term "bank" instead of "credit union" in my comments. Pleased I'd gotten a Tech CU executive to mention a term relating to its largest management debacle without a sense of irony, I explained I wasn't frustrated, but we'd get to see how good he and the team really is over the next four years as interest rates rise. In addition, I told him his colleague can't argue that Tech CU's management did well because it successfully competed with numerous banking institutions, including public ones, while he favors a transparency standard far below all the public banks against which he's allegedly competing. As I left, I noticed employees bringing juices and mineral water into the meeting room, giving themselves a much better selection than offered to their own members.
Tech CU's management didn't listen to their members in 2012, and they're still not listening. Worse, they're getting upset at a member trying to remind them to do exactly what a bank or credit union ought to do in an era of rising interest rates: be humble.
© Matthew Mehdi Rafat (2018)
Bonus: Gloomy Sunday (1999) is Netflix CEO's Reed Hasting's favorite movie. Consider the conversation below in light of Tech CU's Rules of Procedures and Conduct of the Annual Meeting:
Schnefke: "But we must be careful not to stray too far outside the law."
Hans: "Of course. But the beauty and vibrancy of the law lies in its flexible boundaries."
[Two Nazis in Hungary around 1939 discussing their future.]
Bonus: Gloomy Sunday (1999) is Netflix CEO's Reed Hasting's favorite movie. Consider the conversation below in light of Tech CU's Rules of Procedures and Conduct of the Annual Meeting:
Schnefke: "But we must be careful not to stray too far outside the law."
Hans: "Of course. But the beauty and vibrancy of the law lies in its flexible boundaries."
[Two Nazis in Hungary around 1939 discussing their future.]
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