Visa U.S.A. announced a major shakeup to its corporate governance structure. The result is that for the first time Visa will allow nonbankers to serve on its board of directors. Since its inception, Visa has been considered a bankcard Association, and only bankers whose institutions issue Visa-branded cards have been given seats on the board.
Pending approval by member financial institutions, Visa will add one new seat to the board and shuffle membership so that financial institutions hold only seven seats and independent directors hold eight. The restructuring is expected to take up to 12 months to complete.
In a prepared statement, Visa said "dynamic changes" taking place in the payments system precipitated the move. Some observers speculate that the intention, at least in part, is to forestall additional litigation over interchange and other contentious issues.
"Visa and our stakeholders will benefit from the wider range of talent and diverse experience that independent directors will bring to the boardroom as they help shape the Association's growth strategies," said John Philip Coghlan, Visa's President and Chief Executive Officer.
"Independent directors will generate added confidence in the organization's decision making and will ultimately strengthen Visa's position with regard to legal issues concerning the impartiality and autonomy of directors."
Visa said the new, independent directors will oversee "core economic decisions such as pricing, member transaction processing and service fees and economic relationships." Financial institution members will be responsible for control and disposition of assets, membership eligibility and corporate governance. Visa spokesman Will Valentine stated that the new board structure will "strengthen the organization competitively, organizationally and legally."
Visa, MasterCard International and member financial institutions of both organizations are under fire for alleged anticompetitive interchange pricing; they face a host of merchant lawsuits. MasterCard announced its own corporate restructuring in August and is in the process of going public (see "MasterCard Plans IPO," The Green Sheet, Sept. 26, 2005, issue 05:09:02).
K. Craig Wildfang, lead plaintiff attorney in two legal proceedings that merchants have brought against Visa, said the change in Visa's board makeup will not have much of an affect on pending lawsuits. "It will definitely not affect their liability going backward," he said. "They are trying to escape their liability going forward."
To be considered as an independent director, one must have "no material relation to Visa or its members for the past five years," Valentine said. "We have very high standards. They must be a
senior level executive with a relevant business, academic or regulatory body."
While Valentine wouldn't discuss specifics, he left open the possibility that Visa might ask a retailing executive to join the board. Visa's member banks are expected to decide on the new board's makeup sometime in spring 2006. Currently, Visa's board is comprised of 16 people, including 14 from member financial institutions and two nonvoting Visa executives (Coghlan and Visa International CEO Christopher Rodrigues).
Separately, Visa International announced new criteria for its own board and the six regional boards that comprise the organization. The new boards will be required to have at least two independent directors, subject to member approval.
[source: GreenSheet]
