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SAN FRANCISCO – Significant changes to Visa’s board, which are designed to help the card brand position itself better in the face of possible future litigation, have been announced. The number one worldwide card brand revealed on Nov. 3 that the board restructuring to which it alluded earlier this year is a reality and announced the details. According to the plan, Visa’s new board will have 17 seats, eight held by directors who will not be tied to any member financial institution and seven held by financial institution members. The two remaining seats will be held by Visa staff and will not vote. The current board has 16 directors, 14 of whom come from member financial institutions, one who is the CEO of Visa USA and one who is the CEO of Visa International. Under the current structure the two Visa CEOs are voting board members. The eight so-called independent directors will oversee core economic decisions such as pricing, member transaction processing and service fees and economic relationships. Financial institution directors will retain responsibility for control and disposition of assets, membership eligibility requirements and corporate governance, the card brand said. “In light of the dynamic changes taking place in the payments industry, the Visa USA board of directors and Visa’s management team believe the time is right to add independent directors to the board,” said John Philip Coghlan, CEO of Visa USA. “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,” he added. Analysts have widely commented that Visa needed to make this move in order to take the edge off of any future or current litigation regarding its business practices. William Valentine, spokesman for the card brand said an awareness of changing business climates also played into the change. “We are entering a time when more corporate transparency is becoming the norm and the Board of Directors decided that Visa needed to become more transparent about how it does business,” Valentine said. He also said credit unions in particular stand to benefit from the change because the new Board will be “highly committed” to including small issuer perspectives on the Board. Some credit unions and community banks have complained in the past because they have not felt small issuers were not given enough participation in Visa’s decision making. The proposed move will still need to be voted on by the existing members, a ballot which is expected to be completed in March of 2006 and which is almost certain to approve the move. Once that is held, the current board will shrink to the seven financial board members and however many of the eight independent board members have been chosen by then, a process which altogether may take from between nine and 12 months from the announcement date. Visa has retained the well-respected executive search firm Spencer Stuart to assist in its search for the new board members. Valentine said that there would not be a seat or seats set aside for board members from large retail chains or transaction acquirers but some of those new board members could have a retail background. “Visa is willing to consider anyone who fits the requirements,” Valentine said. Board member candidates will not be considered if they have had a material relationship with Visa or with one of its competitors in the last five years, he added. He left undefined what precisely constituted a “material relationship.” Credit unions in the past have expressed doubt about whether the board changes will mean much to them and Moshe Orenbuch, a card industry analyst with Credit Suisse First Boston said they are likely right, even though Visa is putting directors who don’t belong to financial institutions in charge of setting interchange. “What you have to remember is that these directors will be directors of Visa and they are going to have a responsibility to Visa, not to their other affiliations,” Orenbuch explained. “I think Visa considered that the former board could act in its best interest and that a new one will be able to do that too,” he added, without having an additional litigation exposure. What seems almost certain is that the new Visa board will have to allow for more input from big debit issuers who may not also be big credit issuers. Debit has steadily risen as a percentage of Visa transactions and Orenbuch and other analyst have commented that board representation for debit issuers has not generally kept pace. -

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