SAN FRANCISCO - Significant changes to Visa's board, which aredesigned to help the card brand position itself better in the faceof possible future litigation, have been announced. The number oneworldwide card brand revealed on Nov. 3 that the boardrestructuring to which it alluded earlier this year is a realityand announced the details. According to the plan, Visa's new boardwill have 17 seats, eight held by directors who will not be tied toany member financial institution and seven held by financialinstitution members. The two remaining seats will be held by Visastaff and will not vote. The current board has 16 directors, 14 ofwhom come from member financial institutions, one who is the CEO ofVisa USA and one who is the CEO of Visa International. Under thecurrent structure the two Visa CEOs are voting board members. Theeight so-called independent directors will oversee core economicdecisions such as pricing, member transaction processing andservice fees and economic relationships. Financial institutiondirectors will retain responsibility for control and disposition ofassets, membership eligibility requirements and corporategovernance, the card brand said. "In light of the dynamic changestaking place in the payments industry, the Visa USA board ofdirectors and Visa's management team believe the time is right toadd independent directors to the board," said John Philip Coghlan,CEO of Visa USA. "Independent directors will generate addedconfidence in the organization's decision-making and willultimately strengthen Visa's position with regard to legal issuesconcerning the impartiality and autonomy of directors," he added.Analysts have widely commented that Visa needed to make this movein order to take the edge off of any future or current litigationregarding its business practices. William Valentine, spokesman forthe card brand said an awareness of changing business climates alsoplayed into the change. "We are entering a time when more corporatetransparency is becoming the norm and the Board of Directorsdecided that Visa needed to become more transparent about how itdoes business," Valentine said. He also said credit unions inparticular stand to benefit from the change because the new Boardwill be "highly committed" to including small issuer perspectiveson the Board. Some credit unions and community banks havecomplained in the past because they have not felt small issuerswere not given enough participation in Visa's decision making. Theproposed move will still need to be voted on by the existingmembers, a ballot which is expected to be completed in March of2006 and which is almost certain to approve the move. Once that isheld, the current board will shrink to the seven financial boardmembers and however many of the eight independent board membershave been chosen by then, a process which altogether may take frombetween nine and 12 months from the announcement date. Visa hasretained the well-respected executive search firm Spencer Stuart toassist in its search for the new board members. Valentine said thatthere would not be a seat or seats set aside for board members fromlarge retail chains or transaction acquirers but some of those newboard members could have a retail background. "Visa is willing toconsider anyone who fits the requirements," Valentine said. Boardmember candidates will not be considered if they have had amaterial relationship with Visa or with one of its competitors inthe last five years, he added. He left undefined what preciselyconstituted a "material relationship." Credit unions in the pasthave expressed doubt about whether the board changes will mean muchto them and Moshe Orenbuch, a card industry analyst with CreditSuisse First Boston said they are likely right, even though Visa isputting directors who don't belong to financial institutions incharge of setting interchange. "What you have to remember is thatthese directors will be directors of Visa and they are going tohave a responsibility to Visa, not to their other affiliations,"Orenbuch explained. "I think Visa considered that the former boardcould act in its best interest and that a new one will be able todo that too," he added, without having an additional litigationexposure. What seems almost certain is that the new Visa board willhave to allow for more input from big debit issuers who may notalso be big credit issuers. Debit has steadily risen as apercentage of Visa transactions and Orenbuch and other analyst havecommented that board representation for debit issuers has notgenerally kept pace. -

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