SAN FRANCISCO – Visa USA took another step toward restructuring itself from being a private association of credit and debit card issuing financial institutions to being a publicly traded company by naming four new independent board members. The four new members named at an April 28 meeting were Philip DeFeo, a managing partner of Lithos Capital Partners, LLC, a private venture capital firm; Linda Baker Keen, a manager with a history of working with a variety of companies, including payments-rival American Express; Jon Madonna, former CEO of KMPG Peat Marwick, and John Swanson, CEO of CA Inc., an international information technology firm.
"This is a very important step in the process of transforming our board to include a majority of independent directors," said John Philip Coghlan, CEO of Visa USA.
"Although we are a private organization, this is one of a number of steps Visa is taking to meet today's standard of good governance. In addition to the breadth of perspective and experience that these new board members will provide, we believe these changes will strengthen Visa's position in the electronic payments industry," he added.
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In addition to their other board and committee duties, the independent directors will be members of a new "Independent Directors Committee." As members of the new committee, they will assume responsibility for overseeing management's recommendations concerning core economic decisions, such as interchange reimbursement fees, as well as member transaction processing and service fees.
Credit unions in particular were intrigued that the card brand mentioned in the same announcement that it is opening up a seat on the new board for issuers who do less than $1 billion in annual volume.
The governance committee of the board is reviewing eligible candidates for the small financial institution seat and continuing its search for additional independent directors to reach a board majority of independent directors, the card brand said.
The card brand's announcement was the result of a thorough evaluation initiated by Visa management and the board of directors in April 2004, to ensure that Visa maintains the highest standards of performance and accountability. The board's assessment of Visa's corporate governance and structure is ongoing.
Coghlan added, "Through these actions, Visa will emerge as a stronger, more responsive and flexible organization. As a result, we'll be better positioned to meet the future needs of our stakeholders."
Reaction to Visa's move has been muted and somewhat mixed. CUNA refrained from making a detailed comment on the news but noted that it had been having ongoing discussions with Visa for several years about the possibility of getting someone from a credit union on the board of the card brand.
NAFCU said it was "very excited" by the news and that it looked forward to having a credit union representative, perhaps from one of its credit unions, on the board. Visa itself did not return phone calls asking for more information about the small issuer seat and whether any credit union executives were being considered as possible board members.
Reactions from the industry as a whole have also been mixed.
Speaking to the Wall Street Journal, Ken Lewis, CEO of Bank of America which just recently acquired monoline card issuer MBNA, revealed that the bank is considering establishing a network to rival MasterCard and Visa.
Such a move would be somewhat ironic since the BankAmericard was the brand precursor for Visa USA in the 1950s.
Bank of America acquired MBNA at the beginning of the year, making it one of the largest card issuers globally, and making the establishment of an in-house payment system the next logical step, analysts observed.
Lewis suggested to the Journal that his bank was wrong to allow the BankAmericard brand to slip out of the forefront in favor of the in-house developed Visa brand.
"I'm not real happy at this point that we built that brand when we could have been spending money on the Bank of America brand. Why not become the old BankAmericard again," Lewis was quoted as saying.
Bank of America lost control of the Visa business in the 1970s.
Press reports suggest Bank of America could add an extra $70 to $75 million in earnings per year through setting up its own payment operation.
Analysts have largely been silent about the move, noting that the brand had made the decision to go forward previously and that the move had been expected.
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