Visa U.S.A. will ask its members to vote Friday on several significant changes to its corporate structure, including the addition of four independent board members, some of whom could take control of its interchange rate policies.
The association plans to eventually add yet another four independent directors; at least three of the eight would take over the responsibility for interchange-fee policy from Visa's member banks.
Visa first sketched out the plan in November; the details are in an April proxy that American Banker obtained. The goal is largely to protect Visa from the slew of interchange-related merchant lawsuits that have been brought against it over the past year.
The San Francisco card association, on whose board two seats are vacant, proposes to turn over them and two more to nonmember directors this month.
One of the latter two is currently held by Tim Arnoult, the head of global treasury services at Bank of America Corp. Mr. Arnoult is retiring from B of A this month.
The proposal would leave his company, one of the nation's top card issuers, without a seat on Visa's board or MasterCard International's. Kenneth D. Lewis, B of A's chairman, chief executive, and president, was quoted in Wednesday's Wall Street Journal as being interested in the possibility of forming a B of A-owned network to carry card transactions.
One spokesman for B of A confirmed the accuracy of the report. And a spokeswoman for the company said there was no connection between the story and the Visa proposal.
Visa answered an inquiry about Mr. Lewis' comments with an e-mailed statement: "Our mission is to deliver an exceptional value to all financial institutions, large and small, and our long-standing partnership with Bank of America is no exception."
The four independent nominees proposed in Visa's proxy are Philip D. DeFeo, 60, a managing partner of Litos Capital Partners; Linda Baker Keene, 54, a retired marketing executive who until December was the executive vice president of marketing with Scholastic Inc.; John A. Swainson, 51, who is the president and CEO of CA Inc. (formerly Computer Associates International); and Jon C. Madonna, 63, the former chairman and chief executive of Digitalthink Inc.
Mr. Madonna is also a member of the board of Albertson's Inc., the large supermarket chain that is among the plaintiffs in a consolidated interchange-related suit against Visa and MasterCard.
Paul Cohen, a Visa spokesman, said that the four independent nominees stand out for their experience and would bring "fresh thinking" to Visa.
(Under the proposal, the independent directors could not have had a "material relationship" with Visa or its members for the past five years and would need "relevant business, academic, or regulatory experience.")
Visa is interviewing candidates to fill the four other seats and would fill them as soon as it "identifies qualified candidates," Mr. Cohen said. All eight would be in place by November, he said.
If the proxy is approved, the number of bank-member directors on Visa's board would temporarily drop to 11. The board would still include the two Visa executives who are now members - John Philip Coghlan, president and CEO, and Christopher Rodriques, the president and CEO of Visa International - but they would be unable to vote.
Ultimately the board would have 17 directors: eight independents, seven from member banks, and two Visa executives.
Under the proposal, Visa would allow one member bank with annual card sales of less than $1 billon to fill one of the member-bank directorships. Mr. Cohen said that bank has not been chosen.
Visa's restructuring would also include the creation of a committee made up of three or more independent directors, who would determine interchange and reimbursement fee policies as well as member transaction and service fees. That committee would also make decisions about issuer and acquirer partnership programs.
(Member banks would continue to make governance and hiring decisions, determine membership eligibility requirements, and oversee the audit and risk committee.)
The rival MasterCard, of Purchase, N.Y., made some similar changes in turning itself into a quasi-public entity. It plans an initial public offering some time this year. (MasterCard's proposal for its IPO outlines further changes: a new governance structure in which its member banks would have a minority of its equity rights and lesser voting rights, as well as an independent board of directors.)
Meanwhile dozens of interchange-related lawsuits that have been filed against the two companies moved one step forward this week: They were consolidated into a single suit.
The amended suit, headed for what is likely to be a lengthy trip through the judicial process, was filed in U.S. District Court for the Eastern District of New York. It includes at least one significant change from the many separate suits that had been filed: Beyond suing Visa, MasterCard, and some of their issuing banks over credit card interchange fees, the plaintiffs have added debit cards fees to the mix.
The consolidated suit also provides more detail on the plaintiffs' claim that the card associations have prevented merchants from steering customers to lower-cost payment options, according to K. Craig Wildfang, the lead plaintiff's attorney on the case.
Legal experts expect the associations to file motions seeking dismissal. An argument related to the motions is slated for late August, said Mr. Wildfang, a partner at Robins, Kaplan, Miller & Ciresi LLP. In the meantime, however, the discovery period, which will begin May 1, will be allowed to go forward, he said.
