Compensation Discussion and Analysis

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Compensation Discussion and Analysis

Executive Summary

This Compensation Discussion and Analysis describes our executive compensation philosophy and programs, and compensation decisions made under those programs for our named executive officers or NEOs for fiscal year 2016, who are listed below.

NameTitle
Charles W. ScharfChief Executive Officer(1)
Vasant M. PrabhuExecutive Vice President and Chief Financial Officer
Ryan McInerneyPresident
Rajat TanejaExecutive Vice President, Technology
Ellen RicheyVice Chairman, Risk and Public Policy
(1) Mr. Scharf resigned from his employment with the Company effective as of December 1, 2016.

The following underlying principles are reflected in our executive compensation program:

Principles of our Compensation Programs
Pay for PerformanceThe key principle of our compensation philosophy is pay for performance.
Alignment with Stockholders' InterestWe reward performance that meets or exceeds the performance goals that the Compensation Committee establishes with the objective of increasing stockholder value.
Variation Based on PerformanceWe favor variable pay opportunities that are based on performance over fixed pay. The total compensation received by our named executive officers varies based on corporate and individual performance measured against annual and long-term goals.

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Highlights of our Compensation Programs

WHAT WE DO
Pay for Performance: A significant portion of each named executive officer’s target annual compensation is tied to corporate and individual performance.
Annual Say-on-Pay Vote: We conduct an annual Say-on-Pay advisory vote. At our 2016 Annual Meeting of Stockholders, more than 97% of the votes cast on the Say-on-Pay proposal were in favor of the fiscal year 2015 compensation of our named executive officers. Similarly, at our 2015 Annual Meeting of Stockholders, more than 96% of the votes cast on the Say-on-Pay proposal were in favor of the fiscal year 2014 compensation of our named executive officers.
Clawback Policy: Our Clawback Policy allows the Board to recoup any excess incentive compensation paid to our executive officers if the financial results on which the awards were based are materially restated due to fraud, intentional misconduct or gross negligence of the executive officer.
Short-Term and Long-Term Incentives/Measures: Our annual and long-term plans provide a balance of incentives and include different measures of performance.
Independent Compensation Consultant: The Compensation Committee engages an independent compensation consultant, who provides no other service to the Company.
Stock Ownership Guidelines: To further align the interests of management with our stockholders, we have significant stock ownership guidelines that require our executive officers to hold a multiple of their annual base salary in equity.
Limited Perquisites and Related Tax Gross-Ups: We provide limited perquisites and no tax gross-ups except on business-related relocation expenses and tax equalization for employees on expatriate assignments, as provided in our relocation and tax equalization policies or in the offer letters for our Chief Executive Officer, President and Chief Financial Officer.
Double-Trigger Severance Arrangements: Our Executive Severance Plan and equity award agreements generally require a qualifying termination of employment in addition to a change of control before any payments or benefits are triggered.
Mitigate Inappropriate Risk Taking: In addition to our clawback policy, stock ownership guidelines and prohibition of hedging and pledging, we structure our compensation programs so that they minimize inappropriate risk taking by our executive officers and other employees, including using multiple performance metrics and multi-year performance periods and capping our annual incentive plan and performance share awards.
WHAT WE DON'T DO
Gross-ups for Excise Taxes: Our Executive Severance Plan does not contain a gross-up for excise taxes that may be imposed as a result of severance or other payments deemed made in connection with a change of control.
Reprice Stock Options: Our equity incentive plan prohibits the repricing of stock options and stock appreciation rights without prior stockholder approval.
Fixed Term Employment Agreements: Employment of our executive officers is “at will” and may be terminated by either the Company or the employee at any time.
Hedging and Pledging: Our insider trading policy prohibits all employees and directors from hedging their economic interest in the Visa shares they hold or pledging Visa shares as collateral for a loan.

Fiscal Year 2016 Financial Highlights

Visa delivered another year of solid financial results in fiscal year 2016. The following table summarizes our key financial results for fiscal years 2016 and 2015. Please see the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for a more detailed discussion of our fiscal year 2016 financial results. In addition, Visa’s total shareholder return for fiscal year 2016 reflected a 19.5% increase in shareholder value.

fiscal-year-financial-highlights

(1)  Fiscal year 2016 adjusted net income and earnings per share reflect as reported results in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), adjusted to exclude the impact of certain significant items that we do not believe are indicative of our ongoing operating performance, as they are either non-recurring or have no cash impact. Fiscal year 2015 adjusted net income and earnings per share reflect U.S. GAAP as reported results, adjusted to exclude the impact of the non-cash revaluation of the Visa Europe put option. For supplemental financial data and corresponding reconciliation to U.S. GAAP see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016 filed with the SEC on November 15, 2016. Non-GAAP adjusted measures should be viewed in addition to, and not as an alternative for, financial results prepared in accordance with U.S. GAAP. When making its determination of the net revenue, net income, and earnings per share metrics, which were used as goals for the annual incentive plan and for performance share awards, the Compensation Committee further adjusted as reported results for the items described under the heading Compensation Discussion and Analysis – Corporate Performance Measures and Results for Fiscal Year 2016 and Compensation Discussion and Analysis – Long-Term Incentive Awards Granted in Fiscal Year 2016.
(2)  Calculated based on unrounded numbers.

How Fiscal Year 2016 Named Executive Officer Compensation Is Tied to Company Performance

Our corporate performance was a key factor in our fiscal year 2016 named executive officer compensation program:

Link to Company Performance

  • For fiscal year 2016, 92% of our Chief Executive Officer’s target compensation was performance-based and 88% of the average of our other named executive officers’ target compensation was performance-based.

Utilize Annual and Long Term Awards

  • Each named executive officer’s performance-based compensation is comprised of an annual cash incentive award and long-term equity-based incentives consisting of performance shares, restricted stock units, and stock options. For the annual cash incentive, the target award is established at the beginning of the fiscal year and the actual award is adjusted based on performance against pre-established goals. Performance shares provide the opportunity for shares to be earned at the end of a three-year performance period if pre-established financial goals are met. Time-based stock options and restricted stock units provide value based on the Company’s stock price performance.

Focus on Corporate Performance Metrics

  • For fiscal year 2016, Net Income and Net Revenue Growth were the key metrics for our annual cash incentive awards. These metrics were adjusted when determining the annual cash incentive awards as described under the heading Compensation Discussion and Analysis – Corporate Performance Measures and Results for Fiscal Year 2016. In this proxy statement, we refer to these metrics as Net Income Before VIP – VIP adjusted and Net Revenue Growth – VIP adjusted. Actual performance for Net Income Before VIP – VIP adjusted was above target and Net Revenue Growth – VIP adjusted was below target for fiscal year 2016, which resulted in the corporate performance portion of the annual incentive award paying out at 96% of target.
  • Earnings Per Share (EPS) and relative Total Shareholder Return (TSR), were established as performance metrics for our performance share awards. The final number of shares earned pursuant to a performance share award is determined based on the average EPS result over the three separate years applicable to the particular performance share award and the relative TSR for the three-year period. As described under the heading Compensation Discussion and Analysis – Long-Term Incentive Awards Granted in Fiscal Year 2016, the Compensation Committee adjusted the fiscal year 2016 EPS when determining applicable performance share results. In this proxy statement, we refer to this metric as EPS – PS adjusted. Our fiscal year 2016 EPS – PS adjusted, was above target, resulting in a performance factor of 124.5% for the relevant portion of the award.
  • The performance shares previously awarded on November 19, 2013 completed their three-year performance period following the 2016 fiscal year-end. Performance shares earned pursuant to this award were based on EPS – PS adjusted, for fiscal years 2014, 2015 and 2016 and three-year relative TSR (measured against the S&P 500). As described under the heading Compensation Discussion and Analysis – Determination of Shares Earned for Performance Shares Previously Awarded on November 19, 2013 both metrics were above target and the performance shares earned equated to 156.0% of the target share award.

 

Say-on-Pay

At the 2016 Annual Meeting of Stockholders, more than 97% of the votes cast on the Company’s annual Say-on-Pay proposal supported our named executive officer compensation program. We believe these results represent strong investor support of our overall compensation philosophy and decisions for fiscal year 2015. Accordingly, the Compensation Committee did not make any material changes to the underlying structure of our executive compensation program for fiscal year 2016. Nevertheless, the Compensation Committee regularly reviews and adjusts the program to ensure it remains competitive and aligned with our stockholders’ interests.

Setting Executive Compensation

Compensation Committee and Management

Our Compensation Committee, which is composed of solely independent directors, is responsible for establishing and reviewing the overall compensation philosophy and program for our named executive officers.

Setting Performance Goals
Before the end of each fiscal year, the Compensation Committee begins its review of our compensation program, including determining if our compensation levels are competitive with our peer companies and if any changes should be made to the program for the next fiscal year.
 
At the beginning of each fiscal year, the Compensation Committee determines the principal components of compensation for the named executive officers and the individual performance goals of the Chief Executive Officer for that fiscal year, and sets the performance goals for each corporate performance-based compensation component.
 
The Chief Executive Officer sets individual performance goals for each of the other named executive officers, which are reviewed by the Compensation Committee. The individual performance goals are designed to drive our corporate goals. The Compensation Committee then meets regularly throughout the year, with management and in executive session, and reviews the Company’s performance to date against the corporate performance goals.
 
As discussed in detail under the heading Risk Assessment of Compensation Programs, when establishing the annual compensation program for our named executive officers, the Compensation Committee takes into consideration the potential risks associated with the program and structures it to provide appropriate incentives without encouraging excessive risk taking.
Making Compensation Determinations
After the end of the fiscal year, the Compensation Committee conducts a multi-part review of each named executive officer and the Company’s performance for the preceding fiscal year measured against the pre-established performance goals and makes annual compensation determinations. The Compensation Committee’s objective is to ensure that the level of compensation approved is consistent with the level of corporate and individual performance delivered.
 
As part of the annual compensation review process, our Chief Executive Officer reviews the performance of each named executive officer (other than his own performance, which is reviewed by the Compensation Committee) relative to the individual annual performance goals established for the fiscal year. Our Chief Executive Officer then presents his compensation recommendations to the Compensation Committee based on his review.
 
The Compensation Committee exercises discretion in modifying any compensation recommendations relating to named executive officers that were made by our Chief Executive Officer and approves all compensation decisions for our named executive officers.
 
In connection with his own performance review, the Chief Executive Officer prepares a self-assessment, which is presented to and discussed by the Compensation Committee and the independent directors. When making compensation decisions for our Chief Executive Officer and other named executive officers, the Compensation Committee considers the views of the independent directors.
Role of Independent Consultant
Our Compensation Committee has the sole authority to retain and replace, as necessary, compensation consultants to provide it with independent advice. The Compensation Committee has engaged FW Cook as its independent consultant to advise it on executive and non-employee director compensation matters. This selection was made without the input or influence of management. Under the terms of its agreement with the Compensation Committee, FW Cook will not provide any other services to the Company, unless directed to do so by the Compensation Committee. During fiscal year 2016 FW Cook provided no services to the Company other than to advise the Compensation Committee on executive and non-employee director compensation issues. In addition, at the start of fiscal year 2016, the Compensation Committee conducted a formal evaluation of the independence of FW Cook and, based on this review, did not identify any conflict of interest raised by the work FW Cook performed in fiscal year 2016. When conducting this evaluation, the Compensation Committee took into consideration the factors set forth in Exchange Act Rule 10C-1 and the NYSE’s listing standards.

Compensation Philosophy and Objectives

Our Philosophy

We maintain compensation plans that tie a substantial portion of our named executive officers’ overall target annual compensation to the achievement of our corporate performance goals. The Compensation Committee employs multiple performance measures and strives to award an appropriate mix of annual and long-term equity incentives to avoid overweighting short-term objectives.

Peer Group

As part of its annual compensation review process, the Compensation Committee discussed with FW Cook an analysis of our fiscal year 2016 executive compensation program, including total compensation and the elements used to compensate our named executive officers. It then compared the compensation of our named executive officers to the compensation of similarly situated named executive officers of other companies. In particular, the Compensation Committee reviewed compensation levels of our compensation peer group as a reference point of competitive compensation levels. The review was based on public compensation data for our compensation peer group and data from third-party compensation surveys.

To best inform their pay decisions based on where the Company competes for talent, the Compensation Committee established three categories for identifying peer companies:

  • Direct business competitors plus any companies listed as peers by a majority of these companies that would be considered “peers of peers.”
  • Related-industry competitors who are S&P 500 companies (a) classified as financial services or technology, excluding hardware and manufacturing, (b) with a 12-month average market-cap value between 1/4th and 4x Visa’s average market-cap, and (c) with revenues of less than $100 billion.
  • Strategic competitors who are S&P 500 companies recommended by management and approved by the Compensation Committee that have respected global brands, fit the above size criteria, and are frequent competitors for executive talent.

A list of 22 companies identified as peers for fiscal year 2016 is shown below:

 Related Industry Peers
Direct PeersFinancial ServicesTechnology
  • American Express Company

  • Discover Financial Services

  • MasterCard Incorporated

  • PayPal Holdings, Inc.
  • Bank of America Corporation

  • BlackRock, Inc.

  • Capital One Financial Corporation

  • Citigroup Inc.

  • JPMorgan Chase & Co.

  • Morgan Stanley

  • Bank of New York Mellon Corporation

  • The Goldman Sachs Group, Inc.

  • The PNC Financial Services Group, Inc.

  • U.S. Bancorp

  • Wells Fargo & Company
  • Accenture plc

  • Facebook, Inc.

  • Alphabet Inc.

  • IBM Corporation

  • Microsoft Corporation

  • Oracle Corporation

  • salesforce.com, inc.

Competitive Positioning

In order to attract and retain key executives, we target total compensation for our named executive officers by reference to the range of compensation paid to similarly situated executive officers of our compensation peer group. This includes salary, annual incentive targets and long-term incentive targets. The actual level of our named executive officers’ total direct compensation is determined based on both individual and corporate performance and can vary based on such factors as expertise, performance or advancement potential.

Internal Equity and Tally Sheets

As part of its annual compensation review, the Compensation Committee compares our named executive officers’ target annual compensation levels to ensure they are internally equitable. The Compensation Committee also regularly reviews tally sheets for each named executive officer to ensure that it is considering a complete assessment of all compensation and benefits. The tally sheets include each named executive officer’s wealth accumulation, which is comprised of the aggregate amount of equity awards and other compensation values accumulated by each named executive officer, and potential payments upon termination or change of control.

Components of Executive Compensation

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Summary of Fiscal Year 2016 Base Salary and Incentive Compensation

In November 2016, the Compensation Committee determined our named executive officers’ total direct compensation based on corporate and individual performance for fiscal year 2016, which is comprised of the following elements:

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The table below reflects the above components for each named executive officer for fiscal year 2016. As the long-term incentive awards for fiscal year 2016 set forth in the following table were awarded after the end of the fiscal year, they are discussed under the heading Fiscal Year 2017 Compensation – Long-Term Incentive Compensation. The equity awards discussed under the heading Fiscal Year 2016 Compensation – Long-Term Incentive Compensation refer to the equity awards made on November 19, 2015, during fiscal year 2016.

The table below differs substantially from the Summary Compensation Table for Fiscal Year 2016 later in this proxy statement in that the equity awards included in the table for fiscal year 2016 below were granted on November 19, 2016 while the equity awards included in the Summary Compensation Table were granted on November 19, 2015. This supplemental table is not intended as a substitute for the information in the Summary Compensation Table for Fiscal Year 2016 which is required by the SEC

incentive-compensation

(1)  Reflects the named executive officer’s rate of base salary as of September 30, 2016.
(2)  Reflects the payment pursuant to the annual incentive plan approved by the Compensation Committee in November 2016 and paid on November 15, 2016. These amounts are included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for Fiscal Year 2016.
(3)  Reflects the dollar value of performance shares approved by the Compensation Committee in November 2016 and awarded on November 19, 2016. Please see the heading Fiscal Year 2017 Compensation – Long-Term Incentive Compensation for additional information regarding these awards.
(4)  Reflects the dollar value of restricted stock units and stock option grants approved by the Compensation Committee in November 2016 and granted on November 19, 2016. The grant date fair value of these awards will be included in the fiscal year 2017 Summary Compensation Table in the proxy statement for the 2018 annual meeting of stockholders. Please see the heading Fiscal Year 2017 Compensation – Long-Term Incentive Compensation for additional information regarding these awards.
(5)  Mr. Scharf resigned as Chief Executive Officer effective December 1, 2016 and did not receive a grant of any equity awards in fiscal year 2017.

Fiscal Year 2016 Compensation

Base Salary

When setting our named executive officers’ base salaries, the Compensation Committee generally targets the range of compensation paid to similarly situated executive officers of our compensation peer group. The Compensation Committee may set salaries above or below the median amount based on considerations including the expertise, performance or advancement potential of each named executive officer. The base salary levels of our named executive officers typically are considered annually as part of our performance review process, and upon a named executive officer’s promotion or other change in job responsibilities.

During its annual review of the base salaries of our named executive officers for fiscal year 2016, the Compensation Committee considered:

  • market data of our compensation peer group;
  • an internal review of each named executive officer’s compensation, both individually and relative to other named executive officers; and
  • the individual performance of each named executive officer.

Based on this review, the Compensation Committee decided that it was appropriate to increase Mr. Scharf’s base salary from $1,000,000 to $1,250,000, effective as of October 1, 2015. No other changes were made to base salaries for fiscal year 2016.

Annual Incentive Plan

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These reflect weightings for our NEOs, except our CEO.  For our CEO, the weightings are: 80% for Corporate Performance and 20% for Individual Performance.

Incentive Plan Target Percentage. During fiscal year 2016, each of our named executive officers was eligible to earn an annual cash incentive award under the Visa Inc. Incentive Plan, or VIP, which we refer to as our annual incentive plan. Each named executive officer’s potential award was expressed as a percentage of his or her base salary, including threshold, target and maximum percentages. There were no changes made to these percentages for our named executive officers for fiscal year 2016.  After the end of the fiscal year, the Compensation Committee determined the amount of each named executive officer’s actual annual incentive award based upon the achievement of a combination of pre-determined corporate and individual goals.

Corporate Goals and Individual Goals. In November 2015, the Compensation Committee established for fiscal year 2016 threshold corporate goals under the VIP based on Net Income and Net Revenue Growth, each as adjusted by the Compensation Committee. Either of these metrics had to be met or exceeded before annual incentive awards would be made to our named executive officers for fiscal year 2016. These threshold corporate goals are solely for purposes of compliance with Section 162(m) of the Internal Revenue Code and for establishing the maximum levels for VIP payments to our NEOs, and are different from the payment metrics the Compensation Committee uses to determine actual payouts for corporate performance described in the table below. This further aligns our annual incentive plan program with stockholders’ interests by ensuring that no incentive payment is made unless a certain level of corporate performance is achieved. Once either of the threshold corporate performance goals is met or exceeded, each named executive officer becomes eligible to receive up to his or her maximum potential annual incentive award. When making final payout determinations the Compensation Committee may exercise negative discretion to award less than the maximum potential award based on the attainment of the pre-determined corporate performance measures and individual performance goals to determine each named executive officer’s actual annual incentive award amount. This process is intended to permit the entire amount of the annual incentive award to be considered performance-based and tax deductible under Section 162(m) of the Internal Revenue Code.

For the fiscal year 2016 annual incentive award to our Chief Executive Officer, the Compensation Committee established that, assuming the achievement of at least one of the threshold corporate performance goals, 80% of the award was dependent on the achievement of corporate performance measures and 20% was dependent on the achievement of individual performance goals. For our other named executive officers, 70% of their annual incentive awards were based on the achievement of corporate performance measures and the remaining 30% was based on achievement of individual performance goals. These weightings reflect that each of the named executive officers shares the primary goals and objectives of the overall Company, while recognizing the importance of motivating the named executive officers to achieve goals that increase the value of the Company but relate solely to the individual’s specific area of responsibility. These weightings also allow the Compensation Committee to further differentiate compensation between the named executive officers based on their individual performance.

The threshold corporate performance goals for fiscal year 2016, which had to be met or exceeded before any annual incentive awards would be made, were Net Income – VIP adjusted, of $3,429 million and Net Revenue Growth – VIP adjusted, of 3.35%. As the threshold corporate performance levels for both metrics were achieved, fiscal year 2016 annual incentive payments were then based on a combination of corporate and individual performance as described below.

Corporate Performance Measures and Results for Fiscal Year 2016

The Compensation Committee approved the corporate performance weightings, targets and metrics for fiscal year 2016 displayed in the table below. The Compensation Committee selected the Net Income Before VIP Expense and Net Revenue Growth performance measures based on their belief that they are important indicators of increased stockholder value. The Compensation Committee also approved 50%, 100% and 200% payouts as a percentage of each named executive officer’s target annual bonus at the threshold, target, and maximum levels of performance, respectively.

The specific performance goals for each of threshold, target, and maximum level achievement, as well as the actual level of performance achieved for fiscal year 2016, are displayed in the following table (in millions, except percentages). Mr. Kelly was not present during the determinations described below:

corporate-performance-measures

For purposes of the annual incentive plan payout percentage in fiscal year 2016, our Net Income Before VIP – VIP adjusted, was determined by excluding the aforementioned adjustments from our U.S. GAAP Net Income  described in footnote 1 to the table under the heading Fiscal Year 2016 Financial Highlights from our reported U.S. GAAP Net Income, as well as other adjustments including VIP payment expenses for fiscal year 2016, Visa Europe related Net Revenue and Net Income, and interest expense on the debt raised for the Visa Europe acquisition and other acquisition-related costs. There were further adjustments to reflect actions taken during the year that were determined to be in the best interests of the company but negatively impacted fiscal year 2016 net income results, including accelerated investments into Q4 fiscal year 2016 originally planned for the first half of fiscal year 2017, unanticipated asset write-offs, and adjustments for China related investment delays. Based on these adjustments for purposes of the annual incentive plan payout percentage in fiscal year 2016, our Net Income Before VIP – VIP adjusted was $7,143. Interpolating this result between the target (100% payout) and maximum (200% payout) levels resulted in a payout percentage of 114% for this measure.

Our actual Net Revenue Growth – VIP adjusted, for fiscal year 2016 was determined as year-over-year growth in gross operating revenues net of incentives, adjusted from our U.S. GAAP Net Revenue Growth by excluding Visa Europe related net revenue. Interpolating the result shown above of 5.2% Net Revenue Growth – VIP adjusted for fiscal year 2016, for results between the threshold (50% payout) and target (100% payout) levels resulted in a payout percentage of 56% for this measure.

Based on the weightings outlined in the above table, the payout result for corporate performance as a percentage of target is 96%.

Individual Performance Goals and Results for Fiscal Year 2016

The fiscal year 2016 individual goals for each of our named executive officers were set in February 2016. The Compensation Committee believes that our named executive officers’ performance goals should support and help achieve the Company’s strategic objectives and be tied to their areas of responsibility. Individual performance goals for the Chief Executive Officer were established with the oversight of the Compensation Committee. Individual performance goals for the other named executive officers were proposed by the Chief Executive Officer and reviewed and approved by the Compensation Committee.   These goals were established by reference to our corporate strategic “pillars.”  We have designed these strategic pillars to position the Company competitively and thereby deliver superior performance, which would in turn create value for our stockholders.  To ensure that our executive officers stay focused on these pillars, a significant portion of their individual performance goals were tied to one or more of the pillars:

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After the end of the fiscal year, the Compensation Committee, based on each named executive officer’s self-assessment and Mr. Scharf’s input, reviewed each named executive officer’s progress against his individual performance goals. Based on this assessment, a named executive officer could receive an award from 0% to 200% of the individual portion of his annual incentive award. When making its award determinations, the Compensation Committee did not assign a specific weighting to any of the individual goals, but instead reviewed each named executive officer’s progress against his individual goals in the aggregate. The following is a summary description of the performance goal results for each of the named executive officers for fiscal year 2016.

Mr. ScharfGoal Results
FY 2016 Performance Results
  • Performed strongly against financial measures;

  • Successfully completed the Visa Europe Acquisition;

  • Achieved success as a leading partner for digital payments through a suite of new products and services;

  • Expanded access to the Company’s products and services globally;

  • Continued to transform our Company’s technology assets to drive efficiency and enable innovation through a focus on operational excellence, introduction of new products and services and acceleration of the workforce plan;

  • Championed payment system security for the industry; and

  • Continued to position the Company as a choice for top talent through a focus on development and improved employee engagement.
Mr. PrabhuGoal Results
FY 2016 Performance Results
  • Performed strongly against financial measures;

  • Successfully oversaw closing of Visa Europe acquisition and made meaningful progress toward integration; and

  • Built strong teams including upgraded Finance leadership team, redesigned forecasting and budgeting process and improved sourcing process.
Mr. McInerneyGoal Results
FY 2016 Performance Results
  • Performed strongly against financial measures;

  • Made meaningful progress on expanding international access and growing merchant acceptance and MVisa;

  • Renewed key partnerships;

  • Drove digital co-development and grew digital platform; and

  • Made meaningful progress toward US EMV transition.
Mr. TanejaGoal Results
FY 2016 Performance Results
  • Performed strongly against financial measures;

  • Deepened security defenses;

  • Delivered core innovation including consumer transaction control and growing Research Labs; and

  • Expanded talent base and improved on employee engagement metrics.
Ms. RicheyGoal Results
FY 2016 Performance Results
  • Performed strongly against financial measures;

  • Deployed consistent proactive public policy initiatives globally;

  • Strengthened preventive controls in multiple risk categories and developed overall roadmap for future of payment security; and

  • Expanded talent base and improved on employee engagement metrics.

Based on each named executive officer’s performance in managing their function and the progress they made towards their individual goals as discussed above, the Compensation Committee, in its discretion, determined that each named executive officer made substantial progress and awarded the individual portion of each officer’s annual incentive at the percentage of target displayed in the table below.

percentage-targets

Annual Incentive Plan Awards for Fiscal Year 2016

The payouts under our annual incentive plan are computed based on individual and corporate performance, as outlined above. The fiscal year 2016 annual cash incentive award payments are included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for Fiscal Year 2016, and are set forth in the following table.

The table also provides a supplemental breakdown of the components that make up the named executive officers’ actual fiscal year 2016 annual incentive awards. Both the dollar amount of the awards and the awards as a percentage of the target are displayed for each component.

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actual-incentives

(1)   The “threshold” and “maximum” amounts are provided under the Grants of Plan-Based Awards in Fiscal Year 2016 Table.

Long-Term Incentive Compensation

The Visa Inc. 2007 Equity Incentive Compensation Plan, which we refer to as the equity incentive plan, is intended to promote our long-term success and increase stockholder value by attracting, motivating and retaining our non-employee directors, officers, and employees. Additionally, to better tie our executive officers’ long-term interests with those of our stockholders, the equity incentive plan does not allow the repricing of stock grants once they are awarded, without prior stockholder approval.

The Compensation Committee administers the equity incentive plan with respect to our named executive officers and determines, in its discretion and in accordance with the terms of the equity incentive plan, the recipients who may be granted awards, the form and amount of awards, the terms and conditions of awards (including vesting and forfeiture conditions), the timing of awards, and the form and content of award agreements.

Long-Term Incentive Awards Granted in Fiscal Year 2016

In determining the types and amounts of equity awards to be granted to our named executive officers in fiscal year 2016, the Compensation Committee considered the practices of companies in our compensation peer group, the actual compensation levels of similarly situated executive officers of companies in our compensation peer group, corporate and individual performance during fiscal year 2015, recommendations from our Chief Executive Officer (for awards to the named executive officers other than himself) and each named executive officer’s total compensation. The Compensation Committee also considered the incentives provided by different award types, including increasing stockholder value; avoiding excessive risk taking; and encouraging employee retention. Below is an illustration of our equity grants awarded in fiscal year 2016 by type for our named executive officers, including our Chief Executive Officer:

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The following table displays the total combined value of equity awards approved by the Compensation Committee for our named executive officers in fiscal year 2016, and the award value broken down by component.

equity-award-components

(1)  As the aggregate grant date fair values of the performance shares displayed in the Summary Compensation Table for Fiscal Year 2016 and the Grants of Plan-Based Awards in Fiscal Year 2016 Table later in this proxy statement are computed in accordance with stock-based accounting rules and will be displayed in multiple years, the values in those tables differ from the value displayed in the table above.
(2)  Mr. Prabhu’s equity award was prorated to reflect his partial year of service during fiscal year 2015.

Stock Options and Restricted Stock Units

The dollar value of the equity awards in the table above were converted to a specific number of options or restricted stock units on the November 19, 2015 grant date, based on the fair market value of our Class A common stock on that date and the Black-Scholes value of stock options. The value displayed for performance shares reflects the target value of the award. The stock options and restricted stock units vest in three substantially equal annual installments beginning on the first anniversary of the date of grant.

Performance Shares

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The target number of performance shares is determined at the beginning of a three-year performance period and the number of shares earned at the end of the three-year period will range from zero to 200% of the target number of shares depending on our corporate performance, as measured by: (i) the annual EPS goal established for each fiscal year; and (ii) an overall modifier based on Visa’s TSR ranked relative to S&P 500 companies, or TSR Rank, over the three-year performance period. The TSR Rank modifier will reduce compensation to our named executive officers for periods when our stockholders’ value increase is below the median of the companies comprising the S&P 500 and will enhance our named executive officers’ compensation for periods when our stockholders’ value increase exceeds the median of the companies comprising the S&P 500. The total number of shares that may be earned at the end of the three-year period is capped at 200% of the target number of shares.

One-third of the target performance shares awarded on November 19, 2015 were tied to the fiscal year 2016 EPS goal that the Compensation Committee established within the first ninety days of fiscal year 2016. The remaining two-thirds of the target shares awarded are tied to the EPS goals for each of fiscal years 2017 and 2018, which will be set by the Compensation Committee within the first ninety days of the respective fiscal year. The actual EPS result will be used to determine the percentage of target shares credited from each of the three award segments. At the end of fiscal year 2016, the Compensation Committee reviewed our EPS – PS adjusted, of $2.90 which was determined by excluding from U.S. GAAP EPS: the aforementioned adjustments from U.S. GAAP Net Income described in footnote 1 to the table under the heading Fiscal Year 2016 Financial Highlights, as well as other adjustments including Visa Europe related Net Revenue and Net Income, and interest expense on the debt raised for the Visa Europe acquisition and other acquisition related costs. There were further adjustments from U.S. GAAP Net Income to reflect actions taken during the year that were determined to be in the best interests of the company but negatively impacted fiscal year 2016 net income results, including accelerated investments into Q4 fiscal year 2016 originally planned for the first half of fiscal year 2017, unanticipated asset write-offs, and adjustments for China related investment delays. The Compensation Committee determined that the final EPS result – PS adjusted, of $2.90 exceeded the target goal of $2.85 for fiscal year 2016. Using the unrounded result to interpolate between target (100%) and maximum (200%) yielded a result of 124.5% for fiscal year 2016.

At the completion of the entire three-year performance period in November 2018, the shares credited from the above EPS calculations for the three fiscal years will be totaled and the overall number of shares will be modified based on Visa’s TSR Rank for the full three-year period. This TSR Rank modification may increase or decrease the final number of shares earned by a maximum of 25% (see chart below); however, the final number of shares earned at the end of the three-year period, after the modification is applied, is capped at 200% of the initial target number.

modifying-metrics

(1)  Results between the 25th percentile and the 50th percentile and between the 50th percentile and the 75th percentile are interpolated between 75% and 100% or 100% and 125%, respectively.

The EPS goal for fiscal year 2016 and actual EPS results discussed above also apply to the third portion of the performance shares previously awarded to our named executive officers on November 19, 2013 and the second portion of the performance shares previously awarded to our named executive officers on November 19, 2014 (see illustration below).

long-term-incenvite-awards-psus-granted

Consistent with Financial Standards Accounting Board ASC Topic 718, the value of the performance share awards for fiscal year 2016 included in the “Stock Awards” column of the Summary Compensation Table for Fiscal Year 2016 later in this proxy statement represents the third segment of the award made on November 19, 2013, the second segment of the award made on November 19, 2014 and the first segment of the award made on November 19, 2015.

Determination of Shares Earned for Performance Shares Previously Awarded on November 19, 2013

The performance shares previously awarded to certain of the named executive officers on November 19, 2013 completed their three-year performance period following fiscal year 2016. As a result, the final number of shares earned pursuant to those awards based on the Company’s actual results over the three-year period was determined and certified by the Compensation Committee in November 2016. As illustrated below, based on the annual EPS results for fiscal years 2014, 2015 and 2016, and our TSR Rank over the three-year period, the performance shares earned equated to 156.0% of the target award established on November 19, 2013.

eps-targets

(1)  Percentage is based on unrounded values

modifying-metrics-2

primary-metric

Based on this Final Payout Result of 156.0%, on November 30, 2016 Mr. Scharf, Mr. McInerney and Ms. Richey earned shares equal to 156.0% of the target number of shares granted to each of them on November 19, 2013. As a result, Mr. Scharf earned 93,850 shares versus his target of 60,160 shares, Mr. McInerney earned 24,698 shares versus his target of 15,832 shares, and Ms. Richey earned 22,720 shares versus her target of 14,564 shares. Mr. Prabhu and Mr. Taneja did not receive performance share awards on November 19, 2013.

Retirement and Other Benefits

Our benefits program is designed to be competitive and cost-effective. It is our objective to provide core benefits, including medical, retirement, life insurance, paid time off and leaves of absence, to all employees and to allow for supplementary non-core benefits to accommodate regulatory, cultural and practical differences in the various geographies in which we have operations.

We sponsor a frozen tax-qualified defined benefit pension plan, which we refer to as the retirement plan.  We also sponsor a tax-qualified defined contribution 401(k) plan, which we refer to as the 401k plan, to provide market driven retirement benefits to all eligible employees in the United States.

We maintained a non-qualified excess retirement benefit plan and a non-qualified excess 401k plan to make up for the limitations imposed on our tax-qualified plans by the Internal Revenue Code. New contributions to these non-qualified plans ceased effective February 1, 2014. We also sponsor an unfunded, non-qualified deferred compensation plan, which we refer to as the deferred compensation plan, which allows executive officers and certain other highly compensated employees to defer a portion of their annual incentive awards and sign-on bonuses to help them with tax planning and to provide competitive benefits. For additional information on these plans, see the sections entitled Executive Compensation – Pension Benefits Table for Fiscal Year 2016 and Executive Compensation – Non-qualified Deferred Compensation for Fiscal Year 2016.

Perquisites and Other Personal Benefits

We provide limited perquisites and other personal benefits to facilitate the performance of our named executive officers’ management responsibilities. For instance, we maintain a company car and driver which allows for additional security that are used primarily by the Chief Executive Officer for both business and personal use, as well as some business and limited personal use by other executive officers. From time to time, our named executive officers also may use the Company’s tickets for sporting, cultural or other events for personal use rather than business purposes. If an incremental cost is incurred for such use, it is included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2016.

In addition, we have a policy that allows for companion travel on business related flights on our corporate aircraft by the Chief Executive Officer, the President and other key employees, as approved by the Chief Executive Officer. It is our policy that named executive officers are responsible for all income taxes related to their personal usage of the corporate car or aircraft, as well as travel by their companions. Additionally, no named executive officer may use the corporate aircraft for exclusive personal use (not related to business) except under the terms and conditions outlined in the Company’s aircraft time sharing agreement with the Chief Executive Officer, or under extraordinary circumstances with the advance approval of the Chief Executive Officer. Any personal use of the aircraft by our Chief Executive Officer pursuant to the aircraft time sharing agreement requires him to reimburse Visa an amount (as determined by the Company) equal to the lesser of: (i) the amount that would, absent reimbursement, be reportable with respect to the Chief Executive Officer in the Summary Compensation Table (which we refer to as the SEC Cost), or (ii) the expenses of operating such flight that may be charged pursuant to Federal Aviation Regulation Section 91.501(d) as in effect from time to time (which we refer to as the FAR Expenses). The Chief Executive Officer’s personal use of the corporate aircraft is also subject to an annual cap of $500,000, as determined by the Company using the lesser of the SEC Cost and the FAR Expenses. As a result of this arrangement, in fiscal year 2016, the Chief Executive Officer’s personal use of the aircraft resulted in minimal incremental cost to the Company. Please refer to the All Other Compensation Table for additional information about the other limited perquisites and personal benefits provided to our named executive officers during fiscal year 2016.

Severance

We believe that it is appropriate to provide severance to an executive officer in certain circumstances. We do not provide for gross-ups for excise taxes that may be imposed as a result of severance payments and, for payments payable upon or following a change of control, we generally require a qualifying termination of employment in addition to the change of control. Please see the section entitled Employment Arrangements and Potential Payments upon Termination or Change of Control – Executive Severance Plan for additional information.

Offer Letters with Charles W. Scharf, Vasant M. Prabhu, Ryan McInerney and Rajat Taneja

We executed offer letters with each of Mr. Scharf, Mr. Prabhu, Mr. McInerney and Mr. Taneja in connection with their commencement of employment by Visa. Please see the description of the offer letters in the section entitled Employment Arrangements and Potential Payments upon Termination or Change of Control – Offer Letters with Charles W. Scharf, Vasant M. Prabhu, Ryan McInerney and Rajat Taneja.

Fiscal Year 2017 Compensation

Long-Term Incentive Compensation

On November 7, 2016, the Compensation Committee approved the annual equity awards for our named executive officers to be granted on November 19, 2016, using a combination of 25% stock options, 25% restricted stock or restricted stock units, and 50% performance shares. These are the same three equity vehicles and percentages used in prior years. For the performance shares awarded on November 19, 2016, the actual number of shares earned will be determined based on:

  • the annual EPS goal established for each of the three fiscal years in the performance period; and
  • an overall modifier based on our TSR Rank over the three-year performance period.

Consistent with prior fiscal years, the total combined value of each equity award was approved by the Compensation Committee after considering the practices of companies in our compensation peer group, the actual compensation levels of similarly situated executive officers of companies in our compensation peer group, corporate and individual performance during fiscal year 2016, recommendations from our Chief Executive Officer (for awards to the named executive officers other than himself) and each named executive officer’s total compensation. The table below displays the total dollar value of the grants approved in November 2016 as well as the dollar value of each component.

components-of-equity-and-stock

Mr. Scharf resigned from his employment with the Company on December 1, 2016, and did not receive a grant of any equity awards in fiscal year 2017.

CEO Compensation for Fiscal Year 2017

On October 17, 2016, we entered into an offer letter agreement with Alfred F. Kelly, Jr. under which he became CEO Designate as of October 31, 2016 and was appointed as our Chief Executive Officer effective as of December 1, 2016. The offer letter, which outlines the terms of Mr. Kelly’s employment, was the result of negotiations between Mr. Kelly and the Company. During the negotiations, the Compensation Committee consulted with FW Cook, its independent compensation consultant, and external legal counsel with expertise in executive compensation matters. The Compensation Committee also reviewed relevant market data and the terms of Mr. Kelly’s compensation arrangements with his previous employer, including the value of benefits Mr. Kelly would forfeit with his prior employer by agreeing to become our Chief Executive Officer. The Compensation Committee and the independent members of the Board determined, in their judgment and based on Mr. Kelly’s experience, qualifications, and skills, as well as prevailing market practices, that the compensation levels, awards and other terms contained in the offer letter were appropriate to attract and retain Mr. Kelly to serve as our Chief Executive Officer.

Pursuant to the terms of the offer letter, Mr. Kelly receives an annual base salary of $1,250,000.  He will participate in our annual incentive plan for fiscal year 2017, with a target bonus of 250% of his base salary and a maximum bonus opportunity of 500% of his base salary. In addition, Mr. Kelly received a long-term equity incentive award with an aggregate grant date value of $11,000,000, with $5,500,000 in performance shares, $2,750,000 in stock options and $2,750,000 in restricted stock units.  This award was made at the same time and in the same general form as awards to other senior executives of the Company on November 19, 2016, except that the provisions to qualify for retirement treatment were defined as age 60 and four years of service and six months of service from the date of grant.  The standard provisions are age 55 and five years of service and six months of service from the date of grant. Mr. Kelly also is eligible to participate in our Executive Severance Plan.

On November 19, 2016, as required under the terms of his offer letter, Mr.  Kelly received a one-time “make-whole” equity award with a grant date value of $6,300,000 to compensate him for certain forfeited bonus opportunities with his prior employer.  In addition, Mr. Kelly is entitled to a potential make-whole equity award of $1,000,000 if within 90 days of his termination of employment with his prior employer, his prior employer failed to exercise certain call rights in respect of Mr. Kelly’s equity investment in such employer comprised of restricted stock units such that Mr. Kelly was unable to recover the cash value of his original equity investment in his prior employer.  The make-whole awards would vest in three substantially equal installments on each of the three anniversaries of the first quarterly grant date after commencement of employment, assuming his continued employment by the Company through each such date; provided, that upon the termination of his employment by the Company without “cause” (as defined in the offer letter agreement) or his resignation of employment for “good reason” (as defined in the offer letter agreement), conditioned on his execution and failure to revoke a release of claims against the Company and its affiliates in the form attached to our Executive Severance Plan, the make-whole awards will become vested with respect to that number of shares of Company common stock with respect to which the Make-Whole Award would have become vested assuming Mr. Kelly had continued employment with the Company for the twelve month period following termination of employment. Further, in the event of Mr. Kelly’s death or “disability” (as defined in the Executive Severance Plan), the Make-Whole Award will become vested with respect to 100% of the shares subject thereto.  The Make-Whole Award will otherwise be subject to the terms and conditions of our equity incentive plan, and the individual award agreement corresponding to the award(s).

We also entered into an aircraft time sharing agreement with Mr. Kelly, which governs Mr. Kelly’s personal use of the Company’s aircraft during his employment and his reimbursement of the Company for the costs of any such use.

Other Equity Grant Practices and Policies

Stock Grant Practices

The Compensation Committee has adopted an equity grant policy, which contains procedures to prevent stock option backdating and other grant timing issues. Under the equity grant policy, the Compensation Committee approves annual grants to executive officers and other members of the executive committee at a meeting to occur during the quarter following each fiscal year end. The Board delegated the authority to Mr. Scharf as the sole member of the stock committee to make annual awards to employees who are not members of the executive committee. Effective as of December 1, 2016, Mr. Kelly replaced Mr. Scharf as the sole member of the stock committee. The grant date for annual awards to all employees and non-employee directors has been established as November 19 of each year.

In addition to the annual grants, stock awards may be granted at other times during the year to new hires, employees receiving promotions, and in other special circumstances. The equity grant policy provides that only the Compensation Committee may make such “off-cycle” grants to named executive officers and other members of management’s executive committee. The Compensation Committee has delegated the authority to the stock committee to make “off-cycle” grants to other employees, subject to guidelines established by the Compensation Committee. Any “off-cycle” awards approved by the stock committee or the Compensation Committee must be granted on the fourth business day after we publicly announce our earnings or on such other date determined by the stock committee, Compensation Committee or the Board.

For all newly issued stock option awards, the exercise price of the stock option award will be the closing price of our Class A common stock on the NYSE on the date of the grant. If the grant date for the annual awards falls on a weekend, the exercise price of stock option awards will be the closing price of our Class A common stock on the NYSE on the last trading day preceding the date of grant.

Stock Ownership Guidelines

The Compensation Committee maintains stock ownership guidelines for our executive officers as follows:

OfficerStock Ownership Guidelines
Charles W. Scharf6 x base salary
Vasant M. Prabhu4 x base salary
Ryan McInerney4 x base salary
Rajat Taneja4 x base salary
Ellen Richey3 x base salary

Equity interests that count toward the satisfaction of the ownership guidelines include shares owned outright by the named executive officer, shares jointly owned, restricted stock and restricted stock units payable in shares. Newly hired or promoted executives have five years from the date of the commencement of their appointment to attain these ownership levels. Each named executive officer currently meets or exceeds the applicable guideline set forth in the table above. If an executive officer does not meet the applicable guideline by the end of the five-year period, the executive officer is required to hold a minimum of 50% of the net shares resulting from any future vesting of restricted stock, restricted stock units, performance shares or exercise of stock options until the guideline is met. These guidelines reinforce the importance of aligning the interests of our executive officers with the interests of our stockholders and encourage our executive officers to consider the long-term perspective when managing the Company.

Hedging and Pledging Prohibition

As part of our insider trading policy, all employees, including our named executive officers, and non-employee directors are prohibited from engaging in short sales of our securities, establishing margin accounts or otherwise pledging or engaging in hedging transactions involving our securities.

Policy Regarding Clawback of Incentive Compensation

We have a Clawback Policy pursuant to which named executive officers and other key executive officers may be required to return incentive compensation paid to them if the financial results upon which the awards were based are materially restated due to fraud, intentional misconduct or gross negligence of the executive officer.

The Clawback Policy permits the Board to determine in its discretion if it will seek to recover applicable compensation, taking into account the following considerations as it deems appropriate:

  • Whether the amount of any bonus or equity compensation paid or awarded during the covered time period, based on the achievement of specific performance targets, would have been reduced based on the restated financial results;
  • The likelihood of success of recouping the compensation under governing law relative to the effort involved;
  • Whether the recoupment may prejudice Visa’s interest in any related proceeding or investigation;
  • Whether the expense required to recoup the compensation is likely to exceed the amount to be recovered;
  • The passage of time since the occurrence of the misconduct;
  • Any pending legal action related to the misconduct;
  • The tax consequences to the affected individual; and
  • Any other factors the Board may deem appropriate under the circumstances.

Under the Clawback Policy, we can require reimbursement of all or a portion of any bonus, incentive payment, equity based award (including performance shares, restricted stock or restricted stock units and outstanding stock options), or other compensation to the fullest extent permitted by law. Recoupment or reimbursement may include compensation paid or awarded during the period covered by the restatement and applies to compensation awarded in periods occurring subsequent to the adoption of the Clawback Policy.

We believe our Clawback Policy is sufficiently broad to reduce the potential risk that an executive officer would intentionally misstate results in order to benefit under an incentive program and provides a right of recovery in the event that an executive officer took actions that, in hindsight, should not have been rewarded. In addition, appropriate language regarding the policy has been included in applicable documents and award agreements and our executive officers are required to acknowledge in writing that compensation we have awarded to them may be subject to reimbursement, clawback or forfeiture pursuant to the terms of the policy and/or applicable law.

Tax Implications – Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code limits our ability to deduct for tax purposes compensation in excess of $1,000,000 that is paid to our principal executive officer or any one of our three highest paid executive officers, other than our principal executive officer or principal financial officer, who are employed by us on the last day of our taxable year unless, in general, the compensation is paid pursuant to a plan that has been approved by our stockholders and is performance-related and non-discretionary. The Compensation Committee will review and consider the deductibility of executive compensation under Section 162(m) and may authorize certain payments in excess of the $1,000,000 limitation. The Compensation Committee believes that it needs to balance the benefits of designing awards that are tax-deductible with the need to design awards that attract, retain and reward executives responsible for our success.

In addition, Section 274(e) of the Internal Revenue Code limits the amount that companies can deduct for the personal use of corporate aircraft to the amount recognized as income by the executives that used the aircraft. For fiscal year 2016, the total amount of our disallowed tax deduction resulting from the personal use of the corporate aircraft by our named executive officers and any guests was approximately $1,029,000.

For information regarding the Compensation Committee’s review of compensation-related risk, please see the section entitled Risk Assessment of Compensation Programs.

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