Edit Module

Mastermind of MasterCard

William Taufic

It had already been a sufficiently challenging stretch for Robert W. Selander, president and chief executive officer of MasterCard. As 2006 was dawning, the forty-year-old company was on the brink of major change as it prepared to launch what was expected to be one of the richest, most-watched initial public offerings of the year. If that was not stressful enough, on the personal side, Selander was adjusting to the recent loss of his father.

Now, with the IPO drawing near, Selander was summoned from an important meeting with his board of directors at the company’s spacious I. M. Pei-designed headquarters in Purchase, New York, to take a personal telephone call. Unbeknownst to those in attendance, Selander’s doctor was on the phone with the results of his test for prostate cancer.

“It was interesting,” remembers Chris McWilton, MasterCard’s chief financial officer. “He left the meeting and went out to take a call. They said it was long distance and he had to take it urgently, so I thought one of his kids was having an issue. He came back in the room, and I remember he walked past me and he had sort of an apprehensive but warm smile on his face. And he winked at me when he walked by, sort of like, ‘Everything is going to be okay.’ ”

The doctor, however, had bad news: Selander’s test came back positive. Although the malignancy was detected early, he would undergo surgery within a few weeks. And the much-anticipated IPO, with the rigorous travel demands required of the company’s leader, would go on ice until the spring. Whatever emotions Selander might have harbored, few if anyone within the company detected even a hint of gloom, rage, fear or distress from their boss in the days that followed. “He never lost his temper, never seemed distracted, never lost his patience, never lost it throughout that period,” McWilton says.

Selander’s demeanor is cerebral but easygoing. Tall with mature good looks, the Greenwich resident could probably moonlight as a model for a clothing catalog, stacking firewood or patting a golden retriever, should he be so inclined. When asked about this recent cancer scare, the CEO was forthright. “Let’s face it,” he says. “I would have preferred that it never happened, that I never got that call, that I be in perfect health for the next thousand years. But you know what? I got the call.

“It was a reminder that things can go bad. but also that the stuff you don’t know can hurt you. And when you find out about it, it gives you a chance to do something about it.”

He was talking about his health, of course. But Selander’s comment also reflects the no-nonsense, proactive mentality that has marked his decade-long tenure at the helm of what is now MasterCard Worldwide. He stepped into the top job determined to shed the less-than-stringent association culture that pervaded what was then a cooperative of banks, and to bring greater commercial focus, accountability and discipline to the business. On his watch, MasterCard consolidated global operations, buttressed relations with its biggest card issuers, improved the technological infrastructure and established itself as one of the world’s most recognizable brands. (It was Selander who gave the nod, not long after taking the company’s reins, to the successful and long-running “Priceless” advertising campaign.)

His greatest legacy, however, may be his part in last May’s $2.4 billion public offering, among the most lucrative of the year. Since opening at $39 a share, MasterCard’s stock has surpassed expectations, climbing as high as $118.07 on the New York Stock Exchange in February.

A $10 billion company with 4,600 employees around the world, MasterCard is now free of the constraints of its former bank owners. In a day in which plastic is increasingly replacing hard currency, the changeover opens the way to untapped markets and new payment technologies, like cellular phones, which the banks would have regarded as competition. The switch also gives the company a chance to make inroads against its vastly bigger rival, Visa International, which won’t be going public until late this year, if not 2008.

Before the fateful call from his doctor, Selander had devoted many hours to the IPO. During his tangle with cancer, he found even greater motivation to finish the job. “You realize that there are certain things you want to get done in your life,” he says. “So you better get on with them. You better go get them done.”

Truth be told, Bob Selander has always been someone who gets things done. An only child, he was born in Chicago but for the most part grew up in the suburbs west of Boston. His father was a sales executive in promotional marketing, first for the dry-cleaning industry and later, banks. His mother taught high school English and history, then became a town librarian on Cape Cod.

Selander’s educational pedigree includes Phillips Academy in Andover, Massachusetts; Cornell, where he majored in industrial engineering; and Harvard, where he earned his MBA.

Out of school in 1974, he signed on with First National City Bank, which soon became Citibank, and stayed for twenty years. With its commitment to building a global franchise and its focus on retail financial services, Citibank seemed a perfect fit for Selander’s interests. Right from the start he was allowed to test his abilities in a range of jobs in New York, Latin America and Europe. As the bank grew, he would have a hand in retail branch development, retail brokerage businesses, sales and marketing, technology and credit cards. “The growth just sucked a group of us along from a career standpoint,” he says. “I had opportunities that were very hard to find then — I would argue that they’re pretty hard to find now — because of my really good luck at having arrived at that particular bank at that particular time.”

Yet the more he achieved, the fewer opportunities there were to go around. “The metaphor I use is that it was like there were thirty of us circling the airport waiting for permission to land,” Selander says. “And if one of these guys got called to an opportunity before you did, you couldn’t really begrudge it to them because you knew them. But at the end of the day, you wanted to get that opportunity.”

Selander finally decided to prove his mettle elsewhere. He happily touched down at MasterCard, where he would come to oversee the company’s Europe, Middle East-Africa and Canada regions. Among other accomplishments, he helped fortify ties with MasterCard’s overseas agent, Europay International, which the company later acquired. In England he forged a deal to convert the popular Access card to MasterCard.

In 1997 Selander ascended to the top job, replacing H. Eugene Lockhart who moved to BankAmerica Corp. Little did he suspect how much would change in the coming years or how his responsibilities would evolve. In his first five or six years, he marshaled the forces to get the company better directed and rigorous. In 2002 came the merger with Europay International, which consolidated operations abroad. That same year, MasterCard became a private share corporation. Then came the IPO, and now, its aftermath. “I feel like I’ve been in about four jobs in this ten-year period,” Selander says.

The payments industry is often misunderstood by the general public and even by investors. Don’t blame Selander for your credit card interest rate or that late fee. MasterCard provides a network to process card transactions.

“The majority of people still think that we issue cards and that we deal directly with the merchants,” he says. “Even at cocktail parties to this day, individuals will come up and go, ‘Gee, I see you guys are issuing this new card,’ and I’ll have to say, ‘Well, that’s one of our franchisees, one of the banks that is issuing that card, and they’re doing it in conjunction with Sak’s Fifth Avenue, let’s say.’ ”

In other words, MasterCard’s customers are the 25,000 banks that have issued well over 800 million credit and debit cards with its famous logo. They, in turn, pay the company fees for processing the transactions. (The company processed nearly $2 trillion in transactions last year, twice the amount of its gross dollar volume just five years ago.)

The rub, of course, is that Visa has nearly twice as many cards in play and a dominance that is only growing. In the dogfight for market share, Selander and his lieutenants must be especially canny to differentiate their brand. One step in that direction has been for MasterCard to provide consulting services for its top banks.

But their best hope lies in MasterCard having gone public before the competition. “You’re going to have an almost two-year window in which you can try to make something happen that might really matter in terms of market share,” says David Robertson, president of the Nilson Report, an industry newsletter. “So there’s probably a lot of thinking going on about how to really act impactfully in the short run so that the inevitable comparison that will come down the pike once Visa and MasterCard are both publicly traded won’t be so bad.”

Also high on Selander’s list will be the slew of antitrust and unfair-pricing lawsuits by merchants that are piling up against MasterCard as well as Visa.

In 2003 the companies reached a historic $3 billion settlement — the biggest ever for an antitrust case — after Wal-Mart and others challenged the associations’ requirements that retailers who accepted their credit cards also honor their debit cards. That has spurred subsequent litigation. American Express and Discover Financial Services, meanwhile, are suing MasterCard and Visa for antitrust violations by forbidding banks that issue their cards to issue competing cards.

“I don’t think there’s any doubt that this will be settled,” Robertson says of the lawsuits. “Everything will be settled. No one wants the litigation to go on. The question is how much.”

European Union regulators, for their part, have been investigating interchange fees that the companies charge for cross-border transactions. Hoping to stave off regulation, MasterCardEurope recently announced plans to reduce those fees. But regulators in a number of countries, including England, Australia, Hong Kong and Spain have expressed similar concerns.

Selander has a lot to ponder: the consolidation of the banking industry, the ramifications of identity theft and fickle investors. The demands of the past few years have kept him away from the golf course — he is a member at the Purchase Country Club — more than he would like. Although Selander enjoys the sport and has teed off on some of the finest courses anywhere, he is self-effacing about his play. “My downswing and my backswing are my principal handicaps,” he jokes.

Still, he has made it a point to devote time to wife Nancy and sons Crosby, who recently graduated from New York University, and Russell, a junior at Boston University. (Selander also has two stepdaughters, Jessica and Tracey, from Nancy’s first marriage, to Terry Lundgren, chairman, president and CEO of Federated Department Stores.)

After Selander recovered from surgery last year, he spent thirteen days over three weeks selling the IPO to investors. In all, he barnstormed twenty cities in six countries. The road show, as it is known, is a critical part of a public offering, and good timing is essential. All the same, Selander insisted on taking one day off.

“We started the road show on a Sunday night,” recalls CFO McWilton. “His son’s graduation was on a Tuesday, and Bob committed that he would not do the road show on Tuesday. We flew back from Chicago on Monday night, he attended his son’s graduation, and we resumed on Wednesday. That’s one of the times in which he could have said, ‘Well, I won’t go’ or ‘I’ll only attend the morning of the actual graduation ceremony.’ But he carved a day out and took the pause. That said a lot to me.”

Friend Bob Simms, an investment  manager and former professional football player who lives in Greenwich, periodically golfs, trapshoots and hunts birds with Selander. He describes the CEO as “very focused, surprisingly gentle, competitive, disciplined and organized.”

Selander’s competitive side comes out, Simms says, after a morning of small wagers during a round of golf at Purchase or Woodway Country Club in Darien. “He loves to roll the drums,” Simms says. “That’s what we call it when we’re coming into the eighteenth hole and we put whatever we’ve lost to each other all on the line for the one hole. And he normally wins it.”

Although Selander has been reminded that life is short, and fragile, he still enjoys his job and wants to stay at it a while longer. (Between salary, bonus, incentives and other compensation, he earned $13.2 million in 2005. There is a $10 million retention bonus that kicks in should he still be at the helm come 2011.)

At some point, Selander, now in his midfifties, would like to try another venture or two, maybe in an academic environment or by serving on some additional boards of directors. (He currently serves as a director of the Hartford Financial Services Group and is also a member of the Committee to Encourage Corporate Philanthropy, a nonprofit, international forum of top business leaders.)

“I don’t think I’d be happy if I was just out to play golf every day,” he says. “Now, if I can intermingle a little bit of that or perhaps a little bit more of that than right now ...

“I think I have a couple more years in me, and I hope the board and shareholders feel that way for the same time frame I do. But there is a point where I think it’s going to be good for me and good for the company to have different leadership.”

At this, the lights in Selander’s office inexplicably go dark, and then come back on again. The CEO laughs. “I guess they’re giving me a hint by cutting off the power,” he says.