Ghost

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Lululemon (NASDAQ:LULU) became a lightning rod for conspiracy theorists this week, with some outlets suggesting that its longest-tenured board member was a "ghost." The story got legs over the past forty-eight hours when Jim Cramer called the company out about the situation.

Sadly -- for those who were hoping for some juicy drama -- it seems it might be much ado about nothing. While I give TheStreet's Anders Kietz a lot of credit for tracking down details, a few clues make it highly improbable that Rhoda Pitcher -- the board member in question -- is a figment of one's imagination. More likely, she is a low-profile woman that's taken an unconventional route to Lululemon's board after doing consulting work for founder Chip Wilson back in 2005.

A little background

This whole thing got started when Wilson talked with Jim Cramer last Wednesday about what he thinks is wrong with the company. In short, he said that the "longest standing board members" are to blame for the fact that the stock isn't twice what it is right now.

Given that, TheStreet did some digging and failed to confirm any details surrounding Rhoda Pitcher -- who has been a member of the Board since 2005. The outlet was unable to find any web-presence for Pitcher's alleged business: Rhoda M. Pitcher Inc. It also failed to verify that Pitcher held a master's degree from an accredited school; the one listed -- University Associates -- isn't included in the Department of Education's database of accredited institutions.

Given that, the fact that Rhodes has been paid $1.59 million since 2005, and her position as the Chair of the Nominating and Governance Committee, Kietz rightfully questioned the credentials -- and existence -- of Pitcher.

Indeed, there are odd inconsistencies

But before I get to why this is a wild goose chase, it's worth pointing out some oddities I found in my research.

  • In its initial S-1 filing to begin the process of going public in May 2007, Lululemon says that Pitcher obtained her Masters in Human Resource Development. However, when the 2008 proxy statement was filed, her degree was in Organization Development.
  • Before going public, Lululemon said that it had paid Pitcher $131,562 in HR consulting fees. However, when the company filed its first proxy statement, her fees were restated at $99,000.

I'll be the first to admit that when I saw this, my antennae went up. But there's more to the story.

The weight of the evidence

If Rhoda Pitcher really were a "ghost" it would be very difficult to find further evidence of her existence. But there's a ton out there, including:

  • The fact that she serves on the Advisory Board of Educurious, a Seattle-based education non-profit that specifically references her work on the board of Lululemon.
  • She and her husband Charles are referenced as the owners of a house in Clyde Hill, Washington in the Pacific Coast Architecture database -- the same town that appears on Lululemon's filings.
  • When Emma Pitcher -- Rhoda's mother-in-law -- passed away in 2010, the Kalamazoo Gazette mentioned that she and her husband were relatives who lived in Clyde Hill.
  • While I, too, had trouble finding an accredited "University Associates," I also realized that Pitcher is in her 60s, and likely graduated decades ago. Back in the 1970s and 1980s, there were a number of scholarly papers being produced out of a San Diego outfit called "University Associates." Those papers are still referenced today, and they almost uniformly deal with human resources -- the area that Pitcher allegedly specialized in.
  • A Chicago blogger who apparently worked at Lululemon and has had an audience with Chip Wilson described Rhoda Pitcher as, "hands down, one of the most amazing, inspiring and motivating people I have ever had the pleasure of meeting."

For all of this to have been orchestrated, over such a long time frame, seems incredibly unlikely.

What's Chip Wilson's real motivation?

It's interesting that in the interview Wilson threw Pitcher under the bus without mentioning her by name -- as if to feign ignorance. It's pretty clear this was his intention. What's odd is that it seems it was Wilson himself who brought Pitcher on board with the company.

In Lululemon's 2007 prospectus, it states that Wilson -- through his ownership in the company -- was allowed to nominate three people to the board. Pitcher was one of those three. Apparently, this was a relationship that soured over time.

My best guess is that Pitcher isn't your normal B-School board member. Maybe she isn't qualified to have this post, and maybe she'll soon resign if she doesn't like the media scrutiny. Hopefully the company and Pitcher (assuming she exists) will address the issue shortly to end the speculation.

But that's not the real story here.

Go back and watch Wilson's interview with Jim Cramer and you start to get a picture of angry founder who is still bitter after being shown the door in 2015. Wilson continually said that Lululemon's stock should be over twice what it is today, and that it wasn't run by a visionary.

He also claimed that he'd never go back to manage the company, even though he'd do a better job: "They would have to pay me $100 million per year to do it... I could produce billions and billions... But... they would rather pay someone $2 million to earn them nothing." He went so far to say that Lululemon should be worth double Under Armour (NYSE:UAA) (NYSE:UA). For reference, that would mean Lululemon should be worth five times what it is now.

When Cramer pointed out that comps came in above 8% in the most recent quarter, Wilson said that Cramer's bar was simply too low. Wilson came off as disconnected and vindictive. Given that Wilson's comments about overweight women wearing Lululemon's pants probably hurt the company the most, there's one thing shareholders can take away from this: thank goodness Wilson is no longer on the board.

Brian Stoffel owns shares of Under Armour (A Shares) and Under Armour (C Shares). The Motley Fool owns shares of and recommends Lululemon Athletica and Under Armour (A Shares). The Motley Fool owns shares of Under Armour (C Shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.