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Board Stiffs

LENOX, MA-In the wake of a shareholder lawsuit alleging that the board of directors of Silicon Prion allowed a board …

LENOX, MA-In the wake of a shareholder lawsuit alleging that the board of directors of Silicon Prion allowed a board member to keep his seat and attend regular meetings 37 months after he died, both chairman Harry Owens and president Wallace Rutherford, III have voluntarily agreed to step down.

According to local news reports, Charles Dawson had been a member of the Silicon Prion board since the company’s IPO in 1954 and had attended board meetings until August of this year, despite the fact that he died in July of I995. Seemingly, Dawson‘s second wife was so determined to continue collecting the $75,000 annual salary he drew as a board member that she had her dead husband freeze-dried, then wheeled him into meetings on a gurney, and propped him up in his seat shortly before the other board members arrived.

“Obviously, I regret not noticing that Chuck had been dead for the past three years,” said ex-chairman Owens at a press conference called to announce his resignation. “But in my defense, I’d must point out that Chuck was an awfully quiet guy, so the fact that he just sat there in a corner not saying anything at all those meetings never raised any red flags with the other board members. Even when he was young, Chuck liked to pay it pretty close to the vest. To be honest, most of us thought he was napping.”

Rutherford offered a similarly nuanced view of the situation. “Chuck’s wife deliberately propped him up in a wing chair all the way down at the end of the table where you couldn’t really see what he was doing,” says Rutherford. “That doesn’t excuse our not noticing that he was dead, but it does provide prima facie evidence that his widow was trying to pull a fast one. I’d also just like to mention that Chuck always sat next to Biff McPherson, who played defensive tackle at FSU back in the ’40s. Well, Biff has bulked up in recent years, and if he was leaning forward in his chair, it would have been impossible to see Chuck down there behind him.”

Although comatose directors have long been a fact of life in American board rooms, the Silicon Prion incident marks the first time that a medically dead director was allowed to participate in corporate gatherings at a major American firm. But now that the scandal has come to light, numerous observers expect many more of these oversights to be unearthed. “We have compiled a list of I39 U.S. firms suspected of including at least one deceased board member,” says Tom Ford, editor of The Catatonia Report, a Denver newsletter that monitors unusually passive boards. “For a while there, we thought everyone on the Sunbeam board was deceased.”

Speaking without attribution, several directors on prestigious boards sympathized with the plight of Mr. Rutherford and Mr. Owens. “Even when you’re 99 percent sure that one of your fellow board members is actually dead, it’s hard to work up the gumption to ask him if he’s still breathing,” says a typically beleaguered director. “I mean, what are you supposed to do? Poke him? Take his pulse? Kick him in the shins?”

“There’s one guy on our board who I was sure was dead since 1992,” says another director. “Even though he’d been attending our meetings for the past 25 years, he hadn’t said anything since Gerald Ford was in office. So one day I leaned over and whispered, ‘Hey, Bob, are you dead yet?’ Imagine my embarrassment when his eyes flickered open and he said, ‘No, but if you guys don’t stop talking about the new FASB disclosure rules, I will be soon.’ “

Sentient, alert board members confused by the protocol in such situations are advised to consult a new book called, Out Like a Light: A History of Comatose Boards of Directors, recently published by a Washington-based shareholder activist group called the National Association for the Detection of Corporate Cadavers. The book includes an entire chapter outlining the etiquette to be followed in situations where a board member strongly suspects that a director has bought the farm.

“Quarterly fire drills during board meetings is one way to root out the obviously deceased,” the book explains, “but in an alarmingly large number of cases, directors who are snoozing will simply sleep through the drill. Just to be on the safe side, overturning a large vat of scalding hot coffee in the board member’s lap is an effective mechanism for distinguishing the dead from the living. Obviously, when the director is still alive, this can lead to personal damage lawsuits, but the judgments in these suits tend to be much smaller than those that would result from lawsuits accusing directors of neglecting their duties to shareholders.”

Adds Rutherford ruefully: “If I had read that book, I would have probably dropped some hot cocoa in Chuck’s lap. But in my defense, earnings have grown at an I8 percent annual clip in the three years since Chuck died, as opposed to an 8 percent growth rate while he was alive. So even cynics would agree that having a dead person on the board doesn’t necessarily impact negatively on the overall economic picture.”

Joe Queenan is a regular contributor on business issues, corporate culture, and financial follies to Barron’s and The Wall Street Journal.

About Joe Queenan

Joe Queenan is a regular contributor on business issues, corporate culture, and financial follies to Barron's and The Wall Street Journal.