Theranos Was a Governance Problem

Theranos is an American tech start-up in the blood testing business. Last month, the founder and second in command were both charged with fraud. The reason they were charged was because the blood testing product never actually worked in the way it was being marketed. 

Clients relied on blood tests that were not reliable. The book “Bad Blood” by John Carreyrou, a New York Times writer, tells the story. One of the parts I found very interesting was that a number of people had tried to convince the board that the blood testing product did not work, and yet the board chose to believe the President and founder, Elizabeth Holmes. She was able to reassure the board over and over again that everything was going to be all right. I would recommend the book to anyone who is interested in technology or governance.

The lesson that comes out of the Theranos story is that board members should have an open mind and be willing to reconsider their decisions. It appears that the Theranos board was dug in on the idea that Ms. Holmes was a visionary and anyone who did not believe the product was going to work was disloyal to the corporation. In hindsight it looks like these whistleblowers were merely telling the truth and the board should have listened.

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