Business Event Caused by Failed Governance:

Article URL: https://www.nytimes.com/news-event/elizabeth-holmes-theranos-trial

Summary:

The article chronicles the rise and fall of Theranos, a once-promising blood-testing startup founded by Elizabeth Holmes. Theranos claimed to revolutionize healthcare with its Edison blood-testing device, capable of running a multitude of tests from a single drop of blood. However, the company’s claims turned out to be false, and the device never functioned as promised. The article details how Theranos’s downfall stemmed from a series of failures in governance, including:

• Lack of transparency:The company operated in secrecy, withholding information from investors and the public about the limitations of its technology.
• Weak board oversight:The board of directors, composed of influential figures with limited scientific expertise, failed to adequately challenge Holmes’ claims and hold her accountable.
• Cult of personality:Holmes cultivated a charismatic persona and manipulated investors and employees, hindering critical questioning and scrutiny.
• Inadequate due diligence:Investors, blinded by Holmes’ vision and hype, neglected to conduct thorough due diligence on the company’s technology.

These governance failures ultimately led to Theranos’s collapse, causing significant financial losses to investors and damage to its employees and the healthcare industry.

How Proper Governance Could Have Prevented the Event:

• Independent board composition:A board with diverse expertise and a strong commitment to due diligence could have questioned Theranos’ claims more effectively and prevented its misleading information from reaching investors.
• Transparency and accountability:Open communication about challenges and limitations would have allowed for course correction and prevented the accumulation of false claims.
• Whistleblower protections:A culture that encouraged and protected whistleblowers could have brought Theranos’ problems to light earlier, before significant damage was done.
• Thorough due diligence:Investors conducting rigorous research into the company’s technology and business practices could have uncovered the truth before committing their funds.

By implementing these governance measures, Theranos’s downfall could have been avoided, protecting investors, employees, and the public from the consequences of failed leadership and deception.

Additional Note:

While this is just one example, it highlights the crucial role of effective governance in preventing business failures and protecting stakeholders. By learning from Theranos’ mistakes, other organizations can strengthen their governance practices and ensure long-term success.