As the founder of Theranos faces a possible prison sentence and the company collapses under allegations of outright fraud and a board that was at best negligent, Adam J. Epstein points to one director who tried to do the right thing, based on the new book Bad Blood: Secrets and Lies in a Silicon Valley Start-Up, by John Carreyrou.
Courage. As Elizabeth Holmes was garnering more attention, she apparently floated the idea of creating a foundation (for purported tax-planning reasons), and asked the board’s compensation committee to grant additional shares to the foundation. If I understand the book correctly, most of the committee members did not seem to have a problem with the same. Despite the coalescence of his fellow committee members though, [Avie] Tevanian objected. Tevanian reportedly felt that since Holmes had control of her foundation, the requested share issuance to the foundation was just providing more voting control of the company to Holmes at the expense of shareholders.
Objectivity. After objecting to the foundation stock grant, Tevanian was taken to task in a private meeting with Theranos’s then chair, Don Lucas. Apparently, Lucas and Holmes felt Tevanian’s conduct in board meetings was “unpleasant,” and Lucas even suggested that perhaps Tevanian should consider resigning. In the face of that consternation, the book describes how Tevanian set about reviewing all of the board materials he’d been given during his year-long tenure. He apparently came to a discomforting conclusion: in the space of a year, not only had fundamental aspects of the company’s story completely changed, but so had the lion’s share of the company’s management team. Despite his fellow board members’ overwhelming support of Holmes, Tevanian aggregated all the board documents that led him to be concerned and brought them to a subsequent meeting with Lucas. Lucas, in turn, was highly dismissive, and reportedly suggested again that Tevanian should probably just resign.
<strong.Integrity.</strong. Faced with respected employees who had meaningful ethical concerns about the company, and worrying documentary evidence that the chair didn't even want to review – much less discuss – Tevanian resigned from the Theranos board.