MGT3001 Governance and Ethics: Theranos Case Study Analysis

This presentation examines the Theranos case, focusing on the criminal prosecution of the company and its executives for fraud. It begins with an executive summary outlining the charges brought by the SEC against Theranos' leadership for deceiving investors with false technology claims. The presentation then provides a brief history of Theranos, its establishment, and its specialization in various fields. It delves into the details of the case, including Elizabeth Holmes' actions and the company's fraudulent claims. The analysis applies relevant theories, such as property rights, social institution, and stakeholder theory, to understand the ethical implications. The discussion highlights the importance of stakeholder theory, emphasizing the need for companies to act ethically and benefit their shareholders. The presentation concludes by referencing relevant sources and summarizing the key takeaways from the Theranos case, emphasizing the consequences of fraudulent activities in the business world.


Criminal
Prosecution
Name:
Institutional Affiliation

Executive
Summary
 The blood-testing startup
company, Theranos is
facing troubles after its
chief executive officer
and ex-president are
accused of fraud by the
United States Securities
Exchange Commission.
 The Commission accused
them of defrauding
investors using their fake
technology(Watt, 2019)
 They are now facing
criminal charges for
massive fraud

Introductio
n: Criminal
Prosecutio
n
 Criminal offenses
companies can be
prosecuted for either
of the following
charges
i. Conspiracy
to commit
fraud and
fraud
ii. Willful
pollution
iii. Corruption
and bribery
iv. Unsafe
working
conditions
and product

Brief
History of
Theranos
Inc.
 Theranos, Inc., was
established in 2003
and is headquartered
in Palo Alto, California
 The company has
clinical laboratories in
Pennsylvania,
California, and Arizona
 It specializes in
various fields including
geriatrics, pediatrics,
and oncology
 The company also
designs ,
manufacturers, and
develops testing
products

Discussion of the
Case
 Holmes at the age of 19
dropped out of Stanford
University where she was
pursuing a degree in chemical
engineering
 She then founded Theranos, a
firm that was supposed to
bring changes in the rapidly
evolving healthcare sector
through its technological
innovations
 The company cited that its
technological innovation would
use a drop of blood to
diagnose a variety of health
conditions(Watt, 2019)
 Holmes managed to convince
investors into backing up her
ideas

Continuatio
n: Case
Analysis
 As a consequence, the US
Securities and Exchange
Commission in 2018
charged Holmes and the
company’s ex-president
with massive fraud
 The commission argued
that the two top executives
had lied to investors for so
long about the company’s
innovative technology
 Additionally, they fooled
investors into pumping
millions of their
investments into the
project


 Holmes case reflects a the concept of dropout
entrepreneur
 Celebrated business entrepreneurs including Mark
Zuckerberg, Steve Jobs, and Bill Gates dropped out
of school to fulfill their various dreams
 In the contemporary world, the dropout
entrepreneur culture is gaining momentum among
bright students
 These students drop out of college to pursue their
dreams rather than securing employment after
completion of their studies
Continuation: Discussion
of the Case


 The theories that best applies to the case
includes the property rights and social
institution theories and the stakeholder theory
 Social institution theory argues that a
corporation should not be viewed as a private
association to satisfy one’s selfish interests
 On the contrary, it should also be viewed as a
public entity that aims to fulfill the interest of
the public
Ethical Approaches and
Theories


 According to stakeholder theory, the operations of
a corporation should aim to benefit its shareholders
 The shareholders includes the local communities,
suppliers, customers, and employees
 As per the case analysis, it is undeniable that the
designed technology intended to benefit its
shareholders
 However, the product was not successful and
nothing was launched in the market to benefit the
investors and patients
Continuation:
Stakeholder Theory


 Investors should benefit from their investment
 If company owners engages in fraudulent
activities, they should be compelled to pay for
the damages caused to various stakeholders
 Accordingly, they should be charged against
fraud and face imprisonment
 In doing so, companies will conduct their
operations in an honest and trustworthy
manner
Summary/Conclusion


 Theranos, Inc.(2018). Company Overview. Bloomberg,
Retrieved from,
https://www.bloomberg.com/research/stocks/private/snap
shot.asp?privcapId=20334531
 Watt, P.(2019, March 27). Elizabeth Holmes: Theranos
scandal has more to it than just toxic Silicon Valley culture.
The Conversation, Retrieved from,
http://theconversation.com/elizabeth-holmes-theranos-
scandal-has-more-to-it-than-just-toxic-silicon-valley-culture-
114102
References