Attached. Let me know if you have questions about the answer. From a $9 Billion Valuation to FederalCourtNameInstitutionInstructorDateWhistleblowingTyler’s options➢Tyler had two options➢ Blow the whistle➢ Take the issue internally➢Initially, Tyler had decided to bring up his concerns internally➢He approached Elizabeth and stated his concerns about the technology inuse➢Tyler had followed the correct protocol by first raising the issue he hadwith the organization’s leadership➢He took the next best step by keeping the issue in house and trying to get amember of the board involved in the situationTyler’s options Cont’d➢Tyler contacted the New York State Department of Health to find out thevalidity of the procedures Theranos was using, making sure to conceal thecompany’s identity➢Tyler did everything, including finding out whether the company wasviolating state laws and regulations➢He first confirmed his suspicion, after which he decided to quit thecompany to protect his professional morals and ethical standards➢No one he had contacted within the company believed him, including hisgrandfather➢The company officials went as far as threaten him➢Given everything, Tyler did not have too many options leftHandling a situation of employee abuse➢Talk to trusted employees➢ Communicate the matter with trusted colleagues or employees to discuss the issuesand identify channels through which to voice concerns without victimization➢Engage the employer➢ If the first alternative does not work, the next is to talk to the employer about the issue➢Blow the whistle➢ Anonymously or;➢ Through a press conference➢If there are non-disclosure and confidentiality agreements, it is crucial tohave resources for legal battles beforehand➢Whistleblowing could trigger the employer to sue for breach of contract orviolation of non-disclosure agreementsDid other employees know? Why did theynot come out as Tyler did?➢Other non-managers in the company knew that the blood testing protocoldid not work➢ For instance, Erika Cheung voiced her concerns to various employees to no avail andopted to leave the organization➢In his report of the organization, Tyler indicated that the companyemployees knew what was going on but were instructed to report resultsfrom the Siemens devices rather than from the Theranos➢Also, employees signed a non-disclosure agreement which prevented themfrom speaking up➢Most employees feared breaching their contracts and attracting lawsuits➢Others simply feared losing their jobsStructuring a Startup➢A technical breakthrough requires one to develop an actual product and toprepare a demonstration➢A vital component of the technology being a breakthrough is that it shouldwork and function as described➢Ensuring everything, including all the components, is in order is crucialbefore engaging investors➢Have a fully functional prototype➢Explain any shortcomings the product has to the investors before seekingfunding➢The technical team should focus on delivering the products as expected➢Be honest about financial projections and reportsCorporate GovernanceTheranos BoD and their involvement➢The Theranos board of directors was mostly not involved in its operations➢In fact, most members had a laissez-faire attitude towards the executives’activities➢ For instance, Mr. George Shultz admitted to never questioning Elizabeth about any ofthe concerns he had heard about how the device worked during a deposition➢ Another board member, Gary Roughead, also stated that based on the information hehad been presented with, he believed that the Theranos devices were working➢Some members, however, remained skeptical about the firm’s operations➢ For instance, Avie Tevanian voiced concerns on the overly inflated revenueprojections that Elizabeth gave and was concerned about delayed product rollouts➢In 2008, the board attempted to replace Elizabeth with a more experiencedchief executive, showing its dissatisfaction with her leadership➢Generally, BoD was mostly misinformed about the company’s operationsConflict of Interest➢The conflict of interest posed by early-stage investors sitting on a boarddepends on their personal interests, such as getting quick returns for theirinvestment and leveraging their stake in the company for other interests➢When research funders’ primary objective is to commercialize a medicalproduct, the safety of patients stands to lose the most➢At Theranos, the leadership’s main agenda was to commercialize thetesting device➢The drive to market a subpar product which became the primary goal ofthe leaders➢Such interests were in direct conflict with the initial organizational goalswhich was to produce a product that actually worked and that could helpease the medical testing processHow BoD should handle their relationshipwith the executive➢Management in any organization should be hired based on merit, and therelationship between them and the board should remain professional➢Establish a rapport for effective goal attainment, but ensure their roles donot conflict or one does not hinder the other➢Have a policy that defines professional engagements between the boardand management➢Separate personal relationships from professional relationship➢ For instance, Elizabeth had a personal relationship with Schultz and was spottedattending multiple private events held by George➢ While this is okay, it was vital for them to ensure their relationships outside the officedid not affect their responsibilities to the companyTheranos Report OutlineI.Discussion on Whistleblowinga. Tyler’s handling of the situation, how I relate to his decisions and my feelings onthose decisions.b. How I would handle a situation in which the employer was misleading others.c. My thoughts on whether other employees knew about the Theranos scandal andwhy they reacted differently from Tyler.d. How I would structure a new company pursuing a technical breakthrough.e. Tyler’s influence on my future decision making.II.Discussion on Corporate Governancea. Theranos board of directors and their involvement in its operations.b. How the board of directors should handle their relationship with the executive.c. Differentiating between leadership and management within an organization.d. How I would structure my board of directors and executive.e. Conflict of Interest in a startup’s board of directors.IFrom a $9 Billion Valuation to Federal CourtsNameInstitution AffiliatedCourseLecturerDateIITable of ContentsDiscussion on Whistleblowing …………………………………………………………………………………….. 1Tyler’s handling of the situation, how I relate to his decisions and my feelings on thosedecisions. ……………………………………………………………………………………………………………….. 1How I would handle a situation in which the employer was misleading others. ………………. 2My thoughts on whether other employees knew about the Theranos scandal and why theyreacted differently from Tyler. ………………………………………………………………………………….. 3How I would structure a new company pursuing a technical breakthrough …………………….. 3Tyler’s influence on my future decision making. ………………………………………………………… 4Discussion on Corporate Governance ……………………………………………………………………………. 5Theranos board of directors and their involvement in its operations………………………………. 5How the board of directors should handle their relationship with the executive………………. 6Differentiating between leadership and management within an organization. …………………. 7How I would structure my board of directors and executive. ………………………………………… 8Conflict of Interest in a startup’s board of directors. ……………………………………………………. 9References ……………………………………………………………………………………………………………….. 111From a $9 Billion Valuation to Federal CourtDiscussion on WhistleblowingTyler’s handling of the situation, how I relate to his decisions and my feelings on thosedecisions.Initially, Tyler had decided to bring up his concerns internally. He approachedElizabeth and stated his concerns about the technology in use. His concerns were that theresults produced different numbers in terms of the coefficient variation advertised on theircompany’s website. Holmes found a loophole stating that the company had only stated thecoefficient variation related to Vitamin D. She also recommended that Tyler met theTheranos statistics team’s head for further clarification (Primeaux, 2019).The subsequent meeting with Daniel young did not go well. At this juncture, I believethat Tyler had followed the correct protocol by first raising the issue he had with theorganization’s leadership. The meeting with Daniel further escalated Tyler’s worries about theoperations of the company. After several unsuccessful meetings with Holmes, Tylerapproached his grandfather and tried to explain his concerns. His grandfather did not believehim and tried to broker a deal between Tyler and Theranos. To me, Tyler, at that point, musthave been very conflicted. He would have expected that his grandfather would have taken theissue seriously and addressed it by confronting Elizabeth. I believe that he took the next beststep by keeping the issue in house and trying to get a member of the board involved in thesituation.According to Primeaux (2019), Tyler contacted the New York State Department ofHealth to find out the validity of the procedures Theranos was using. Since Tyler did not yetwant to expose the company, he kept the organization anonymous. He got a reply indicatingviolation of state and federal regulations, and the Department of Health requested the name of2the company and his name. He declined to name them for fear of violating the non-disclosureand confidentiality agreement he signed when hired. A year later, Tyler left Theranos andCarreyrou, the journalist that exposed the Theranos saga, contacted him to gain moreinformation about the company’s misdeeds. Tyler again followed the right procedure. Oncehis suspicions were confirmed, he opted to leave the organization to avoid violating hismorals. Given Tyler’s dilemma, I would have left the organization since my opinion wouldhave been disregarded by the parties involved.How I would handle a situation in which the employer was misleading others.Tyler’s case shows the importance of whistleblowing. I would first communicate myreservations about the employer’s actions with employees that I could trust. This dialoguewould aim to discuss the issues and identify channels through which we could voice ourconcerns without victimization. If the team failed to come up with solutions, I would considerholding a meeting with the employers to voice my concerns. If the meetings are notsuccessful, and after doing intensive research, I would decide whether to be an anonymouswhistleblower or give a press statement on the issues. The choice between the two would bebased on having the resources to fight the legal battles ahead and considering what wassigned in the non-disclosure and confidentiality agreements. Breach of contract might resultin the employers taking legal actions. A financially stable individual can take on theemployers and hire an excellent team to fight the lawsuit. The reasons for being awhistleblower will then be based upon the importance of the action to me as an employee.According to Chen and Lai (2014), the whistleblower’s perceived potential reactionswill also affect one’s whistleblowing behavior. As a whole, whistleblowing is dynamic. Weshould examine whistleblowing behavior from the perspective of an interactive decisionmaking process. The decision to be a whistleblower will have been influenced by many3reasons, including my role in the company and how adverse the misleading information to thepublic is.My thoughts on whether other employees knew about the Theranos scandal and whythey reacted differently from Tyler.Other non-managers in the company knew that the blood testing protocol did notwork. One such employee was Erika Cheung, who voiced her concerns to various employeesto no avail. She opted to leave the organization (Tugend, 2019). However, some did notspeak up due to multiple reasons. Tyler indicated that the company employees knew whatwas going on and were acting on instruction to report results from the Siemens devices ratherthan from the Theranos devices (Primeaux, 2019). Tyler also pointed out that he had signednon-disclosure agreements with the organization. The other employees must have signedsimilar agreements. In fear of breaking those agreements, it is possible the employees feltuncomfortable taking action.Breach of contract usually results in lawsuits. Some of the employees must havefeared breaching their agreements with the organization, fearing that they could sue them.Another possible reason could be the fear of the aftermath of such an action. With many ofthe employees depending on the job as their source of income, it could be challenging tospeak up, knowing that they could lose their job. Such fear could have been brought about byMr. Balwani, the company’s chief operations officer. Erika describes Balwani as a dictatorand fear monger who was always yelling at the employees (Tugend, 2019).How I would structure a new company pursuing a technical breakthroughA technical breakthrough requires one to develop an actual product and to prepare ademonstration. Breakthrough technology is defined as technology that has broken through abarrier in the industry or technology that indicates a sudden advance in that field (Hein &Brun, 2019). A vital component of the technology being a breakthrough is that it should work4and function as described. I would ensure that we have all the required products in placebefore approaching investors in my company. When showcasing the product, I would have afully functional prototype. In the meeting, I would clearly explain any shortcomings theproduct has to the investors before seeking funding. I would also ensure that Board membersare highly-regarded personnel in my industry to attract the right investors. The right boardmembers would also be instrumental in coming up with sound strategic decisions for thecompany.Once business processes begin, I would ensure the technical team’s focus is to deliverthe products as expected. I would also properly educate users on the product’s capabilities. Iwould also clearly explain any projections the organization has on future features to ensurethe consumers are not misinformed. This standard of clarity would be a core tenant of ourorganization. Every party involved in the company should communicate clearly and preciselywhen giving public comments about our products. The employees would be encouraged tovoice their concerns about the organization’s processes. They would also have a right torequest an explanation from the management in line with the company’s mission. Withtransparency and a willingness to modify errors, I believe the company would avoid thepitfalls that led to Theranos’ failure.Tyler’s influence on my future decision making.Tyler’s story provides the backbone for a future whistleblower. Through Tyler’sactions, he has drawn the blueprint for other potential whistleblowers on how to handle suchsituations. Tyler chose to address the issues internally by voicing his concerns with Elizabethand his grandfather, a board member of the organization. I have learned from Tyler that thisis an excellent way to approach the problem and would act similarly. It was only when thesituation became untenable that Tyler left the organization before outing its unethicalbehavior. He was wary of the consequences of being a whistleblower and sought anonymity.5Given contractual agreements between companies and employees, I have learned fromTyler’s story that it is prudent to seek legal advice before taking any actions. Tyler wassubject to various legal challenges that required a lot of capital to sustain. I have learned thatthe best way to protect myself would be by seeking legal advice early. If there are anypotential legal suits I could face, it would be prudent to seek lawyers offering legal defenseservices pro bono or informing the authorities early.Most importantly, Tyler has taught me that truth and courage in such a situation areessential. Tyler was committed to ensuring the company changed its ways. When that couldnot be achieved, he left the company since his conscience could not let him stick in such acompany. Sticking to your morals is the most important lesson for any whistleblower. As awhistleblower, you should not continue to gain, whether financially or otherwise, from anunethical organization. Be courageous enough to question authority and if your efforts bearno fruit, leave that organization. However, after leaving the organization, the whistleblowershould continue to pursue justice by outing the organization of its wrong doing.Discussion on Corporate GovernanceTheranos board of directors and their involvement in its operations.The Theranos board of directors was mostly not involved in its operations, with mostmembers having a laissez-faire attitude towards the executives’ activities. Mr. George Shultz,a former US Secretary of State, was a board member from 2011. During a deposition, Shultzadmitted to never questioning Elizabeth about any of the concerns he had heard about howthe device worked (Neto, 2020). Shultz noted that he believed the product worked since hehad seen it in action. Such sentiments were also echoed by Gary Roughead, a former USNavy Admiral, who was, at the time, a Theranos director. In his deposition, Roughead statedthat based on the information he had been presented with he believed that the Theranosdevices were working (Neto, 2020). From the two members, it is clear that the Board of6Directors was misinformed on the state of the devices. The members also took no initiative tolearn more about the devices.However, in the formative years of Theranos, some members were skeptical of theproduct. One such member was Avie Tevanian, a former Apple executive, who had joinedthe Theranos board in 2006. Avie voiced concerns on the overly inflated revenue projectionsthat Elizabeth gave. Avie also had reservations due to the consistent delays in productrollouts. The concerns led to Avie being requested to resign from the Board (Neto, 2020).From the handling of Avie, it is evident that Elizabeth held a strong grip on the board whereany concerned members were either lied to or forced to resign. In 2008, the board attemptedto replace Elizabeth with a more experienced chief executive. During the meeting, Elizabethconvinced the members that she would address their concerns. After holding onto her seat,Elizabeth fired the Theranos’ general counsel, Michael Esquivel. By getting rid of anymembers who had doubts, Elizabeth could control the board’s oversight role over theorganization’s operations.How the board of directors should handle their relationship with the executiveManagement in any organization should be hired based on merit, and the relationshipbetween them and the board should remain professional. It is essential to have rapportbetween the board and management to ensure policies and the organization’s goals are clearlyunderstood and implemented by the administration. However, the relationships built betweenthe two should not hinder the roles of any of the parties. For instance, a board member’soversight role should not be affected by their relationship to an executive. This was not thecase in Theranos. The Theranos board members should have maintained a professionalrelationship with the executive. In this company, there were many conflicting interests due tothe personal nature of some of the relationships. For instance, Elizabeth, the chief executive7officer and founder, was in a romantic relationship with the chief operating officer (Neto,2020). This relationship hindered administrative checks and balances.The relationship also led to collusion between the two, where they collaborated ontricking the board into believing that the devices were performing as expected. The twoshould have maintained a professional relationship. The board could also have stepped in toset a policy to ensure that the relationship did not adversely affect the organization’soperations. Another relationship that hindered the oversight role of the board was that ofElizabeth and George Schultz. Elizabeth had a personal relationship with Schultz and wasspotted attending multiple private events held by George. Due to this relationship, Shultzignored the questions raised by one of the employees, his grandson, and sided with Elizabeth.Schultz should have differentiated between his personal and professional relationship withElizabeth. By so doing, he would have taken the initiative to uncover the truth once hisgrandson raised the alarm about the testing product.Differentiating between leadership and management within an organization.Leadership and management are essential within an organization. Any person taskedwith these roles is expected to aid in the running of the company. However, a leader differsfrom management in how they help the organization achieve its goals. A leader generallyestablishes the direction of the company. This direction embodies the organization’s missionand vision. The leader will set targets and come up with general ideas on the organization’sprojects. The leader is also crucial in ensuring employee motivation. As for managers, theyare engaged in the day to day running of the organization. The managers maintain order andorganize company resources towards achieving specific tasks (Kotterman, 2006).To achieve the organization’s goals, the hired executive should work with the board toset policies. The board sets the goals and values of the organization from which theexecutives can center organizational policies. These policies should get approval from the8board to ensure they match the company’s overall values. The board should also take moreinterest in the organization’s daily operations since oversight is one of their crucial roles. Toproperly carry out the oversight role, the board members should know organizationalprocesses and how they are carried out. This is important for them to understand whether thecompany goals, values, and vision are being implemented by management. Operationalknowledge can also enable them to adjust strategic priorities accordingly.Most importantly, the board should be involved in the company’s running to keepmanagement in check. The Theranos board failed to uncover Elizabeth’s fraudulent claimsabout their testing devices since they were misinformed about the product. That board alsolacked knowledge of how the blood tests were carried out and could therefore not questionElizabeth on the company’s progress. Their failure in their oversight role eventually led to thecollapse of the entire organization. However, the board must restrain themselves from gettingtoo involved in the company’s running. A board that insists on being involved in all aspects ofthe organization such as the day-to-day decision making would adversely affect the company.Such behavior would slow down the decision-making process since they would require toreach a consensus on every decision.How I would structure my board of directors and executive.For me, I would ensure the board of directors in a startup is primarily composed ofpeople with experience in the field or industry the company is in. Members with suchknowledge could prove vital in pointing out loopholes in management’s logic and decisionmaking. The Theranos board was comprised of members with little to no understanding ofthe medical industry. Such a board was inherently at a disadvantage of providing soundadvice or oversights. In his deposition, Mr. George Schultz admitted to not questioningElizabeth on the testing device and relied on the executives’ information to make decisions9(Neto, 2020). With a proper understanding of how medical tests are done, Schultz could havequestioned the reports more and discovered the fraudulence that was taking place.The board should also retain a larger percentage of the voting rights. Elizabeth wasable to exert pressure on board members to resign from the board since she had considerablecontrolling interest. The board should have some independence from the founder in makingdecisions that can be achieved when their controlling interest is larger. For instance, if theTheranos board was independent, they could have questioned Elizabeth when she decided tofire its general counsel. It is also crucial for the board members to maintain a personalrelationship independent of the professional relationship with the executive. Mr. Schultz hada personal relationship with Elizabeth, who constantly came to his private parties. Suchrelations make it difficult to provide oversight and hence detect fraud in its early stages. Byhaving a relationship with the chief operations officer,Elizabeth further made oversight over the executive difficult since the scam could becollaborated by her boyfriend to gain the board’s trust. If I were tasked with structuring theorganization, one of the policies would prohibit such relations by top-ranking officers.Finally, I would try to incorporate most of the stakeholders in the organization within theboard. This act would ensure that everyone associated with the company voices their opinion,and their interests are factored in during policymaking. According to Abor and Adjasi (2007),it is in the best interest of any organization to ensure that the firm’s operations are alignedwith all the stakeholders. For instance, if Theranos had included a Walgreens official insidethe board, the concerns on what devices were permissible for testing inside the Theranoswellness centers could have been adequately addressed. Such a decision could have savedTheranos millions in fines paid later in a court settlement to Walgreens.Conflict of Interest in a startup’s board of directors.10The conflict of interest posed by early-stage investors sitting on a board depends ontheir personal interests. The individual interests of an investor range from getting quickreturns for their investment to leveraging their stake in the company for other interests.Where the board member’s individual interests match those of the organization, then aconflict of interest is minimal. In such a case, the investor buys into the organizations shortand long-term goals. Such an investor makes decisions based on the organization’s missionand therefore poses no conflict of interest.However, if the board members’ interests directly clash with the organization’s goals,there is potential for a conflict of interest. DuVal (2004) calls these types of conflicts theInstitutional conflicts of interest. He points out that where the research funders’ primaryobjective is to commercialize a medical product, the safety of patients stands to lose the most.This was the case in Theranos where the leadership’s main agenda was to commercialize thetesting device. The drive to market the product which was not fully functional became theprimary goal of the leaders. Such interests were in direct conflict with the initialorganizational goals which was to produce a product that actually worked and that could helpease the medical testing process.11ReferencesAbor, J., & Adjasi, C. K. (2007). Corporate governance and the small and mediumenterprises sector: theory and implications. Corporate Governance: The internationaljournal of business in society.Chen, C.-P., & Lai, C.-T. (2014). To blow or not to blow the whistle: the effects of potentialharm, social pressure and organisational commitment o…
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