October 16th, 2023 , Dinesh V
Leadership & Ethics
The grey line with Theranos and Elizabeth Holmes, defrauding their stakeholders and the public
In our current era of fast-paced, interconnected world of the 21st century, leadership is a skill which must be attained and is more critical than ever. However, while leadership may be attained through training and practice, without ethics, it can lead to dire consequences, both for individuals and organizations. Ethical leadership is a concept that involves making morally sound decisions, setting a positive example, and promoting ethical behaviour within an organization but it may also just be a perception created to publicize that an individual or a company are doing the right things. This blog post will delve into the significance of leadership and ethics, against the case of Theranos and it’s CEO Elizabeth Holmes where stakeholders and the public was defrauded into believing they had a viable product which included deliberate attempts by the CEO to conceal the fraud from employees and silence nay-sayers.
Deontological of Ethical Leadership through Engagement and the Dark Side of Telling Tales
Ethical leadership is much more than setting principles and following it correctly, it is about leading by example, fostering a culture of ethics to your followers and promoting socially acceptable actions with responsibility. This culminates values which leaders start to prioritize naturally followed through within the organization such as valuing honesty, integrity, fairness, inclusivity and accountability.
The essence of these values by Leaders are emulated by their followers, we will analyse the impact which Elizabeth Holmes had on her followers following the typology developed by Kellerman (Kellerman, 2014).
Ethical leadership influences employee behaviour by creating a moral compass or creating a perception that there is one, per Kellerman’s typology, this can be measured through the level of engagement that ranges from “feeling and doing absolutely nothing” to “being passionately committed and deeply involved”. Leaders may achieve this level of influence through actions such as leading by example or creating a compelling story. Storytelling is a powerful tool used by leaders in organizations to reach the emotions of followers, regarded as a powerful form of witchery, (Gottschall, 2016), it can change what they think, which allows the leader to influence how their followers act.
Elizabeth Holmes was very skilled and naturally talented in constructing inspiring tales as a hero set to take the medical technological industry into a new era, potentially saving millions of lives around the world with a device which looked and worked like what Dr. McCoy would use in Star Trek. Despite not providing a single shred of evidence that her invention worked, she continued to repeat her inspiring tales building on the influence she had on her followers ultimately succeeding in establishing Theranos as a company worth $9 Billion Dollars. In the perspective on the typology scale by Kellerman, Elizabeth had achieved to influence her followers to “being passionately committed and deeply involved” at the highest scale.
Over time the same story had transformed from an inspiration to just a symbol of what may be with progress, empowerment and innovation which was becoming fictional instead of the realization of what it may be. This lead to the hard fall from grace, the hero fallen, creating a fiery storm of disbelief and despair to her followers and stakeholders which lead to her eventual conviction and incarceration (U.S. V. Elizabeth Holmes, Et Al., 2022).
Teleological of Telling Tales
As analysed above, Leaders serve as role models within their organizations. Every action and behaviours emulated by leaders significantly influence the ethical choices of their followers. Organizations alike should take the tale of Theranos as a lesson and thoroughly understand the impact of telling tales may have internally and externally to the organization to prepare against individuals who are manipulators or deceivers which could lead an organization into widespread corporate fraud and misconduct. Individuals alike should also consider as they grow in their careers that corporate social responsibility is of paramount importance as it guides an individual in making the right narrative and aid them in making socially responsible decisions. This not only improves the individual’s reputation but also aligns with societal expectations and regulations.
Conclusion: Balancing Stakeholder Interests for Sustainable Success or Is it a Determent to Growth
Leaders will continue to face the challenging task of balancing the interests of their followers, stakeholders, employees, customers and the public. This dilemma often underscores the importance of ethical decision-making. Freeman (2010) argues that ethical leaders must adopt a stakeholder approach, prioritizing the well-being of all parties involved and not just be a Likeable Leader.
When leaders make decisions that prioritize short-term gains, they may compromise long-term sustainability and ethical integrity, while it may present considerable results in the short term but eventually be a determent to long-term growth. By considering the interests of all stakeholders, leaders can navigate these complex dilemmas while upholding their moral obligations in an ethical manner. This helps both the leader and the organization to achieve sustainable success.
Ethical leadership is the essence of sustainable success in any organization. Leaders who prioritize ethics will naturally set a positive example and foster a culture of integrity and responsibility. Their actions, which includes leading by example, will significantly influence the ethical behavior of their followers and impact the overall success of the organization.
In a world where ethical lapses can lead to catastrophic consequences as in the case of Theranos and Elizabeth Holmes, leaders must embrace ethical leadership as a core principle. Ethical leaders not only enhance trust and collaboration but also contribute to the long-term sustainability and reputation of their organizations.
References
Detert, J. R. (2015, December 21). Can Your Employees Really Speak Freely? Harvard Business Review. https://hbr.org/2016/01/can-your-employees-really-speak-freely
Kellerman, B. (2014, August 1). What Every Leader Needs to Know About Followers. Harvard Business Review. https://hbr.org/2007/12/what-every-leader-needs-to-know-about-followers
Gottschall, J. (2016, October 18). Theranos and the Dark Side of Storytelling. Harvard Business Review. https://hbr.org/2016/10/theranos-and-the-dark-side-of-storytelling
Das, R. K., & Drolet, B. C. (2022, April 4). Lessons from Theranos – Restructuring Biomedical Innovation. Journal of Medical Systems; Springer Science+Business Media. https://doi.org/10.1007/s10916-022-01813-3
U.S. v. Elizabeth Holmes, et al. (2022, December 13). https://www.justice.gov/usao-ndca/us-v-elizabeth-holmes-et-al