Theranos, a blood-testing startup, had a board full of accomplished, independent directors. However, they lacked deep knowledge of the company’s operations and technology. This led to the board’s inability to detect and prevent fraudulent activities. The case suggests that including knowledgeable inside directors could have provided crucial insights and potentially prevented the company’s downfall.
During the 2007-2008 financial crisis, firms with more inside directors performed better. These directors had a deeper understanding of the complex risks in their companies’ balance sheets. This knowledge allowed them to make better decisions about capital needs. The case demonstrates how inside directors’ intimate knowledge of a company can be crucial during challenging times.
By Bryce Tingle | SEP 30, 2024
Read the original article at HBR
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