An Unsung Hero from the Theranos Board


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By now, everyone has heard of or read about Theranos.

The consumer healthcare startup vowed to revolutionize the blood testing industry by facilitating hundreds of cost-effective tests from a mere drop of blood. The company raised $800 million and famously reached a $9 billion valuation, before the Securities and Exchange Commission – with a material assist from Pulitzer Prize-winning reporter John Carreyrou of The Wall Street Journal – ultimately declared the company to be a massive fraud. Numerous commentators (including this one) have referred to the company’s celebrity board as the embodiment of corporate governance failure. But Carreyrou’s virtuoso, new book, Bad Blood: Secrets and Lies in a Silicon Valley Startupcontains a broadly overlooked vignette depicting excellent corporate governance at Theranos of which I was previously unaware.

Avie Tevanian was an early board member at Theranos. Tevanian is a well-known technologist, who worked closely with Steve Jobs at both NeXT and Apple. According to Bad Blood, an employee Tevanian had recruited to join Theranos from Apple was having ethical reservations about some things she was witnessing at Theranos, and she shared the same with Tevanian. Tevanian, per the book’s account, was also having some reservations about a pattern exhibited by Elizabeth Holmes, Theranos’s founder and CEO. That is, each successive board meeting had more ebullient revenue projections from management than the last, but none of the projections were remotely coming to fruition.

The book then chronicles some actions Tevanian took, which are poignant examples of… outstanding corporate governance.

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, 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.

Integrity. 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.

The three critical boardroom takeaways from Avie Tevanian’s exemplary comportment are: (1) directors need to stick to their proverbial guns even when they are outnumbered; (2) your job as a board member isn’t to fawn over management, take their word for everything, or be pals with other boardroom colleagues – it’s to rigorously oversee the company on behalf of all shareholders; and (3) when directors fundamentally disagree with how a company is being operated or governed… they should resign.

I agree with some others who are also regularly in boardrooms, that the number of directors who probably should resign from their boards far outpaces the number who actually do. Unfortunately, very few corporate governance thought leaders and educators speak frankly – and realistically – about the circumstances under which resignation is the most prudent decision for a board member. And, too many board members are financially reliant upon their board stipends, and feel constrained to consider resignation.

Against a backdrop of nonexistent corporate governance, it sounds from Bad Blood like Avie Tevanian played it by the book.


This post was previously published on LinkedIn Pulse.


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A globally recognized small-cap expert, Mr. Epstein has advised, governed, and invested in hundreds of small-cap companies. His capital markets and corporate governance acumen are products of a singular perspective – a former corporate attorney, operating executive, institutional investor, and, now, board advisor. As Bloomberg Businessweek commented regarding Mr. Epstein’s category-defining corporate governance book, “attention, directors of small-cap companies. Help is on the way.” 

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