by Tom Snee
Theranos founder Elizabeth Holmes has become the latest symbol of unethical business behavior, and a researcher in the University of Iowa’s Tippie College of Business wonders how it all went so wrong for her.
Holmes, the one-time celebrity entrepreneur now convicted of defrauding investors in her health care startup, has become the villain in books, documentaries, TV series, and movies.
Her fraud made Miranda Welbourne Eleazar wonder about how entrepreneurs approach business ethics. An assistant professor of management and entrepreneurship at the Tippie College of Business, Welbourne Eleazar studies ethics and entrepreneurship with the university's John Pappajohn Entrepreneurial Center (Iowa JPEC) and was curious about the point at which Holmes went from legitimate startup entrepreneur to fraud. Did she even realize that change had been made? How did her perception of ethics inform her business decisions?
Cases like Holmes’ inspired Welbourne Eleazar to launch a new study that looks more closely at how entrepreneurs can most effectively balance innovation with ethical decision making.
“We need entrepreneurs to be innovative and help improve society through their innovation, but we also need them to help society through ethical decision making,” she said.
While vast amounts of research has been conducted on the failures of corporate ethics, little attention has been given to entrepreneurs, who are often in unique ethical situations. She said it’s sometimes hard for entrepreneurs to even see ethical dilemmas because their business becomes a part of their identity, which can cloud their vision.
“Entrepreneurs are also supposed to push the envelope and push against regulations to be innovative, but sometimes they push too far or too hard,” she said. “Once their business is growing, everything starts moving fast. When they reach a point with an ethical question, they may just keep going instead of slowing down to really think about the issue.”
Everyone faces ethical conundrums every day, she said, but they usually aren’t make-or-break decisions. An entrepreneur might get so excited about their business that they get carried away and exaggerate their product development during a pitch meeting with investors. Most of the time, this can be easily rectified or doesn’t affect anything.
But what about Holmes, who pointedly told investors that Theranos’ blood analysis machines worked when she knew they did not? Welbourne Eleazar wonders what made Holmes decide to keep going into unethical and eventually illegal territory. It appears that the pressure to get funding played a major role in Holmes’ decisions, making Welbourne Eleazar interested in both investor and entrepreneur perceptions of ethics.
Welbourne Eleazar cites Facebook as another recent example. When the company’s own research discovered that its Instagram app was damaging teenager’s mental health, leaders diminished the study results and continued developing an app designed for even younger children. Not until Congress started to investigate, did they acknowledge the app was causing issues.
“There’s a growing awareness of the need for more ethical decision-making, even when things are moving fast,” she said. Her research focuses on those moments and what leads up to them, and how entrepreneurs and investors can make ethics a regular part of their decision making.
Unfortunately, she said that there are few tools designed specifically to help entrepreneurs deal with these issues. One of the goals of her current study is to use the data to develop ethics training modules that can be offered through consultants or other sources to help entrepreneurs balance the interests of society with their innovative new products and businesses.
Welbourne Eleazar and her research collaborators, including Tippie doctoral student Karl Reinke, are looking for entrepreneurs and investors to participate in interviews about their thoughts on business ethics. Researchers will discuss situations entrepreneurs have found themselves in that had the potential to be ethically fraught, and how they navigated them. Interested entrepreneurs can sign up at tinyurl.com/uiowastudy.
MEDIA CONTACT: Tom Snee, 319-384-0010 (o); 319-541-8434 (c); firstname.lastname@example.org