“There's this unfortunate reality that it takes a crisis to get people to pay attention to ethics and what is the right thing to do as an individual, as a business leader and as just a participant in society.”
When 23-year-old Erika Cheung first learned of biotech startup Theranos at a university career fair, she was immediately drawn to it. Influenced by the company’s innovation, core values, and its charismatic CEO, Elizabeth Holmes, Cheung waited in a long line of other students for her chance to apply. She was thrilled to be hired as a research lab associate. Little did she know that while there she would be faced with a decision that would change the trajectory of both her career and life.
Cheung was one of the key whistleblowers that reported to health regulators that Theranos was providing unreliable medical results to patients. The move was one of several factors that led to a criminal trial where Holmes was found guilty of fraud and conspiracy. Cheung now advocates for ethics in the tech industry as co-founder and executive director of Ethics in Entrepreneurship. For the Ian O. Ihnatowycz Institute for Leadership’s 2022 Leader Character & Candour Conference, she shared with HBA1 students the factors that led to her decision to report Theranos to authorities and the role that character played. The discussion was moderated by Jon Hantho, MBA ’89, President and CEO of CBI Health Group.
Don’t ignore the red flags
Cheung’s suspicions of Theranos arose early. While researching the company prior to taking the job, she noticed the board of directors was made up of ex-politicians and military personnel rather than individuals with medical experience. Assuming this decision must have some business justification, Cheung still accepted the job.
At first, Cheung was excited about and grateful for her new role. However, she soon noticed glaring issues regarding the leadership’s judgment and integrity. Employee turnover was high and she worked a minimum of 50 hours per week. Many employees feeling burnt out, overworked, and afraid to speak out. She noticed the company took confidentiality very seriously and said employees were warned not to discuss the company or their roles with anyone. Cheung described it as a “militaresque culture.”
To top it all off, she learned the technology Theranos was developing did not actually work. While leaders of the company were accumulating massive media attention, behind-the-scenes, Cheung and her co-workers were unable to receive accurate results.
“It was hard to be under leadership that was constantly changing priorities. People started to see the misalignments between what leadership was saying and what was actually occurring. Employees just lost faith in the mission. There was an immense amount of burnout. It was very hard”, said Cheung
While initially admiring Holmes’ tremendous drive to achieve results, Cheung notes that it ultimately led to her downfall because it impaired her judgment.
“I think it got to the point where having that much drive turned into strong-headedness, and not only that, but a mentality of I'm going to be right at all costs, and I’m going to win at all costs. I think that transition is something that people really have to pay attention to,” she said. “Business, in general, is a place where you can't be right at all costs for sure. You're going to make mistakes.”
Taking a stand
As clinical trials began, Cheung decided she could no longer take a backseat. She approached Ramesh "Sunny" Balwani, Theranos COO, with her concerns. She was met with a disheartening response, as Balwani urged her to do the job she was paid to do.
“He said, ‘What makes you think you’re qualified to make those calls? You need to do the job I pay you to do, which is process patient samples, and that’s it.’ For me, just that type of response was an indicator of this person's character. You just intuitively know, Oh. These people know what's going on but they're not doing anything about it,” she said. “It was really at that moment, my world kind of crumbled right? Because here I am, sleeping in my car, working 16 hours a day – doing all this crazy stuff because I have this belief that we're all in alignment about the mission that we're trying to accomplish and actually there's something else going on. I just can't stand by. I can't stand by at all.”
Cheung made the courageous decision to collect quality control data, quit Theranos, and report the company to regulatory bodies. By 2018, Theranos was shut down.
Be comfortable with being uncomfortable
Although whistleblowing may be glamourized by the media, Cheung said it wasn’t easy. The move led to her being trailed by a private investigator hired by Theranos and she said she felt isolated from her peers.
“There is a misconception sometimes with courage that I think is really important for people to recognize. Doing the right thing is uncomfortable sometimes. You know, the majority of the time. It's going to be a very emotional experience,” she said. “But that doesn't detract from the fact that you do the right thing, because it's the right thing to do.”
Cheung said she has never regretted her decision to take a stand because it allows her to sleep at night. That’s why she now dedicates her time to ensuring business leaders put ethics at the forefront, not on the backburner.
Her advice to students about to embark on business careers: Understand yourself, the values that you hold, and think about how the decisions that you make are going to carry through your life.
“I think what courage stands for is being able to feel comfortable with who you are and the decisions that you make over the course of your own individual journey,” she said.
The 2022 Leader Character & Candour Conference also included a video case workshop and a presentation from Margot Lee Shetterly, author of New York Times bestseller Hidden Figures.
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