by Dr. Peter Stephenson and Professor Richard Bolden
- 10 December 2025
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With rising speculation on the potential for the AI bubble to burst with catastrophic effect, it’s timely to reflect on the factors that contribute towards corporate failure. Whilst this is often blamed on a few unethical or ineffective leaders, reality is far more complex. In this blog post, Dr. Peter Stephenson and Professor Richard Bolden share insights from their analysis of Theranos to reveal a web of interconnected factors that contributed to organizational failure and identify implications for policy, practice, and research.
Note: While the underlying research and paper are the authors’ entirely original work, this blog post was created with the assistance of artificial intelligence to help summarize and condense the main points into a more accessible format.
The spectacular rise and fall of Theranos has become one of the most infamous corporate scandals of the 21st century. Once hailed as a revolutionary health-tech company, Theranos promised to transform blood testing with groundbreaking technology. At its peak, the company was valued at $9 billion, and its founder, Elizabeth Holmes, was celebrated as a visionary leader. Yet, behind the glossy headlines and Silicon Valley hype lay a web of deception, systemic failures, and ethical blind spots that ultimately led to its collapse.
In a recent paper, published in the Journal of Business Ethics, we offer a fresh perspective on this case. Rather than focusing solely on Holmes as the “unethical leader,” we take a dispositional analysis, a holistic approach that considers the broader network of influences shaping leadership behavior. This lens challenges the simplistic narrative of “good” versus “bad” leaders and invites us to rethink how we understand and prevent unethical leadership.
The Problem With Oversimplified Binaries
Leadership ethics is often framed in stark terms: leaders are either ethical or unethical, heroes or villains. Whilst this binary view dominates much of the literature and popular discourse it fails to capture the complexity of real-world leadership dynamics. Ethical judgments are rarely clear-cut, and behaviors deemed unethical can sometimes produce positive outcomes.
The Theranos case illustrates this ambiguity. Holmes projected confidence and charisma, inspiring employees and investors with a compelling vision; the same traits exhibited by many celebrated leaders and heralded in concepts such as transformational leadership. She also exhibited secrecy, pressure, and unrealistic promises which, whilst also common amongst celebrated leaders, are less frequently addressed in leadership literature and often overlooked in our search for exemplary models of heroic leadership. Was Holmes inherently unethical, or was she shaped by a system that rewarded boldness and punished transparency? Would we view Holmes as an unethical leader if the engineers employed by Theranos had managed to overcome the issues with the technology?
Moving Beyond Leader-Centric Explanations
Traditional studies of unethical leadership tend to focus on individual traits and behaviors. While personal accountability matters, this leader-centric approach overlooks the contextual forces that enable or constrain ethical conduct. Instead, we advocate for a holistic-heterogenous approach, drawing on Michel Foucault’s concept of the “dispositive” — a network of interconnected elements that collectively shape power relations and behavior.
In the Theranos case, several dispositives converged:
- Silicon Valley Culture: A climate that glorifies disruption and risk-taking, often prioritizing speed and innovation over caution and ethics.
- Organizational Culture: Theranos fostered secrecy and loyalty, discouraging dissent and whistleblowing.
- Media and Public Hype: Positive press amplified Holmes’ image as a tech icon, creating immense pressure to deliver results.
- Regulatory Gaps: Weak, arguably even complicit, oversight allowed or encouraged questionable practices to persist unchecked.
These factors did not merely influence Holmes; they co-created an environment where unethical practices could flourish. Understanding this interplay is crucial for designing systems that prevent similar failures.
Unethical leadership is not just about unethical leaders. It is about the interplay of cultural, structural, and relational forces that shape organizational life.
Why Context Matters in Leadership Ethics
Ethical leadership is not exercised in a vacuum. It is embedded in social, cultural, and institutional contexts. Research shows that power dynamics, industry norms, and stakeholder expectations all shape leaders’ decisions. For example, the relentless pursuit of growth and investor returns in tech startups can incentivize shortcuts and opacity.
Framing leadership as a collective process (rather than a trait of individuals) offers a more accurate and actionable perspective. Leadership emerges through interactions among multiple actors: executives, employees, investors, regulators, and even the media. Each plays a role in reinforcing or challenging ethical norms.
The Limits of Prescriptive Models
Much of the leadership literature promotes normative models such as authentic, servant, or transformational leadership. While these frameworks offer aspirational ideals, they often fail to account for contextual complexity. For example, authentic leadership emphasizes transparency and moral integrity, but what happens when transparency threatens competitive advantage or investor confidence? Similarly, transformational leadership can inspire innovation, but it can also enable cult-like devotion and ethical blind spots.
We caution against relying on universal prescriptions and call, instead, for approaches that recognize ethical relativism and the situated nature of moral judgments. What counts as “ethical” varies across cultures, industries, and circumstances. This does not mean abandoning standards or suggesting that “anything goes,” but rather acknowledging that ethics are always negotiated within specific contexts.
Implications for Practice: Building Ethical Ecosystems
If unethical leadership is not solely the product of “bad apples,” then solutions must go beyond replacing individual leaders. Organizations and regulators need to address the systemic conditions that foster misconduct. Through our analysis of the factors that contributed to failure at Theranos we suggest a range of strategies, including:
- Strengthening Governance and Accountability: Robust auditing and compliance mechanisms can detect and deter unethical practices before they escalate.
- Cultivating Ethical Cultures at a Societal Level: Encourage open dialogue, protect whistleblowers, and value integrity over performance.
- Challenging Industry Norms: Question narratives that glorify disruption at any cost. Balance innovation with responsibility.
- Educating for Complexity: Leadership development programs should move beyond simplistic models and prepare leaders to navigate ethical ambiguity.
Lessons for Leadership Scholars
The Theranos case underscores the need for more nuanced research on leadership ethics. Scholars should explore multi-level influences, including societal, organizational, and interpersonal factors. Adopting relational and processual perspectives can illuminate how ethics is enacted and contested within dynamic systems.
The dispositional analysis approach we’ve outlined above represents a step in this direction. By mapping the network of influences that shaped Theranos’s trajectory, it demonstrates that unethical leadership is rarely the result of isolated choices. It is a systemic phenomenon and thus demands systemic solutions.
Conclusion: Rethinking Responsibility
The downfall of Theranos is often portrayed as a morality tale about hubris and deception. While personal accountability remains vital, this narrative risks obscuring the deeper lessons. Unethical leadership is not just about unethical leaders. It is about the interplay of cultural, structural, and relational forces that shape organizational life.
As we confront ongoing scandals across industries — from tech to finance to healthcare — the challenge is clear: Move beyond blaming individuals and start addressing the ecosystems that enable and encourage misconduct. Only then can we hope to build organizations and societies where ethical leadership is not an exception, but the norm.
Reference
Stephenson, P. and Bolden, R. (2025) Beyond the Unethical Leader: A dispositional analysis of unethical leadership in the case of Theranos, Journal of Business Ethics, https://doi.org/10.1007/s10551-025-06208-1
Dr. Peter Stephenson is a lecturer in leadership and management at the University of Exeter. Prior to commencing his academic career Peter had a career in a commerce and as an entrepreneur founding and successfully exiting two businesses. With a passion for the practical applicability of leadership Peter’s research is centred around the perspective that leadership is a collective phenomenon. The influence of communicative processes, internal and external influences, power dynamics, and a nuanced consideration of ethics have all been a part of Peter’s research to date.
Dr. Richard Bolden is Professor of Leadership and Management and Director of Bristol Leadership and Change Centre at Bristol Business School, University of the West of England. His teaching and research explore the interface between individual and collective approaches to leadership and leadership development. He has published widely on topics including distributed, shared and systems leadership; leadership paradoxes and complexity; cross-cultural leadership; and leadership and change in healthcare and higher education. He is Associate Editor of the journal Leadership, Fellow of the International Leadership Association, Visiting Professor at the University of Pretoria and Senior Fellow of the Higher Education Academy. His latest book Exploring Leadership: Individual, organizational and societal perspectives, 2nd edition was published by Oxford University Press in March 2023.
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