Theranos lawyer becomes director, may face conflict

Theranos' lawyer, David Boies, has been appointed a director of the embattled diagnostics startup. This could represent what the New York Times describes as a potential conflict for the attorney, as he may soon be put in a position where he has to either protect the company, as Theranos' lawyer, or protect its shareholders, as its director.

If the technology of Theranos turns out to be not what it claims, investors would almost certainly seek to sue the chief executive, Ms. Holmes, and the company, as well as the board that allowed this to happen.

This gets complicated for Mr. Boies, because Theranos is a corporate governance disaster.

Ms. Holmes controls the company, and she solidified that control in 2013 by arranging for the company to adopt a high-vote stock structure that gave her most of the votes. This is a problem because the company is essentially Ms. Holmes, although it has raised hundreds of millions of dollars from outside investors. She founded it, had the idea and has led the technology. If the technology is shown to be flawed, she may not be quick to admit that to the benefit of the remaining shareholders.

Mr. Boies, of course, is no expert in blood testing technology. But in evaluating the firm’s technology, he will get little to no help from his fellow board members. Before the first Journal article appeared, the board of Theranos had no outside scientific experience. It consisted mainly of statesmen, including two former senators and even Henry Kissinger. Most of these board members have now been demoted to advisers.

The Theranos board is now five people, including Ms. Holmes and the company’s chief operating officer. None of the rest have scientific experience. Two other directors are a retired Marine Corps general and the chief executive of Bechtel, the construction company. Then there is Mr. Boies.

This is, frankly, a weak board and another potential land mine for Mr. Boies, as the weakness of the board does not lessen the fiduciary duty he has to all Theranos shareholders.