Enron
2001
Dec 2001
bankruptcy filing
What happened
Off-balance-sheet partnerships run by CFO Andrew Fastow hid debt and inflated profits. Enron collapsed into bankruptcy.
What the board did
The board had waived its own ethics code so Fastow could run the partnerships. Its special committee’s Powers Report later faulted the board for weak questioning and monitoring.
Inside the boardroom: timeline
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Jun 1999Board waives the ethics code so CFO Andrew Fastow can run the LJM partnerships that trade with Enron.
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Oct 2001Board forms a special investigative committee, chaired by new director William Powers.
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2 Dec 2001Enron files for bankruptcy.
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Feb 2002Powers Report faults the board for weak questioning and monitoring of the partnerships.
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May–Jul 2002Senate subcommittee hearing (7 May) and report (8 Jul): the board failed its fiduciary duty and was not ‘out of the loop’.
Lesson
A passive board that approves what it doesn’t understand shares the blame.
Volkswagen
2015
11M
cars fitted with cheat software
What happened
VW admitted installing ‘defeat device’ software to cheat US diesel emissions tests. Shares fell about 30% in a week.
What the board did
CEO Martin Winterkorn resigned days later, though he denied knowing. The supervisory board pledged to pursue those involved.
Inside the boardroom: timeline
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Apr 2015Months before the scandal, chairman Ferdinand Piëch resigns after a boardroom clash; Berthold Huber is interim chair.
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23 Sep 2015Days after the EPA notice, CEO Winterkorn resigns ahead of a board meeting on his future.
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25 Sep 2015Supervisory board meets for seven hours and names Porsche chief Matthias Müller CEO; some staff suspended.
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30 Sep 2015Board commissions US law firm Jones Day for an external investigation, overseen by a special committee.
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7 Oct 2015Long-time CFO Hans Dieter Pötsch is elected chair, criticised as an insider overseeing the probe.
Lesson
A board dominated by insiders and family interests struggles to challenge management.
Wirecard
2020
€1.9B
cash that “likely never existed”
What happened
Auditor EY couldn’t confirm €1.9B said to be held at two Philippine banks. The banks denied any dealings with Wirecard.
What the board did
CEO Markus Braun resigned and was arrested; COO Jan Marsalek was fired. Wirecard became the first DAX member to file for insolvency.
Inside the boardroom: timeline
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Oct 2019After FT reports, the supervisory board commissions KPMG for a special audit.
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28 Apr 2020KPMG cannot verify the third-party business behind much of the revenue; investor TCI writes to the chair asking why the board didn’t act.
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18 Jun 2020EY cannot confirm €1.9B of cash; results are cancelled and shares collapse.
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19–22 Jun 2020CEO Braun resigns; COO Marsalek is fired; the company says the cash likely doesn’t exist. Braun is arrested.
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25 Jun 2020Wirecard files for insolvency.
Lesson
Boards must chase red flags (short-seller and press warnings) and not hide behind auditors.
Theranos
2015–18
2 of 12
directors with medical backgrounds
What happened
The blood-testing startup claimed tests it couldn’t deliver. Its board was packed with ex-cabinet members and generals.
What the board did
After criticism, the board was reshaped in 2015 and big names moved to an advisory ‘board of counselors’. Too late: the company later collapsed.
Inside the boardroom: timeline
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Oct 2015After WSJ exposés, the 12-person board is cut to five; big names move to an advisory board of counselors.
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Dec 2016Theranos says the board of counselors will be retired; Mattis stays on the board.
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14 Mar 2018SEC charges Theranos and Holmes; she settles, gives up voting control and accepts a 10-year director/officer ban.
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Jun 2018Holmes and Balwani are indicted. The board announces Holmes stepped down as CEO (she stays chair); general counsel David Taylor becomes CEO.
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Sep 2018Theranos tells shareholders it will dissolve.
Lesson
Board prestige is not expertise; you need directors who can test the core claims.