Governance, SPACs and Whistleblowers

Thought of the day: we’re not working from home, we’re living at work.

SPACémon: Gotta List 'Em All! (non-GAAP)


  • The ideal governance if every member of the Board can contribute their unique skill / experience for the management to tap into this pool.

  • A gap in some area or overrepresentation in another one can lead to long-term value destruction.

  • Overrepresentation leads to a minority of Directors dominating the Board’s agenda, leaving other Directors unable to fully contribute.

  • Since Board proceedings are collegiate, many Directors don’t rock the boat, but statistically 49% Directors think 1 Director in the Board should be replaced, and 21% believe that 2 or more Directors should go.

  • The reason why Directors are NOT replaced is that the Board leadership (Chair, Head of Comp) doesn’t want to raise an uneasy conversation (20%) or the assessment process is ineffective (19%).

  • Taking a long-term view means looking 5 years into the future, which also means that in 5 years 4-5 Directors may be replaced via rotation; those who get re-elected should pick up their game.

  • Board members work for shareholders and the management reports to the Board, not the other way around. It’s OK and helpful to be friendly with the management without losing the impartial way of challenging them.


  • Misaligned incentives are a major source of the company’s weakness. And the #1 concern always is the focus on the insiders’ short-term personal / professional considerations rather than the company’s long-term interests. An example of this can be going public via the SPAC (faster, but usually way more expensive in the long run).

  • SPACs may be valuable to the target firm if the sponsor can provide a star Director (who will become a Chair of a Vice Chair), otherwise paying 20% of the equity for average or meh governance is value destruction for the current company’s shareholders.

  • Also, the true share price after going public can be established no earlier than 18-24 months after the IPO, when insiders sell out and the company has published several reports and hit or missed revenue targets.


What Makes A Whistleblower Law Successful In Today's Globalized World?

  • Whistleblowing laws in many countries (excluding US) don’t deliver the intended benefits because they encourage employee’s retaliation towards an [ex-] employer, informants have insufficient legal representation (and the firms can afford it), and they de-facto don’t offer protection in the workplace – people are stigmatized and are forced into unpaid or sick leave.

  • An example of such law is the UK’s PIDA (Public Interest Disclosure Act).

  • Protection must be offered to a whistleblower not when the firm retaliates (leading to emotional, financial and career damage), but when the claim is made.

  • Even in the US the number of cases where a whistleblower prevailed in a retaliation case is low. Often – because it’s impossible to fight a firm with unlimited legal resources at its disposal.

  • One part of the solution is instituting reward programs for whistleblowers as an anti-retaliation insurance. If the whistleblower’s original information directly leads to the government’s ability to collect a fine / fee / penalty, the whistleblower gets 15-30% [depending on the quality of information] of the money actually collected by the government.

  • This payment shouldn’t be based on the retaliation suffered, but rather on the quality of the information about the crime. But this payment is partially meant to make good the damage from the various forms of retaliation.

  • This leads to a reduced number of false / frivolous reports (no incentive) and increases the quality and consistency of actual reports, supported by facts (otherwise there’s no payment).

  • Anonymity is not always achievable, as the report to the government can be matched with the internal report the whistleblower initially makes, so it’s easy to trace the report to the actual person.

  • However, some whistleblowers prefer to report claims to the US regulators instead of their countries’ law enforcement agencies due to the higher privacy standards.

  • There will be 2-3 more chapters on Mondaq, which I’ll keep an eye on.