TR EMERITUS

Will a new CEO bring change amid tough markets? Singapore's state-owned investment fund Temasek announced a change in leadership last week to a non-Singaporean CEO. We hope his appointment heralds a new era of openness. Temasek manages public monies, yet much of what it does is hidden from the public it aims to serve. Its stated mission is "to create and maximise long-term shareholder value as an active investor and shareholder of successful enterprises." But to what end? To support Singaporeans in times of recession, like now? Government officials in the past said they are accumulating reserves for an unspecified "rainy day." In a speech this month, Senior Minister Goh Chok Tong said reserves should be used only "under dire circumstances when one-off extraordinary measures are required to ward off catastrophe or prevent irreparable damage to the economy." A spokesman tells us that, "Temasek's charter is to manage these investments independent of the Singapore government on a purely commercial basis in order to generate sustainable returns for the benefit of future generations." But who decides when to use the reserves, and under what metrics? Temasek's murky goals are part and parcel of Singapore Inc., where the line between public and private firms is often blurred. This corporatist approach worked for Singapore in its early years -- though of course we'll never know whether the market might have done a better job. Temasek was set up in 1974 as a holding company to manage state-owned firms and has nurtured successful, world-class companies such as Singapore Airlines and DBS Group, a major bank. The current CEO, Ho Ching, is the wife of Prime Minister Lee Hsien Loong. Today, however, Singapore needs to develop a more vibrant private sector that encourages entrepreneurship and innovation. The city-state is in the throes of the worst recession in its modern history, with GDP forecast to contract as much as 5% this year. Expatriates are fleeing and the government, for the first time, is going to tap its reserves to the tune of S$4.9 billion ($3.3 billion) to help fund a stimulus package. But if this is the "rainy day" Temasek is there for, why not give back the fund's piles of cash to taxpayers and let Singaporeans invest their own money? As of March 31 -- its last public annual statement -- Temasek's portfolio totaled S$185 billion. During the course of a parliamentary debate Tuesday, the government announced a 31% drop in the company's net portfolio value between March 31 and November 30 last year. The decline was not unexpected, given the world financial crisis and some poorly timed investments, including $5.8 billion in Merrill Lynch and £975 million ($2 billion) in Barclays. Temasek says it oversees its portfolio prudently. But it has never provided historical financials to back up its claim of an 18% compounded annual "total shareholder return" by "market value," nor has it released detailed results showing how money flows among its subsidiaries, the holding company and its government shareholder. Temasek outlines its compensation arrangements but doesn't say how much it pays its top executives. Temasek is 100% government-owned and isn't required to release publicly audited financial statements. The President of Singapore must sign off on the "appointment or removal" of the CEO and board members, according to Temasek's annual report. It cannot "draw on or diminish our past reserves without the President's concurrence." So even while it is a "commercially disciplined investment firm," as the company says, Temasek still answers to the Singapore executive. This system would be more effective if Singapore boasted a more vibrant democracy with better checks and balances. All of which makes last week's change at the top of Temasek all the more intriguing, and an opportunity. Replacing Ms. Ho in October will be American Charles "Chip" Goodyear, who will be Temasek's first foreign CEO in its 35-year history. Mr. Goodyear is a Wall Street veteran -- not always a compliment these days -- and the former head of BHP Billiton, the world's largest mining firm. He has run firms accountable to their shareholders, and run them well. The hiring of a foreign CEO is a notable change, and we hope it's a signal that Temasek and Singapore's leaders understand the need for more transparency in the company's operations. The world is demanding more openness and accountability from sovereign-wealth funds, and the shareholder-voters of Singapore deserve nothing less. Source: Wall Street Journal  Read More →

By Eugene Yeo The PAP leaders had always proclaimed themselves as "financial gurus" comparable to the likes of Warren Buffett and George Soros in Wall Street deserving of the highest salaries pegged at market rates. Singaporeans have been told again and again that we have to pay them salaries commensurating with their "capabilities" or they will be proached by the likes of Morgan Stanley, Citibank, Goldman Sachs etc. In 2007, Minister Mentor Lee Kuan Yew berated Singaporeans as "absurd" for protesting against the government's decision to raise their own salaries to 88% of the benchmark set by the private sector: "But for people in government like m, having to deal with these sums of money which we have accumulated through the sweat of our brow over the last 40 years, you have to pay the market rate or the man will up stakes and join Morgan Stanley or Lehman Brothers or Goldman Sachs. And then you've got an incompetent man and you've lost money, by the billions. So get a sense of proportion." Since they demand to be paid salaries pegged at market rates, shouldn't they follow what the CEOs in the United States are doing now ? Citigroup Inc Chief Executive Officer Vikram Pandit said he will take a salary of $1 and no bonus until the bank, which has accepted $45 billion in government bailout money, returns to profitability. Chief executives at companies outside the finance industry, including Rick Wagoner of General Motors Corp. and Ford Motor Co.’s Alan Mulally, have also agreed to work for $1 a year. (Read full article here) The government cannot continue to blame the sharp depreciation in our reserves on the current financial turmoil as there were still some investors like George Soros and Oei Hong Leong who made quick bucks from the crisis. The bulk of our bloated government expenditure goes towards paying the President, Prime Minister, Senior Minister and Minister Mentor, each of whom commands almost $3 million dollars a year even after the recent 20% pay cut. Prime Minister Lee Hsien Loong was the Finance Minister till he relinquished the portfolio last year. Senior Minister Goh Chok Tong is the Chairman of MAS. Minister Mentor Lee Kuan Yew is the Chairman of GIC and President Nathan is supposed to safeguard our reserves. Are they not complicit in the planning and management of Singapore's economy during the past three years when alarm bells had already rung from certain quarters in the finance industry about the looming subprime crisis and "bubble" ? Who should take responsibility for the mess we are in now ? If they are not at least partially responsible, have we been sailing in auto-pilot mode all this while ? As senior leaders of the present administration, they should emulate CITI CEO Vikram Pandit's gesture to take an annual salary of $1 and no performance bonus till our reserves are returned to the pre-financial crisis level. After all, they have accrued enough wealth through the years and do not need any more sponsorship from Singapore taxpayers to continue their affluent lifestyle. Furthermore, since according to MM Lee, we are "investing for 10, 15 and 20 years", will he walk his talk by not taking a single cent from the State's coffers till "the shares go up." ? I haven't heard any body from Wall Street who dares to concur with MM Lee's bold prediction that the market will bounce back in 10, 15 or 20 years. With due respect to him, MM Lee is more accomplished as a lawyer than a financial wizard. What if the market doesn't recover and our shares remain depressed ? Will our children and grandchildren end up servicing the debt incurred by the government ? A habitual gambler will never admit he has lost. It is ingrained deeply in his psyche the false belief that he will be able to recoup his losses in the next round and therefore he will never know when to stop. Even when he is broke, he will still try to convince money lenders to trust him one last time - "My luck is down, but I will bounce back, give me a few more tries, I will return all the money I owe you!" Why should Singaporeans believe MM Lee and his team again ? How can we be sure we will ever recover our losses ? To be fair to future generations of Singaporeans, MM Lee should leave us something as a collateral before we continue to sponsor his "exploits" such as offering to work for free for the rest of his life. Vote in 4 polls on the Temasek debacle here  Read More →

By Kelvin Tan, Guest Columnist The announcement of Ho Ching's impending exit from Temasek Holdings came as a surprise to many. The official reason given is that the celebrated American CEO Charles Goodyear is available for hire. However, many questions surrounding Ho Ching’s impending departure is left unanswered. First, if Ho Ching is a CEO of such impeccable quality and who possesses strategic foresight, why is there a need to change hands so abruptly, and in the middle of one of the greatest financial storms in the world? If Ho Ching were as good as the government has made her out to be, surely she would be the best and most familiar pair of hands to steer this ship in these frantic times. Second, when Ho Ching was hired seven years ago, it was stated that her appointment would be one of at least ten years, so as to see Temasek through a series of long-term restructuring and re-direction. Therefore, shouldn’t Ho Ching stay on, and see that Temasek properly restructures in tandem with the larger tectonic shifts in the global financial complex? It seems peculiar then, that one of the reasons for her departure is laid on the current sudden changes in the global economy. This reason also does not hold in the face of Temasek and the Government's constant reiteration that such downturns are periodical and only to be expected. If they are to be expected, then shouldn’t it be business as usual? Unless the real reason for Ho Ching’s departure is due to her performance. Temasek's chairman S. Dhanabalan's emphasis that Ho Ching's departure had nothing to do with performance is at best disingenuous. If a corporate honcho is not hired (or fired) due to performance, then what else is it? Family ties? While one could attribute Temasek's huge investment failures to the current financial crisis, it hardly explains Temasek's string of failures prior to the crisis. For example, the collapse of its investment in Australia's ABC Learning was a result of the latter's bad management and financial health rather than because of the global crisis. More notably, the failed takeover of Shincorp, that instead contributed to the ousting of former Thai PM Thaksin Shinawatra, highlighted the strategic mis-judgement of Temasek with regard to its investments. The disastrous Shincorp episode had cast doubt on whether Temasek had conducted due diligence, and whether that its failure to do so was a result of the cosy ties between the Singapore Government and the Thaksin regime, and, of course, the even more intimate ties between Ho Ching and the Singapore Government. The revelations of Temasek's enormous losses were made in Parliament just three days after Ho Ching's announcement. This follows a familiar pattern of a series of high-profile CEO-resignations of billion-dollar corporations just before disastrous corporate disclosure. In the local context, this was what Singtel’s chief Lee Hsien Yang had done recently, before Singtel revealed its unsavoury financial status. Ho Ching's departure seems to carry with it a wider political significance, and perhaps, this should not come as a surprise at all. What should be surprising is how comparatively mild Singaporeans have been in light of these mis-steps, with most of our criticisms contained in online blogs and forums. Of course, if the Temasek’s losses had been announced without Ho Ching's public decision to leave, she would have been the prime target of ordinary Singaporeans, and by extension, the Government would have been implicated. This current arrangement - first announce her departure, then Temasek's losses, seem to be the lesser of two evils. In addition, even if the losses of S$58 billion are merely 'paper losses', and due to the world crisis, and should be evaluated as 'long term' investments, the current rising political tide from the ground against the Government has to be addressed. Having Ho Ching step down now and bear the full brunt of the people's 'anger' while these people are simultaneously concerned about their income and jobs will ensure that the people will have little more to rant against Temasek or the Government by the next General Election. While in our current anger we might think this scenario impossible, it is worth reminding that Singaporeans are generally quick to forget, and the Government's ability to take the upper hand in glossing over issues and intimidating Singaporeans should not be underestimated. Furthermore, such angry Singaporeans are still in the minority. Even fewer are those angry ones who would be driven to action. The hundreds of retirees who had lost their High Notes and Minibonds investments is a case in point. After having their rants and anger stretched out over three months, they eventually heeded the Government's call to adhere to the legal processes. And these are the people who had their lifesavings wiped out ! On the other hand, we should not to deny some of the good work done by Ho Ching during her tenure. Most notably, she made Temasek more accountable and transparent by publishing annual reports. Of course, it might be said that these are only required of CEOs, and as far as Singaporean institutions are concerned, belated moves. To be fair too, it is not easy to be in Ho Ching’s position, being the ‘first lady’ and daughter-in-law of the most powerful man in Singapore, and being subjected to such unfair and widespread dislike among Singaporeans. Furthermore, much of the people’s dislike of her stem from their dislike of the PAP or the Government. In this regard, she is a convenient scapegoat. To be able to withstand such intense scrutiny all these years is a testament to Ho Ching’s ability, if not strength of character. At the end of the day, no one takes on the role of CEO to want to see the company fall. This is especially so given Temasek Holding’s responsibility to the nation, as well as her personal stakes as Mrs Lee Hsien Loong. To blame her, however unfairly simply because she is Mrs Lee, is just as bad as blaming her wrongly for wanting to deliberately incur losses. Temasek’s losses should be seen in a more balanced light: a combination of bad timing, inhospitable global developments, and, the likelihood that Ho Ching was simply not up to task. This last point can either refer to Ho Ching's 'ability', or her role as the PM's wife that has become an obstacle when investing abroad. In this regard, Ho Ching’s stepping down is the first step. The next step is to rethink our foreign investment strategy that seems to gamble on high brand-name stakes in a bid to fly the Singapore flag and boost our nationalistic egos. ‘Gamble’ is the key word here, and a dangerous one. This should be enough remind Singaporeans that they should pressure the Government to place less emphasis on chasing after the relentless growth of the GDP and national reserves, that have been the main objectives of Temasek and the GIC. Singaporeans should also play a stronger and more active role in demanding accountability and transparency from the Government: from the choice of CEOs, to analyzing these companies annual reports, to when these CEOs leave. Ideally, our ‘demands’ should go beyond online rants. But do we have the guts to do so? If S$58 billion is not enough for us to take a more proactive approach, then how much losses is needed? S$100 billion? S$200 billion? Or would we still be sitting here ranting, regardless of the figure? There is no better time than now to be an active citizen, as well as a supporter of the Opposition – any party of the Opposition, for they each contribute in their various methods and strategies to the increasing strength of oppositional politics in Singapore and pressing the Government to be more accountable to the people. This can only benefit Singaporeans eventually. Many questions remain as to why Temasek did what it did, and why Ho Ching has decided to step down. But rather than embarking on a witchhunt that amounts to nothing more than displaying our silly dislike of a person just because she is someone else’s wife, we should be demanding some real answers, from Ho Ching herself as CEO of Temasek, as well as from the Government that owns it. EDITORS' NOTE: The author is currently pursuing a PhD in Philosophy  somewhere in Europe and is our latest guest columnist. We welcome more writers to join us to offer this site a diversity of views including pro-establishment ones from the other end of the political spectrum.  Read More →