Temasek - who's in charge anyway?

The pristine impeccable hallmark of integrity and competency in governance that Singaporeans sacrificed for and hold dear is gone. In one generational change of leadership, a culture of non-accountability has slipped in. In Singapore Inc hierarchical structure, there is always a boss, but the buck does not stop there anymore. 

The Finance Minister, and Prime Minister-in-waiting, Heng Swee Kiat, has said our sovereign wealth funds are not the responsibility under his ministry. If the affairs of looking after the country's reserves is not his concern, is he swatting mosquitoes in office? Of course a supervisory entity is not going to be concerned with transactional routines of operating units under them, but it ought to be involved in terms of policies and other significant developments as well as general oversight which encompasses monitoring performances and compliance.

Singapore Inc is managed by tightly knit PAP insiders, particularly the Kwa, Lee and Lim families. With marriages, this group has expanded considerably whose members have gone forth and populated various government agencies and the web of government-linked companies. Conflict of interest is the albatross the  administration refuses to take off their necks.

The core worry of Temasek is CEO Ho Ching happens to be the wife of the Prime Minister. The moral hazard of a million dollar salary ensures no Finance Minister, no cabinet members, and no PAP members of parliament, will raise any issue of concern. There is not a squeak in parliament as Temasek suffered one huge loss after another from investments in Shin Corporation to UBS. Absolutely no claim is being made here that Ho Ching has been less than upright. The case being made here is that management of massive wealth places immense power in the hands of a few. It would be naive to live on trust alone.

Massive funds and massive power coupled with opaqueness in dealings, despotism and ruling family or small inner circle management, is a recipe for financial disaster. This powder keg ignites easily given human frailties. Track records of sovereign wealth funds have shown this naivete to base on trust is deadly. The sovereign wealth funds of Angola, Libya, Brunei, Kuwait, Malaysia etc have suffered scandals and losses running into billions. They all say they comply with Santiago Principles, which is some accepted principles adopted by International Forum of Sovereign Wealth Funds. It's not what they say, but what they do or don't do that matters.

Santiago Principles GAPP 7 states :
"The owner should set the objectives of the SWF, appoint the members of its governing body(ies) in accordance with clearly defined procedures, and exercise oversight over the SWF’s operations."
 
Is Heng acquainted with GAPP 7, and how does MOF exercise oversight? MOF as the sole shareholder of Temasek, has no monitoring function over Temasek. No MOF representatives sit on the Board of Temasek.

Is the government really not concerned with the investment decisions of Temasek? It is seriously a political leadership that is blind to the geopolitical impact that a sovereign wealth fund can create with consequences to foreign relations. This was brought home when Temasek acquired Thai Prime Minister Shinawarta's 49% stake in Shin Corporation in 2006. The Thais were incensed with Shinawarta's tax evasion scheme in the deal and riots ensued with lots of Singapore flags burnt. This deal added to the rising contempt of Shinawarta which led to his downfall.

When no one is held accountable for mistakes or poor management, the lapse of control like a cancer grows. From MRT (poor maintenance, massive delays, accidents) to Health Ministry (data losses) to Temasek associated company Keppel Offshore Marine.

The latest scandal of Keppel Offshore Marine bribing Petrobas officials in order to secure contracts is now given the expected treatment. Lee Boon Yang, a PAP insider and chairman of the Keppel Group, initially passed the buck. The board does not know of the bribery -- of course, because they don't interfere with the operations of the management. Standard fare. Eventually Keppel had to pay of a US$422m fine to US authorities to make the problem go away. Meanwhile, the government gave Keppel a "severe reprimand" but criminal investigations are still in progress to bring some lower level executives to court. Scapegoats aplenty, but where are those in charge?

Temasek holds a 20% stake in Keppel, but of course it does not concern itself with the running of their associated companies. It is left to the top honcho, Temasek Chairman Lim Boon Heng, ex-PAP cabinet member, to do a show of reigning in the pack by warning Temasek stable of companies about the 'bright red line' that they must not cross. Unlike Lee Kuan Yew, PAP now carries a big stick to be used only on political opponents, never on their own error members.

Santiago Principle GAPP 17 requires financial statements to be disclosed publicly. Temasek hides behind its corporate charter as a private exempt company not to publish such information. It publishes an annual review but no balance sheet and profit & loss statements.

The continuing loud cry from the public to disclose the remuneration of top executives falls on deaf years for decades. Now it is the Minister of National Development Mr Lawrence Wong who defended this stance in parliament that the government does not interfere in the salary decisions of the top brass in GIC and Temasek. What has National Development Ministry got to do with our national reserves money? Who is the god damn boss?

Recently Standchart's CEO, Tim Winters, did a sleight of hand and computed a high pension payout for himself. It infuriated many shareholders. Temasek, a major shareholder in the bank, maintained silence throughout the public outcry. When pursued for a response, it was an invisible spokes person who gave the standard reply -- Temasek does not involve itself with the executive remuneration of the companies it invests in.  Where are the top Temasek executives, where's Ho Ching? Having vigorously defended the confidentiality of their own remuneration, they have lost the moral authority to comment. This awkward situation stands in the way of them of them doing what is right with Standchart. No matter how one looks at it, it is tantamount to derelection of duty.

Compare Temasek's stand on a wrong doing in a company they invested heavily to Norway's sovereign wealth fund that has sued Volkswagen for tempering with the emission test results of their vehicles. The reason is, nobody seems to be in charge in Singapore.


Coming up : Temasek - shocking $3.61b* executive bonus



* Note: Post fact revision - initially thought was S$14b.