Temasek salaries are benchmarked to industry, I'm guessing the fund management industry, which is one of the highest paying ones, if not the highest. Further incentive bonuses are required to motivate employees who are not already motivated by good salaries. There is a fine line between putting aside a certain amount to reward employees for a good year, and over-reaching into the dark side of incentive plans to outright plunder. S$3.61b is testing Singaporeans' credulity. It should make Ali Baba and his 40 thieves turn dark green with envy.
This is Temasek's compensation package :
- Basic salary
- MAD (Make A Difference) rewards
- Short term incentive - Annual Cash bonus
- Medium term incentive - WA (Wealth-Added) Bonus
- Long term incentive - Co-ownership grants
The basic salary is competitive and benched-marked to industry. One wonders which industry. Are they compared to other sovereign wealth funds, or to other investment companies or to the fund managers. Temasek website says they are not a fund management company. And that is right. They simply invest the money the owners (Ministry of Finance) hand to them. So they are something in the nature of the investing arm of an insurance company. Fund managers need to raise funds from investors and manage other people's money. Is Temasek bench-marking themselves to the likes of Berkshire Hathaway, Soros Fund Management, Bridgewater Associates, etc and all those maverick fund managers that earn in billions?
"MAD Programme rewards employees for achieving non-financial goals targeted at strengthening the institution, contributing to our community, and taking care of our families and ourselves.'' No idea what these goals are nor the quantum of rewards. The "our" sounds like "me", "me", "me".
Annual cash bonus is based on team and individual performance and capped by budget. It appears there are several targets, but hardly any details.
WA bonus is the incentive to die for. The S$3.61b that has been set aside for y/e 31 Mar 2018 is for this bonus. Temasek uses a risk-adjusted hurdle rate to assess performance. Earnings above this hurdle rate is the Wealth Added. Based on some data provided in Temasek Review 2018, I estimate the WA bonus as follows:
Info provided:-
- Shareholder equity - S$273b.
- Total Wealth Added - S$14b.
- Risk-adjusted hurdle rate - 7%.
- Profit before tax - S$29.5b.
Profit before tax before WA bonus = S$273b x 7% + S$14b = S$33.11b.
WA bonus = S$33.11b - S$29.5b = S$3.61b
In the year when there is a positive WA, the WA bonus is computed and the sum goes into a slush fund. Only a portion of this WA bonus is paid out in respect of that year. The balance is retained to meet clawbacks in future years when there is a negative WA.
Temasek total employee strength is about 750 but only top executives are in the key team that enjoys WA bonus. Ali Baba obviously has a way to distribute the S$3.61b to each of the key team members. Each member is credited their share into individual ledger accounts called, would you believe it, WA Bank accounts. How much they get paid in 2018 depends on 3 levels of seniority. Out of their individual WA Bank accounts, the most senior get 1/3 out, mid level ones get 1/2 out and the lower level get 2/3 out. On average, probably 50% of the S$3.61b has been paid out.
Co-ownership grants is a bit scant in details. It seems to be like sort of unit trusts. Part of the funding comes from the WA slush funds and balance presumably from the company.
How much is Ho Ching paid?
What is the remuneration package of Ho Ching, the CEO of Singapore sovereign wealth fund Temasek, who happens to be the wife of the Prime Minister? This has been the best kept secret in Singapore for more than a decade.
GAAP (generally accepted accounting practices) requires all companies to show executive remuneration in their financial statements of companies. Temasek is a private exempt company, the shareholder is the Ministry of Finance. As an exempt company, it does not need to publish its annual financial statements. It hides behind this legality to shield from the public, information regarding executive remuneration. The only reason for this is it posses a great embarassment for the government to disclose a huge payout for the wife of the Prime Minister. It has become a hot potato politically as the country has seen a big segment of the older population slipping below poverty line in a wealthy country that is unwilling to allocate more to social welfare spending.
Ho Ching's salary has it's Barbara Striesand effect. The more they try to shield it, the more the unintended effect of people wanting to know and asking all over the internet. Social media pundits guess it could be in the upper level of CEOs in Singapore, or what was possibly offered to Charles Goodyear. In 2009 Goodyear was hired to replace Ho Ching but eventually she was retained. (It was businessman Ong Beng Seng who influenced Lee Kuan Yew that Ho Ching was doing a great job at Temasek and ought to be retained). Goodyear was already drawing S$54m at BHP Billiton at the time. Perhap that was simply a faux placement exercise to gauge a salary level for Ho Ching.
Those who believe her salary was about $54m certainly has a reasonable basis. More interesting is what is her bonus? Most disconcerting is, what will be her severance pay? Since husband Lee is stepping down from the premiership soon, her retirement is imminent.
Singaporeans ought to be concerned with top executive salaries. Greed has crept into big corporations all over the world, especially in financial institutions. Compensation has gotten to estronomical levels. It is a blatant transfer of wealth from shareholders to executives, even at times when corporations are not doing well. Temasek can hide behind the cloak of private exempt status, but all Singaporeans know it is a public institution and we have the right to know.