Saturday, 23 September 2023

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The president, the cabinet, Ho Ching, Temasek’s Board of Directors – all got it wrong?

Andrew Loh

Anyone expecting Temasek Holdings to shed further light on the departure of Mr Charles Goodyear will be disappointed. Don’t hold your breath. Despite calls for more transparency and openness in its dealings, the state sovereign wealth fund (SWF) is notoriously secretive.

Singaporeans will be left to speculate on the reasons for the sudden and unexpected exit of Mr Goodyear.

Having said that, lets take a look at the selection process adopted by Temasek through which it appointed Mr Goodyear to take over Ms Ho Ching, wife of Prime Minister Lee Hsien Loong, as Chief Executive from October 1st.

In the Parliamentary sitting of 4 March 2009, then-second Minister for Finance, Mrs Lim Hwee Hua, stoutly defended Mr Goodyear’s appointment. She explained how Mr Goodyear came to be offered the position of CEO of Temasek:

Mr Charles Goodyear was identified and approached by the Temasek Board as a potential CEO candidate in 2007.  Once he agreed to be considered as a CEO candidate, Mr Goodyear was interviewed by the Board members, individually and as a group.  The Board engaged with him for over a year before it finalised its decision. Temasek picked Mr Goodyear as its next CEO because its Board assessed that he was the best person for the job, based on merit…. The Board was also satisfied that he shares Temasek’s values and is committed to building long-term sustainable value.

As Temasek is a Fifth-Schedule Company under the Singapore Constitution, Mr Goodyear’s appointment both as a Board member and as a CEO successor was subject to the concurrence of the President.  Cabinet first discussed the Temasek Board’s nomination of Mr Goodyear.  Cabinet decided that the Government should have no objection to Temasek appointing a foreigner as CEO if he was assessed by the Board to be suitable and the best candidate available.  Cabinet, therefore, endorsed Mr Goodyear’s nomination, but also reaffirmed the need for the Board of Temasek to remain in the effective control of Singaporeans.

Temasek Board’s recommendation was then put to the President for approval, and the President met Mr Goodyear before giving his concurrence. (Parliament)

So, the president, the cabinet and Temasek’s Board of Directors all had a hand in assessing and approving the appointment of Mr Goodyear over an extended period of time. He was identified as a potential CEO in 2007 – two years before he was offered and took up the job in March 2009.

In its news release on 6 February 2009, where Temasek announced Mr Goodyear’s appointment, its chairman, Mr S Dhanabalan, said: “Ho Ching has been instrumental in bringing Chip on board. We have been working on this appointment for more than a year.” (Temasek website)

Less than three months before he was to replace Ms Ho Ching as CEO, Temasek announces Mr Goodyear will no longer be its CEO come October 1st – and that Ms Ho Ching will continue as its chief. The problems seem to have started immediately after Mr Goodyear was designated as the new Temasek CEO. According to the Associated Press, “Goodyear…  had been working alongside outgoing chief executive Ho Ching since March.”  One would imagine that in the four months since, the two may not have got along as well as what has been reported.

So, what happened?

The reason given by Temasek in its news release of 21 July 2009 said that “there are differences regarding certain strategic issues that could not be resolved.” However, this runs counter to what Minister Lim had said, that Goodyear “shares the values of Temasek and its position as a long-term investor committed to delivering sustainable returns.”

It therefore raises the question: Did not the president, the cabinet, Ms Ho Ching and the BOA of Temasek ask Mr Goodyear about his strategy for Temasek before appointing him as CEO? And what does Temasek mean by “strategic issues? Did not Minister Lim say Goodyear “shares… the values” and its long-term position?

More curiously, on 21 July, Ms Ho Ching said: “I am sorry he is unable to continue with the leadership transition, and hope to complete the initiatives that he has started.”

If Temasek cannot reconcile Mr Goodyear’s ideas on “strategic issues” with its own, why is Ms Ho Ching going to “complete the initiatives” which Goodyear started? What are these initiatives? And how sure is Temasek that Ms Ho Ching is up to the tasks, given that she herself admitted, in February, that “Chip brings capabilities that I don’t have”? (Straits Times)

So, is there more to Mr Goodyear’s departure than meets the eye?

The New York Times:

“This is not good news for Temasek,” said Carl Linaburg, co-founder of the Sovereign Wealth Fund Institute in Roseville, Calif., which tracks data on the investment funds. “Prior to Chip’s arrival, Ho Ching had been widely criticized for Temasek’s major losses in financials. Chip’s departure makes people wonder why Temasek can’t seem to make firm decisions with sound judgment, which is essential for managing the assets of a country.”

Some have suggested that it is a clash of culture – according to the Financial Times (FT):

“… there has been intense speculation since Mr Goodyear’s appointment was announced about how he would deal with Temasek’s senior management, and the close-knit community of Singapore business executives in charge of the Temasek-owned companies that dominate the city-state’s corporate landscape. These include Singapore Airlines, Singapore Telecommunications and DBS Bank.

Many observers said that Mr Goodyear might encounter a culture clash if he attempted to shake up the management of Temasek and its affiliated companies.”

The FT also reported thatNomura Securities, in a recent research report, suggested that Mr Goodyear might increase Temasek’s borrowings to make new acquisitions in an effort to rebalance its portfolio. Such a move would have been a break with Temasek’s conservative cash management.”

We will probably never know the true reasons for Goodyear’s departure. But perhaps that is not the real or important question we should ask. What should be of concern to Singaporeans is the process of selection adopted by Temasek and the seemingly rubber-stamp approval which the president and cabinet gives to Temasek’s actions. This is especially important given that Temasek guards and invests billions of dollars which belong to Singaporeans, which have resulted in monstrous losses in the past year or so.

Another important point to note is the question raised by Workers’ Party chairman, Ms Sylvia Lim, in Parliament in March. She had asked why the hiring practice of the Civil Service, which restricts access to state secrets to Singaporeans, was not applied to Temasek Holdings. (Parliament)

In her reply, Minister Lim said, “Temasek is not part of the Civil Service  or the public sector.  It is a commercial company that is wholly-owned by Government.” Turning to Mr Goodyear’s appointment, Minister Lim said, “As Temasek CEO, Mr Goodyear would be privy to information about the company’s operations.” Her only defence regarding the question of keeping state secrets to Singaporeans was that Mr Goodyear is bound by the Official Secrets Act (OSA). But as the WP chairman said, what good is the OSA given the fact that Mr Goodyear may leave and never return to Singapore? “Does the OSA really help us?” asked Ms Lim.

Minister Mentor Lee Kuan Yew has always rejected calls for Singapore’s two sovereign wealth funds – Temasek and the Government of Singapore Investment Corporation (GIC) – to reveal its investments. Indeed, in a letter to the Wall Street Journal on 27 June 2007, the press secretary to the Prime Minister said “it is not in Singapore’s interest to publish the details or reveal their size.” (Wall Street journal)

Mr Goodyear, now no longer taking up the CEO position, has such confidential information about Temasek’s investment strategy, as Minister Lim Hwee Hua admitted in her parliamentary reply.

How will the government ensure that this is not used to compromise Temasek’s investment strategy, besides relying on the OSA, which may be useless anyway?

‘We hired the best,” MM Lee said in June, referring to Mr Goodyear. (Source)

While Mr Goodyear’s credentials may indeed be impeccable, perhaps the more important question lies with the selection process itself. Clearly, despite having been intensely interviewed by the president, the cabinet, the BOA of Temasek and Ms Ho Ching herself, the exit of Mr Goodyear has shown that the selection process has flaws.

And the flaw seem to be a fundamental one – the selection process failed to determine Mr Goodyear’s stand on “strategic issues” which Temasek now says is the reason why he will no longer be chief.

As blogger Lucky Tan put it:

“Gee, nobody bothered to ask him about what his strategies were and his views on key issues when he was interviewed for the job? Is that how we hire people to manage billions of tax payers’ money?” 


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