Good Corporate Governance begins with transparency
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http://www.wp.org.sg/news/press_releases/20041007_govt_managed_assets.htm
We refer to the report printed in The Straits Times on Wednesday, 6 October 2004.
Standard & Poor's (S&P) had in an earlier report claimed that "the Singapore Government's annual returns have averaged between 1.7% and 4% from 1999 to last year. This was markedly inferior to Hong Kong Government's investment returns, which averaged 6% each year during the same period".
The Ministry of Finance had to come to the rescue of the Singapore Government saying that "the Singapore Government makes good long-term returns on its assets and its investments continue to perform creditably when compared to international benchmarks".
Just what is the definition of "good", and what is the definition of "long-term", and what is the definition of "creditable" and which appropriate international benchmarks are used?
The Government of Singapore Investment Corp manages about US$100 billion of our hard earned reserves. This money is accumulated from taxpayers, of which Singapore Citizens and Singapore Companies are amongst them. This mindset of saving for a rainy day, extended to saving for a drizzling day, saving for a cloudy day, and perhaps saving for a sunny day. Huge budget surpluses lowers Singapore's standard of living. Many Singaporeans are suffering today in anticipation for an uncertain tomorrow.
Huge budget surpluses benefit the ruling party. The ruling party is in a good position to pay their Ministers and Civil Servants some the world's highest public-sector wages. To argue that these Ministers manage an economy similar in size to the largest public-listed companies, and that their pay should be equivalent to the executive officers of these companies leave much to be desired. There exists a corporate governance issue of which a recent incident at the New York Stock Exchange serves to remind us.
Good Corporate Governance begins with transparency. Full disclosure of the average Singaporean's hard-earned reserves can at times be detrimental to the Singapore's currency and its credit rating. However, if the returns are as good as what the Ministry of Finance makes it out to be, the "outperform the market" performance can do no harm but only good.
The Workers' Party calls for the Government of Singapore to be more transparent with the dealings of the hard-earned savings of the average Singaporean, and that an appropriate benchmark be used consistently to report the performance of our investments.
Tan Wui-Hua
Treasurer, The Workers' Party
Vice-Chairman, Policy & Communications Committee
7 October 2004 -
Accountability and transparency can be readily set up as elaborated in other postings i.e. "What is disclosure, accountability and transparency" and "A practical guide to efficiency and productivity" .
Many tasks are nowadays transparently set up in computerized applications which can be provided appropriately to public from work processes on (1) investment strategies, (2) business plans (3) schedules of works. Shareholders' information can be provided on returns on investments and factors considered or reviewed on risk management. Information sources will be reliably set up in administrative forms, - head office, department reports - operations and work forms - detailed works.
There will then be greater openness, accountability and transparency and good corporate governance.
Incomes, dividends, payments of directors' fees and key officers' salaries and processes in appointments of key officers and work processes behind the tenders/quotations and awards of tenders can be made ready for inspection by shareholders and public from planned work processes as elaborated.
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A suitable model of accountable and transparent corporate governance as a follow-up on my earlier post:-
COMMON MANAGEMENT PRACTICES
Very often, people tend to manage tasks on concepts or assumptions emphasising on Leadership, talents, Focus and Consistency, Positive Work Attitude, Foresight & Insight, or other abstract which cannot be applied by workers to actual works?
On the other hand, many tasks today in the advent of computers are already managed more efficiently in accountable and transparent logical doable component processes defined in quality-time-cost parameters as in on-line banking, e-trading, travel-ticketing, CAD-CAM designing, transportation, logistics, stock-trading, accounting, telecommunications etc.
TRANSPARENT WORK PROCESSES
Hence, company performance will be reported accurately and reliably from objectively planned work processes to avoid intuitive or ad hoc justifications.
It is clear that tasks are interlinked in logical internal relationships. When suitably divided in smaller tasks, they can be followed through in sequence such as: (1) Study of Ideas, (2) Enquiry, (3) Securing Contracts and (4) Contract Administration (Operations).
Operations (routines) can be divided in ten departments, namely: 1.(General) 2.(Human Resource) 3.(Revenue) 4.(Accounts) 5.(Marketing) 6.(Services-all outsourced activities) 7.(Facility) 8.(Enforcement) 9. (Production) 10.(Compliance) with each department set up consisting of simple core activities (primary tasks) captured in one-page department report supported by detailed work forms as follows:-
1. Identify 3-4 Core Activities in department.
2. Define core activity in 2-3 quality-time-cost parameters.
3. Perform Core Activities to attain parameters.
Hence once tasks are set up as doable component work processes they can be performed and assessed in quantitative data of “1”, “2” or “3” (or percentages) being “non-attainment”, “attainment” and “excellent attainment” of parameters.
These variances can be submitted weekly (say Friday 1630 hour) with corrections of "1" in a two-way communication task-line.
SEQUENTIAL WORK FORMS
A production department can now be managed transparently in core activities consisting of: (1) manpower, (2) programs, (3) equipment and (4) schedules each governed by quality-time-cost parameters (attendance/costs/needs).
Detailed works and services can now be performed by workers in logical sequential workflows in Work Forms to attain efficiency and quality of performance.
Similarly, government can perform its tasks with transparency to keep tab on : (1) investment strategies, (2) industries and (3) schedules/jobs creation in production department supported by detailed work forms for mass participation and knowledge application (by civil servants).
There will then be coordination and knowledge applications by all instead of too much controls, and bureaucracy that only stifle growth, creativity and entrepreneurship.
TOTAL MANAGEMENT – COORDINATION AND KNOWLEDGE-BASED MANAGEMENT
In summary, tasks can be managed in logical work processes contained in: (1) administrative forms, - head office (2) department reports - operations (3) work forms - detailed works with openness, equity, accountability and transparency to produce results and good governance.
Note: copyright of Robert Teh Kok Hua. -
I am surprised that nobody really bothers about the type of transparency our PAP govt is practicing.
The Finance Ministry's reply has not touched on whether it is a fact as reported by S&P that our investment return is bad relative to HK's govt's management of reserves. Most likely it is true but they try to justify it by saying we have good "long term" investment strategy/plan.
You will find similar argument when they explain why PAP GRCs and SMCs town council have to raise fees as compared to opposition wards....they claim they have "prudent long term" financial planning! Everything could be explained away using the magic word "long term" but let's remind them what Keynsian said, in the long run, we all die.
Goh Meng Seng -
Temasek reports impressive returns
For the first time, holding firm details its performance over 30 years; for the year ended March 31, net profits were $7.4b
By Lee Su Shyan
SINGAPORE investment company Temasek Holdings has lifted its veil of secrecy by providing detailed figures on its financial performance to the public for the first time in its 30-year history.
In an eagerly-awaited 72-page annual report issued yesterday, it disclosed, among other things, that for the year to March 31 this year, net profits shot up to $7.4 billion from just $241 million a year earlier as the economic recovery kicked in.
The low figure for the year to March 31, 2003, was also partly caused by a $2.5 billion cut in the value of telecoms and power plant assets in its accounts that year.
Temasek, with controlling stakes in seven of Singapore's biggest companies including SingTel, DBS Group Holdings and Singapore Airlines, also gave figures stretching back 30 years to show the returns from its vast investment portfolio.
As at March 31 this year, Temasek's investments were worth $90 billion. Just over half were in Singapore, with the rest spread across Australia, India, Malaysia, Indonesia and the United States, among others, reflecting its recent push overseas.
Earlier this year, Temasek, set up in 1974, said that it would open its books to the public as 'part of our efforts to demystify Temasek and to be more transparent'.
It wanted to become more transparent given that it may sell bonds to the public for the first time to raise funds. Bonds offer investors a fixed rate of return.
Temasek's unprecedented disclosure reaped immediate rewards. Both the world's leading ratings agencies, Standard & Poor's and Moody's, yesterday gave it top ratings in terms of financial stability, AAA and Aaa.
In the report, Temasek stated the rate of return on its investments for the past 30 years, using a measure known as total shareholder return. This refers to how much the share price of Temasek's various companies have gone up, plus any dividends paid.
Over the past year, Temasek achieved a spectacular return of 46 per cent. And over the full 30 years since it was set up, its annual return was an impressive 18 per cent.
But in the intervening years, the return was weaker. Over the last 10 years, it was only 3 per cent, explained by events such as Sars and the 1997-98 Asian financial crisis.
Earlier this year, Temasek's executive director and chief executive, Ms Ho Ching, gave a hint of the strong performance when she said Temasek had posted annual returns of more than 16 per cent over the past 30 years, though using a slightly different measure.
While the report included details of its profits for the past three financial years, it also went beyond the numbers to give a picture of the company, detailing Temasek's strategy, profiling its senior management, and describing how it manages its risk.
In his chairman's statement, Mr S. Dhanabalan said: 'With a diversified industry portfolio of $90 billion today, Temasek is poised as an Asia investment company committed to delivering shareholder value as an active investor and shareholder.'
Temasek is interested in five areas: transportation and logistics; services such as banking and education; resources such as power, energy and water; pharmaceuticals and information technology; and lastly, small and promising companies.
Ang Mo Kio GRC MP Inderjit Singh said of the report: 'It's impressive and there is a lot of information. It's a good start as it gives Singaporeans visibility as to how well Temasek is doing.'
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WHAT YOU DIDN'T KNOW ABOUT TEMASEK:
TEMASEK manages a portfolio worth $90 billion.
Senior management includes 21 managing directors, each focusing on different areas such as strategic investments, private equity funds and strategic development.
Its 200 in-house staff are mostly young and fairly new to Temasek. Only 4 per cent are over 50 while 55 per cent are 35 and under. Nearly two-thirds have worked at Temasek for three years or less. Only 8 per cent have been with it for 10 years or more.
Across the 34 major Temasek-linked companies, 71 per cent of its directors are independent, that is, with no other ties to the companies they serve. And 15 per cent are non-Singaporean. Only 8 per cent are female and 7 per cent are from Temasek management.
Over the past two years, Temasek has invested $3.3 billion in 35 companies in Singapore, India, Indonesia, South Korea and Malaysia. In the same period, it sold off 36 investments for $1.6 billion at a profit of $765 million.
Half of its investments are in Singapore, the rest are in Australia, the US, Europe, Japan, India and Pakistan, China, Taiwan, South Korea and the Asean countries. -
Temasek gets top scores from S&P, Moody's
GLOBAL ratings agencies Standard & Poor's (S&P) and Moody's have given Temasek Holdings the thumbs up for its financial health, with both agencies awarding Temasek the highest possible rating and stating that its outlook was stable. -
Dear Barracuda,
Stop your spinning lah! That's amateurish! S&P and Moody's give Temasek triple A ratings not because it is a "great" company that could perform extraordinary well. It is simply because they see the amount of assets Temasek has. They are only interested in whether Temasek could repay loans or bonds. period.
I pick this article up from discuss Singapore. To me, what is more relevant is the not so distance past of performance by Temasek; the performance of past 10 years only manage to give returns of 3%? You could that "Top scores"? Hahahaha. This is especially so in contrast when remuneration & perks packages for those directors in the GLCs increase tremendously for the 10 years! Such mediocre performance, ST dares to boast about "Top Score"?
There is one comparison made against Govt owned companies in India; Temasek performed poorly in comparison. In fact, the 30 fold in profits for last year has nothing to boast about; selling assets away to boost revenue, what so difficult about that? What is more important are the dividends generated by those GLCs; are they delivering the goods? These are Temasek's long term lifeline!
So now, let's see what others have to say..
Goh Meng Seng
Dear All,
It seems that the 18% returns over the 30-yr period was artificially boosted by a one-off performance of 45% return in YR 2003.
Overall, it is really a NON-PERFORMANCE by Temasek.
rgds
kickapa wrote:
>>>But Mr Agarwal said Temasek underperformed listed non-state private
companies in Singapore, the top 50 Asian companies outside of Japan,
and state-owned companies in India and Malaysia during this period.<<<
What a smack on those million-dollar ministers!
>>>But corporate restructuring undertaken in the past two years by Ho
Ching, who was appointed Temasek executive director in May 2002,
appears to have sparked a turnround in the group's fortunes...
Net profits for the group rose 30-fold to S$7.4bn in the year to
March 2004, boosted by the sale of non-core assets, such as the sale
of a stake in Belgacom, the Belgian telephone group. Revenue climbed
by 14 per cent to S$56.5bn. <<<
Sounds more like creative accounting more than anything else.
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Singapore's secretive Temasek opens books
By John Burton in Singapore
Published: October 12 2004 11:54 | Last updated: October 12 2004 11:54
Temasek Holdings, the Singapore investment group, on Tuesday revealed
that its annual average shareholders' return over the last 10 years
amounted to only 3 per cent, although it produced a dramatically
improved 46 per cent return in the past financial year.
In its first annual report since its founding in 1974, the secretive
state agency said it had total assets of S$181bn, which would make it
Asia's largest conglomerate outside of Japan.
Temasek owns most of Singapore's leading companies, including
Singapore Airlines, Singapore Telecommunications, Singapore
Technologies, DBS Bank and port operator PSA.
"Temasek's performance in the past decade has been pretty mediocre,
very unimpressive," said Prabodh Agarwal, an analyst at with
brokerage CLSA in Singapore. "In spite of its reputation for having
well-managed companies, the figures do not support that."
But corporate restructuring undertaken in the past two years by Ho
Ching, who was appointed Temasek executive director in May 2002,
appears to have sparked a turnround in the group's fortunes.
Net profits for the group rose 30-fold to S$7.4bn in the year to
March 2004, boosted by the sale of non-core assets, such as the sale
of a stake in Belgacom, the Belgian telephone group. Revenue climbed
by 14 per cent to S$56.5bn.
The resulting increase in shareholder returns could ease questions
about the appointment of Ms Ho, who is the wife of Lee Hsien Loong,
the prime minister and finance minister.
Temasek said it had spent S$3.3bn on acquisitions in 35 countries
over the last two years and that nearly half of its portfolio is in
overseas investments, mostly in Australia and Asia. It plans to
reduce Singapore-based assets to a third of its total portfolio from
the current 52 per cent through more foreign acquisitions.
It recently bought minority stakes in India's ICICI Bank, South
Korea's Hana Bank and Telekom Malaysia as part of a regional focus on
banks and telecommunications.
Last year's profit jump was flattered by comparison with charges and
write-downs in 2002-2003 that depressed net earnings to S$241m.
Annual shareholders' return was 18 per cent over the past 30 years,
reflecting Singapore's strong growth in the 1970s and 1980s.
Temasek blamed its lacklustre performance in the last 10 years on the
Asian financial crisis, the September 11 terrorist attacks in the US
in 2001, the outbreak of severe acute respiratory syndrome in 2003,
the liberalisation of the Singapore telecommunications market and a
weak local property market.
But Mr Agarwal said Temasek underperformed listed non-state private
companies in Singapore, the top 50 Asian companies outside of Japan,
and state-owned companies in India and Malaysia during this period.
A sharp drop in the market value of SingTel, Singapore's largest
listed company in which Temasek has a 65 per cent stake, hurt
Temasek's performance, he said.
Plans to release an annual report were announced in February by Ms Ho
as part of a plan to develop Singapore's bond market, with Temasek
considering the issuance of a 25-year to 30-year bond.
Both Standard & Poor's and Moody's Investors Service, the
international ratings agencies, on Tuesday gave Temasek a triple A
credit rating.
Temasek has an "extremely strong financial position," said Paul
Coughlin, managing director of S&P Asia Pacific.
Temasek had total shareholder equity of S$64.5bn at the end of March
2004 and net debt of S$10.9bn.Originally posted by The Barracuda:
[b]Temasek gets top scores from S&P, Moody's
GLOBAL ratings agencies Standard & Poor's (S&P) and Moody's have given Temasek Holdings the thumbs up for its financial health, with both agencies awarding Temasek the highest possible rating and stating that its outlook was stable.[/b]