Last Wednesday (8 May), Hougang SMC Member of Parliament (MP) Png Eng Huat asked Deputy Prime Minister and Minister for Finance, Heng Swee Keat, two questions on the remuneration given to key management staff at Singapore sovereign wealth funds, GIC and Temasek.
Specifically, the Workers’ Party MP had asked whether there is a “remuneration cap for key management staff of Fifth Schedule companies like GIC and Temasek” and what is the range of “total annual remuneration, including salary, annual and performance bonuses, paid to the top three higher paid executives in GIC and Temasek respectively” over the past five years.
Temasek is run by Prime Minister Lee Hsien Loong’s wife, Ho Ching, who has led the fund for the past 17 years, since 2002.
GIC is led by Lim Chow Kiat. PM Lee is the chairman of GIC’s board while Senior Minister Tharman Shanmugaratnam is the group’s Deputy Chairman. PAP heavyweights like DPM Heng Swee Keat, National Development Minister Lawrence Wong, Senior Minister Teo Chee Hean and former Minister for Trade and Industry Lim Hng Kiang are also directors at GIC.
Minister Lawrence Wong, who also serves as second minister for finance, answered Mr Png’s questions on behalf of DPM Heng who was not present.
Instead of revealing the remuneration cap and range of total annual remuneration for top executives at GIC and Temasek, Mr Wong replied that the “Government maintains an arms-length relationship with the companies and does not interfere in their operational decisions such as remuneration.”
Mr Wong would only say that remuneration at GIC and Temasek is based on performance and industry benchmarks. He added that the pay packages of staff at GIC and Temasek emphasises a prudent risk-taking culture as remuneration is also tied to long-term performance.
Revealing that the Government expects the boards of both entities to be accountable for their respective performances and to independently decide on staff remuneration, Mr Wong said that this “ensures that they can attract and retain capable people.”
He added: “Staff, including senior management, are rewarded for long-term sustained performance, rather than a focus on short-term gains.”
Dissatisfied, Mr Png pressed the Minister and asked: “These two entities are managing our reserves, and the Government is the sole shareholder. Usually, shareholders would know the remuneration packages for the companies they own.”
Instead of divulging the details Mr Png had asked for, the Minister responded that there is a system in place to determine compensation and that the performance of both entities in the past shows that this system works.
Mr Wong said that this system consists of a “thorough assessment” to determine long-term expected returns, instead of focusing on “one or two expense items” like remuneration. This assessment is then brought to the nation’s President who conducts an independent assessment with the aid of advisers.
Noting that GIC and Temasek’s returns can be found in their annual reports, Mr Wong said: “Ultimately, the Government evaluates the performance of the two entities based on their long-term returns, net of all expenses incurred.”
Last year, socio-political activist and blogger Leong Sze Hian questioned why Singapore sovereign wealth fund Temasek does not disclose its management costs like the salary it pays to its chief executive, like its peers in other nations such as Norway.
Mr Leong asked this question as he referred to a Bloomberg report that covered how Norway’s finance ministry rejected the nation’s wealth fund’s proposed cost ceiling, because of the fund’s rising management costs.
The news report made it clear that Norway’s sovereign wealth fund reports on the actual and projected management costs figures and that these figures are so transparent that the government can take the fund to task over it.
Pointing to this practice, Mr Leong noted that Temasek does not clearly post the management costs it incurs annually: “To the best of my knowledge, I understand that Temasek does not disclose its “management costs” (such as the CEO’s annual remuneration) like Norway’s SWF (sovereign wealth fund).”
Leong further noted that in 2017, it was reported that Temasek incurred “administrative expenses” of S$8.4 billion, against a net portfolio value of S$275 billion. The fund, however, has claimed that such expenses were not incurred by the fund alone, but represents the total “administrative expenses” of the fund and its subsidiaries.
Responding to an opposition party’s scrutiny over the high “administrative expenses” Temasek appeared to have incurred despite only employing about 400 employees in 2011, the group’s corporate affairs director Serena Khoo said: “This (administrative expenses) also included expenses of subsidiary companies such as Singapore Airlines, PSA, and others, and not for Temasek Holdings only.”
Questioning whether other sovereign wealth funds also include the expenses of subsidiaries in their “administrative expenses,” Leong called on Temasek to take a leaf out of the Norwegian national wealth fund’s book and disclose its management costs.
Singaporeans responding to Leong’s post expressed concern over the lack of transparency at sovereign wealth funds like Temasek: