20150628 Temasek CEO’s expected grand exit, undeserved oversized remuneration a burden to taxpayers

I refer to CNA’s “Temasek CEO Ho Ching takes 3-month sabbatical leave”, dated April 15.

There are reasons to believe the stage has been set for Ho Ching’s departure as well as to reward her with a gargantuan amount of tax dollars for her ‘leadership’ role and ‘contributions’.

Although Temasek has denied Ho’s sabbatical was linked to her departure, it had stated in 2009 that it had been “addressing succession planning annually since early 2005” ie 10 years ago. Temasek has already been searching the entire planet for 3,650 days for a successor and there’s no better time than now.

Time is of the essence and Ho, if she has learned her 2009 lesson with Chip Goodyear, would of course prefer to make her grand exit before the next financial crisis strikes.

It has been 6 years since Temasek’s flip-flop on its CEO appointment in 2009.

PAP’s record speaks for itself – top management staff have always been rewarded regardless of performance. A recent example would be SMRT which disclosed in its latest annual report that ex paper general CEO Desmond Kuek’s pay package ranges between $2.25 million and $2.49 million. This is double his 2012 (annualised) pay package of $1.22 million.

If Desmond’s remuneration could double after only 2 years on the job (OJT) and a still-overcrowded MRT, Ho Ching’s impending windfall must be $xx,xxx,xxx.

SMRT is only one of more than 50 Temasek-linked companies and as far as PAP is concerned, an undeserved colossal amount of bonus will go a long way to help maintain a bit of dignity.

We should also not forget Singtel CEO’s 19% pay raise last year for no rhyme or reason.

My take on Ho’s undeserved millions and how Temasek has been crediting her to justify her pay package.

1 In Temasek Review 2014 (pg 21), it has attempted to credit Ho for her investment ‘prowess’ by classifying investments into pre-2002 (before Ho became a director and ventured into Asia and beyond) and post-2002.

Without Ho’s leadership (pre 2002), Temasek delivered annualised returns of only 11%.
With Ho parachuted into Temasek (post 2002), “investments of a newer vintage” had annualised returns of 15%.

We are not talking about an additional 4% on our POSB balance but billions in wealth ‘created’ by Ho.

We are also reminded that Temasek’s “net portfolio value was up S$133 billion from S$90 billion 10 years ago,” (pg 11). And who created all this value??

If taxpayers were to reward Ho with a departure bonus for her ‘stellar’ performance, even a fraction of the billions she ‘earned’ for Temasek could easily amount to hundreds of millions.

Temasek’s figures are suspect and unless it provides details of all pre- and post-2002 investments, they should be taken with a pinch of salt.

2 In Temasek Review 2013, a year earlier, it had also credited Ho by disclosing its pre-2003 annualised return of 16% vs post-2003 (10-year period) 20%. link

2013 newer and older investments

Ho’s achievement – a mind-boggling 10-year 20% annualised (compounded) return in Singapore dollar! According to this calculator, a 20% return over a 10 year period translates into a six-fold increase in the investment value. The initial capital to increase the value of newer investments post-2003 to $117 billion was about $20 billion. (Temasek previously reinvested all its profits and dividends)

In Temasek Review 2012, pre-2002 annualised return was 11% vs post-2002 (10-year period) 18%.

2012 newer and older investments

Credit should be given where credit is due. But Ho headed Temasek at around the bottom of the business cycle during the SARS period. Asset prices were so low that Temasek’s portfolio had the same market value as in 1994, 10 years earlier. This accounts for the phenomenal 46% 1-year TSR in FY 2004.

If Chip Goodyear had stayed on as CEO when asset prices had bottomed in 2009, it would be giving him undue credit for the ‘wealth creation’.

3 But of course something is not quite right here. Temasek’s sister company, GIC, had managed to achieve only one third of Temasek’s annualised return during the same period ie its Sing dollar 10-year annualised return was less than 6.8% in 2013. (need to shave 2% to 3% off GIC’s rate of 8.8% in USD, link pg 2)

Hmm.. but how is this possible with PM Lee, five ministers, 2 ex ministers and an ex civil servant chief on GIC’s board? If Temasek’s figures are factual, CPF members should sign a petition to have our retirement savings managed by Temasek.

4 Investment for Idiots teaches one to buy low and sell high. But what Temasek has been doing is the exact opposite. (chart below) As asset prices increased, Temasek invested an increasing amount of our reserves. When stock markets tanked, Temasek organised a Great Singapore Sale.

In FY 2008 when stock markets were making new highs, Temasek was extremely bullish and committed a record NET $15 billion investment. When markets hit rock bottom, the following year, Temasek made a net $7 billion divestment.

Global asset prices were still cheap in FY 2010 and 2011 but Temasek’s net investments amounted to only $4 billion a year. A year before the crisis hit, when global asset prices were inflated, its net investments jumped to $11 billion in one year. Last year, 60 months after the stock market had bottomed out in 2009, Temasek reported a net investment of S$14 billion. If history repeats itself, the end of the current bull market should be around the corner.

Temasek should disclose details of its investments instead of regularly making wild claims.

If Ho could prove the 10-year 20% annualised return is factual, I am certain Singaporeans wouldn’t mind even a $1 billion bonus for her. And every blogger and commenter who have ridiculed her should apologise unconditionally.

5 Temasek seems to have been making most of its profits from local companies and not overseas investments.

Temasek’s group net profits since 2005

Temasek’s profit from major local investments.

Name Total % Shareholding Temasek’s
. Profit ($mil) 29 Profit ($mil)
DBS 3672 29 1064
SINGTEL 3652 52 1899
S TECH TELEMEDIA -38 100 -38
STATS CHIPPAC -47 84 -39
KEPPEL CORP 1846 20 369
NOL -76 65 -49
PSA 1425 100 1425
SEMBCORP IND 820 49 402
SIA 360 56 202
SMRT 62 54 33
Temasek’s Profit . . $6483 mil

Temasek’s profit from these 13 companies was $6.5 billion. Including other mostly-profitable local companies, Temasek earns about $7 billion or 63% of total profits locally. A complete? list of Temasek’s local investments here.

Temasek is totally transparent with local investments but why not foreign ones? If Ho’s miraculous 10-year 20% annualised return on its overseas investments is factual, why doesn’t Temasek disclose their details to the public?

6 What Temasek has been doing is selling our family jewels to raise funds for its overseas investments. Its high returns are misleading because they do not take into account the opportunity costs for selling our power generation companies, Singapore Pools (SP), etc.

Temasek had divested the following national assets as if they subsequently did not generate any revenue:
Tuas Power – S$4.235 billion (March 2008),
Senoko Power – S$4 billion (September 2008) and
PowerSeraya – S$3.8 billion (December 2008).

Temasek swopped our riskless utility companies and invested in risky overseas companies. When stock markets head north, credit goes to Temasek for its ‘foresight’ and judgement. Nothing is mentioned about its stupid mistakes when the reverse happens. Heads Temasek wins, tails Singaporeans lose.

7 Temasek sold SP to Tote Board, a stat board, in May 2004 (pg 4). SP was the most ‘pow chiak’ company in Temasek’s stable since 1980 and could have been run by any Singaporean of average intelligence. When it was ‘acquired’ by the government, rest assured Temasek would have demanded the highest amount of tax dollars to part with SP.

Temasek would have likely profited more than $10 billion from SP, including from its sale. If SP had continued to be in Temasek’s stable, it would have continued to generate regular profits.

Returns of post-2004 investments should not be seen in isolation but should take into account the opportunity cost. Unless Ho’s returns could beat SP’s, no credit should be given.

8 Out of its $11 billion profit, PSA contributed $1.425 billion or 13%. What’s really incredible is PSA’s revenue is only $4.7 billion which would mean costs were incredibly low at PSA. If PSA was competing without any government assistance, the profit to revenue ratio would have been similar to other private companies. Temasek’s TSR is high because of companies like PSA and it has little to do with having capable leaders.

Even with a revenue of $8.83 billion, almost double PSA’s, NOL had made a loss of $76 million because it is competing in the international arena. Other TLCs (transportation and industrials) had to generate much higher revenues but still made proportionately lower profits than PSA. Temasek’s TSR is high because of companies like PSA and EXTRAORDINARY government support, eg STATS ChipPAC, etc.

9 Just how EXTRAORDINARY is self-evident in the BSEP for SMRT and SBS Transit – the original $1.1 billion funding in 2012 is now expected to hit $2 billion after PAP further enhanced its enhancement programme.

To put ‘extraordinary’ into perspective, SMRT and SBS Transit paid out about $2 billion in dividends since 2001, the bulk of it going to …. Temasek. Heads Temasek wins, tails you know I know who lose.

Without government support, PSA would have made lower profits or maybe even losses.

Temasek’s performance has been boosted by huge amounts of tax dollars. Private sector remuneration should not apply the CEO of a holding company like Temasek.


In my humble opinion, plans are underway for Ho’s exit as well as recognition for her ‘contributions’. But it’s not the PGP sort of recognition.

Temasek has preferred to be opaque and its returns are unverifiable. This has led to its ridicule, online and offline. Members of the public feel that Ho does not deserve her oversized pay because individual companies are managed by individual CEOs.

With extraordinary support from the government, billions of tax dollars can be injected and rules of the game changed to prevent a TLC from making losses.

Ho’s oversized remuneration is a burden to taxpayers and it is also unearned, ie Temasek is a holding company receiving extraordinary government support and the government only transfers profitable national assets to Temasek.

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