CEO-DESIGNATE OF TEMASEK HOLDINGS

CEO-DESIGNATE OF TEMASEK HOLDINGS:

(Resignation): 1.

Mr Lim Biow Chuan asked the Minister for Finance (a) whether he will explain the reasons why the CEO-designate of Temasek Holdings resigned after such a short stint at the company despite assurances that he had been assessed to share the values of Temasek Holdings; and (b) whether Mr Goodyear was given a 'golden handshake' or paid any bonus or gratuity when Temasek Holdings agreed to his resignation.

2.

Mr Seah Kian Peng asked the Minister for Finance (a) what are the remuneration provisions that govern Mr Goodyear’s discontinuation of service as the CEO-designate of Temasek Holdings; and (b) whether there is a deadline for the search of a new CEO.

3.

Mr Low Thia Khiang asked the Minister for Finance (a) what strategic differences emerged between Temasek Holdings CEO-designate Mr Charles Goodyear and the Temasek Board which led to the decision not to proceed with his appointment as CEO and when did these first surface; and (b) whether the Government is concerned about leadership

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renewal at Temasek Holdings in view of this development.

The Minister for Finance (Mr Tharman Shanmugaratnam): Mr Speaker, Sir, may I take Question Nos. 1 to 3 together?

Mr Speaker: Yes.

Mr Tharman Shanmugaratnam: Temasek’s Board has issued a carefully considered statement on the mutual decision that the Board and Mr Charles Goodyear have taken to terminate the leadership transition process at Temasek. It would not be appropriate for the Government to add to the statement, bearing in mind that the Government had no role in the decision of the Board and Mr Goodyear not to continue with the CEO transition. Temasek informed the Government of the decision before it was announced, but the Government was not involved in any way in the decision.

This does not mean that the Government is a disinterested observer of Temasek’s leadership succession. As shareholder of Temasek, the Government has a clear interest in Temasek continuing to have strong leadership, so that it can deliver good returns over the long term. However, the Government does not directly manage the process of CEO succession. To do so would be to make the appointment of the CEO a political decision, which it must never be. The decision must remain the responsibility of the Board of Temasek, which oversees the process of leadership succession and decides based on the merits and suitability of any CEO candidate.

Temasek’s Board and current CEO Ms Ho Ching had set about the process of CEO succession review since 2005 not because there was an urgent need to find a new CEO, but because a disciplined system of regular succession planning for its CEO and senior management is essential for Temasek’s future as a

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professional organisation. It was through this process that Temasek had found Mr Goodyear to be a suitable CEO successor and made the offer for him to join Temasek. While it is obviously unfortunate that the Board and Mr Goodyear decided that the leadership transition should be terminated, Temasek intends to keep up its processes for CEO succession review and planning as part of Board discipline.

Temasek’s leadership remains strong, at both the CEO and Board level. They have enabled Temasek to sustain its generally superior overall investment performance over the years, including over the last cycle in global markets that began in 2003. The Board will continue to review succession options, and the Government is confident that it will make its decision to appoint a successor CEO in the best interest of Temasek when a suitable candidate is available and ready. Thus, with regard to Mr Seah Kian Peng’s question, Temasek has no deadline for the search for a CEO successor.

Mr Lim Biow Chuan and Mr Seah Kian Peng also asked if a severance bonus or “golden handshake” was offered to Mr Goodyear. Temasek had no contractual obligation to make any compensation to Mr Goodyear on separation. It was an amicable separation, based on mutual agreement.

Mr Lim Biow Chuan (Marine Parade): Thank you, Minister, for your answer. In my last Parliamentary Question (PQ) a couple of months back, I asked the Minister why pick a foreigner as a CEO for Temasek Holdings, considering that Temasek Holdings is a strategic asset and a Fifth Schedule company under the Constitution. And the Minister had assured this House that the CEO shares Temasek's values, and he is aligned with the long-term orientation of Temasek. May I just ask the Minister how does this impact the Government's evaluation of

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Temasek's future recommendation, regarding the assessment of the next CEO, considering that they had assured the Minister that Mr Goodyear shares Temasek's values and is aligned with the long-term orientation? Next question is, does the Government not think that a Singaporean CEO would be in a better position to share Temasek's values and be more aligned with Temasek's long-term orientation?

Mr Tharman Shanmugaratnam: I think Mr Lim Biow Chuan was referring to the question he had asked in March this year, which my colleague Mrs Lim Hwee Hua had answered. The question of whether the CEO of Temasek should be a Singaporean is not a trivial one. It is one which the Cabinet considered very carefully and debated on before arriving at a decision. I would say that, ideally, we should have a Singaporean as a CEO – that is the ideal. Everything else being equal, when you look at two candidates who are equally suitable for the job, I think we should prefer to have a Singaporean.

But Temasek is not a typical company. It is a very large company and a rather complex one, as has happened over time. It is now engaged in many regions, geographically, and in many sectors. It is much broader in its sectoral reach than it used to be. It is not just a steward of Singapore's TLCs (Temasek-linked Companies). So it has really been transformed very substantially over the years. So we really want someone as CEO, and we want enough people on the Board, with direct experience of managing global operations – ideally not just the operations of an investment company but someone having operating experience.

Quite frankly, the field at any point in time is always narrow – among Singaporeans, as well as among

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foreigners. Even among foreigners, to find someone who is willing to come to Singapore and work for a Singapore Government-related organisation is not easy. So I would prefer, and the Government's position is that it would prefer, not to restrict Temasek in its choice of CEO. The ideal is not always possible.

What is critical is that the Board remains in the control of Singaporeans – the Chairman has to be Singaporean; Deputy Chairman, a Singaporean; majority of the Board, Singaporean. But we should allow for a few foreigners and indeed, we currently have at least one foreigner on the Board. Let the Board decide on who the best candidate is for CEO. The Board knows our preferences but it knows also that the Government wants to ensure that Temasek gets the best person for the job each time it looks for a potential CEO successor. And we are not just talking about the current situation of the search for a CEO successor but also the situation well down the road. This is about managing a complex, large investment organisation – large in terms of its portfolio – in the best interests of Temasek and Singapore. We should not restrict their choices. To restrict their choices would also be sending a signal – not just to Singaporeans but more importantly to the countries which Temasek invests in – that there is an element of political decision-making in the way Temasek is run. We do not want to send that signal.

So it is a fair question and we had considered it very carefully within Government when the issue of Mr Goodyear came up earlier in the year. That was the only issue we considered because the Government did not know Mr Goodyear. We were not responsible for nominating him. We had to consider whether we were comfortable with Temasek appointing a foreigner. We decided we should not restrict Temasek

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from appointing a foreigner. If the Board's assessment was that Mr Goodyear was suitable and ready, we were willing to put his name to the President for concurrence. But the key issue on which Cabinet deliberated was whether we should allow for a foreigner and it was not a trivial issue.

Mr Low Thia Khiang (Hougang): Sir, my first supplementary question is a follow up on Mr Lim Biow Chuan's question on the Government's position on Mr Goodyear. He was identified in 2007 and I understand that the Government found he shared Temasek's values and was committed to building long-term sustainable value. Why has the issue of strategic difference suddenly emerged and resulted in his departure? Was this an error of judgement made by the Board when they interviewed him? My second supplementary question is, does the Minister not agree that the appointment of the CEO of Temasek is a matter of public interest? By saying that it is not appropriate for the Government to add further to the statement by Temasek nor be involved in the Temasek decision, it leaves the Singaporean public in the dark. Would the Government consider asking Temasek or the CEO of Temasek to reveal more information on the issue? Is it good to leave Singaporeans in the dark and let them continue to speculate on what happened?

Mr Tharman Shanmugaratnam: I think Mr Low Thia Khiang has rightly pointed out that at the point when Mr Goodyear was selected, he was assessed not just on the basis of his career track record but also on the basis of interviews of the Board members with Mr Goodyear and cross-checking with other sources – Chairmen or board members of previous companies he had worked with. The assessment was reached that he also shared the basic values of Temasek. I have no reason to doubt that even after this recent episode, the Board remains

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unchanged in its views that he shared the basic values of Temasek – building long-term sustainable value, not just going for a quick turn of profit; commitment to maintaining a globally-diversified portfolio; commitment to the basic geographical stance of Temasek.

Points of disagreement between management and the Board, or even amongst management, are not just about basic values. There are many possible points of disagreement – some can be serious, some can be minor. I think it is fortunate that Temasek had, together with Mr Goodyear, provided for this transition period. It was a good idea to have a transition period for both sides to work into the relationship and find out more about each other's thinking, think through future possible strategies and make sure they were aligned. It is unfortunate that it did not work out but it is fortunate that they both realised this early, during the transition period. I think we should look forward now.

On the second half of the Member's question – I know where the Member is coming from. It is a matter of public interest who the CEO of Temasek is, just like other prominent public positions in Singapore. But we have to find the right dispensation between Government and Temasek; Parliament and Temasek. Our approach has been to go for ample disclosure of investment performance, investment strategies and the distribution of the investment portfolio. And frankly, if you look at the Temasek annual Review and compare it with many comparable institutions, it has far more disclosure, as an objective matter. In fact, it has insisted on having far more disclosure. For instance, on investment returns – not all Members would have had the opportunity to go through the Temasek Review – it reveals annual returns and the value of the whole portfolio on a one-year, two-year, three-year, five-year, 10-year, 30-year basis, both by market value as well

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as shareholder funds, plus full income statements, balance sheets – all fully audited. So it goes for full disclosure. In fact, it is more than most comparable organisations.

Internal governance is a matter for the Board to oversee. The key task of the Government is to make sure we are comfortable with the people on the Board, so that they can be entrusted with the responsibility of running the organisation well. Once the Government starts intruding, with the best of intentions; once for that matter Parliament starts intruding with the best of intentions as well as just out of interest in what goes on in Temasek, then we are, over time, changing the character of the relationship between Government and Temasek. It is a relationship that clearly designates Temasek as independent of Government in its operations, including its internal governance procedures. The rest of the world must understand that. Temasek is accountable to the Government, like GIC for that matter, to deliver good, sustainable returns. That is what we hold them accountable for. That is what we have extensive dialogue with them on, not just once a year but through the course of the year. That is what the President looks at very carefully. But we want it to be clear that this is an independently-managed organisation, independent of Government interference. I am not keen to change that dispensation, that balance, because it may tip against the interests of Temasek and against our interests, ultimately, as stakeholders. Keep it as an independent organisation, hold it accountable and up to scrutiny on its performance, particularly over appropriate periods of time. As you know, we have had a healthy debate in Parliament not just on long-term periods, but even short-term periods – which is understandable given the nature of the global crisis we went through in the last couple of years.

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So I would rather keep to that dispensation. It is not untransparent, it is more transparent than most on matters that really concern us ultimately – investment performance, being accountable for long-term sustainable returns.

Mr Seah Kian Peng (Marine Parade): I just want to ask the Minister two supplementary questions. In the spirit of greater disclosure, I would assume that with Mr Goodyear's departure there would be some changes in the search criteria for the next CEO. I would like to suggest to make public, both from the Government's perspective and Temasek's perspective, these new search criteria or the prerequisites for the next CEO of Temasek. My second supplementary question relates to the Minister's comments that there is no timeline for this search. I would like to suggest that surely the search for a CEO is an important one. And timeline is necessary because targets drive action. So I would suggest that this be reviewed.

Mr Tharman Shanmugaratnam: Sir, the Member's first question, in essence, is very similar to Mr Low Thia Khiang's question. I would prefer that internal governance matters continue to be overseen by the Board. The Board will, I am sure, reflect on this recent episode to see whether improvements could be made. And I trust that it will make refinements, where possible. But, on the face of it, this was not a situation of a faulty selection process. This was a situation which both parties realised would not work out well only after working together in the transition process. And sometimes, quite frankly, this happens. It is never desirable but it is not rare in the private sector for CEOs not to work out, typically after being on the job. It is not rare, never desirable, always unfortunate, and always something which boards should try to learn lessons from.

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On the Member's second question, basically, if I can put it squarely, there were no push factors for the current CEO to want to step down. There was no push factor in terms of the way the organisation was being run, no push factor in terms of the performance of Temasek over relevant periods of time compared to the markets or compared to comparable organisations. Temasek has, on objective reckoning, done rather well since 2003, exceeding most comparable organisations. So it was not a push factor. It was part of a Board discipline that they imposed on themselves, which the Government supports – go for regular succession planning for all your key management posts, not just the CEO but other senior management posts. And if someone whom you find suitable is available, which is not often, take that very seriously. It is a discipline that they impose on themselves and which they intend to continue. How quickly they find a CEO successor will depend on whether the right person is available.

Mr Inderjit Singh (Ang Mo Kio: ): Sir, this issue of succession planning, and then the reversal, has created a bit of a dent in the reputation of Temasek and indirectly the reputation of Singapore, because they link the Government to whatever decisions Temasek makes. While the Minister does not want Temasek to share the search criteria with everyone but, as a shareholder, will the Minister require the Board to clarify the process with him, so that we do not make another embarrassing decision in the future?

My second question is the "golden handshake". While Temasek did not have a contractual obligation, was there a goodwill payment? I think people want to know whether a payment was made.

Mr Tharman Shanmugaratnam: Sir, on the second question, there was not.

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On the first question of whether it is a dent in the reputation, it is a dent in the reputation. It is a very visible dent in the fender; no damage to body parts, no damage to the axle, no damage to the engine.

Mr Low Thia Khiang: Sir, on my first supplementary question, the Minister's answer was that the Government should not intrude into Temasek's affairs. I am simply asking for information on Temasek. What is the strategic difference? When did it emerge? I am not asking the Government to intrude into Temasek's affairs.

My second supplementary question arises from the concern of Mr Goodyear. All Singaporeans know next to nothing about Temasek. We now have a foreigner who has actually gone deep enough into that company with probably inside information or even state secrets. How does the Government ensure that Mr Goodyear will not divulge such information? And how does the Government ensure that he will be bound by the Official Secrets Act? We all know that the Official Secrets Act is hard to enforce on someone outside Singapore.

Mr Tharman Shanmugaratnam: Sir, on his first question, let me repeat what I said earlier. The Board, together with Mr Goodyear, issued a carefully crafted statement. Both sides agreed on the statement, and I really do not think it is advisable for the Government to comment further on the matter to add grist to the mill. There is a reason why they crafted the statement as they did – words were carefully chosen.

People do want to know. There is curiosity, it is a matter of public interest. But that is not sufficient reason to disclose information. It is not sufficient that there be curiosity and interest, that you want to disclose information. And this applies to private sector organisations

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as well. It applies to publicly listed companies. Sometimes they disclose the reasons, sometimes they do not. It depends on the circumstances of departure. Is it mutual? Is it amicable? Is there an understanding between the parties as to what should be kept private and what should be made public? I think it is fairly clear what I am saying in this regard. It will not be advisable, and it is not in the interests of Temasek or Mr Goodyear, for us to have to comment further on it. It serves no strategic purpose. I understand the interest but it serves no strategic purpose.

On his second question, we discussed it earlier as well in Parliament. I cannot remember when it was. I think Ms Sylvia Lim had raised the question. Anyone who is a CEO, or for that matter senior management of Temasek, has access to proprietary information. Sometimes people leave. There is clearly a code of conduct on the part of departing management as to what they should keep private. There is not much Official Secrets Act information in Temasek, as distinct from proprietary information. The main thing that we are very guarded about is the size of our reserves – not Temasek's assets because that is fully published, with many slices of that data as well being published. But the size of GIC-managed assets is not published, and that would not have been accessible to Mr Goodyear or to other senior management in Temasek. So there is not much information that is critical to Government that is within the Temasek fold. But there is proprietary information. Had Mr Goodyear stayed on for a few years, he would have had the same proprietary information as other senior management. And that is always the risk you take with people coming and going, be they Singaporeans or foreigners. That does not fall under the Official Secrets Act. That is proprietary company

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information. That is the risk you take with any candidate.