PAYMENT TO MR JOHN OLDS AND MR NG KEE CHOE (Justification)

Mr J. B. Jeyaretnam asked the Senior Minister if he will explain why he justifies the payment of $10.9 million in the year 2000 to Mr John Olds, former CEO of the Development Bank of Singapore (DBS) and to ex-DBS President, Mr Ng Kee Choe.

The Second Minister for Finance (Mr Lim Hng Kiang) (for the Senior Minister): Mr Deputy Speaker, Sir, the Singapore banks and companies have entered a totally new phase. They are no longer competing in a domestic market, against domestic competitors, and not even in the immediate regional market. They either make it against global players, whether in the Singapore, Asian and global markets, or they get marginalised. If they do not provide customers with quality products and services, equal to the best international players, they lose the business. The banks could rely for many years on protection against their competitors. This will not be possible for much longer. So like other Singapore companies, if they cannot compete with the best they will end up as marginal players, both in Singapore and abroad. They will not grow, shareholders will dump their shares, and they will not be able to provide jobs and add value to the Singapore economy.

Singapore companies will only be able to compete with the best international players if they have the talent and management systems to equal the best. This means paying global rates to attract and retain talent, not rates we want to set for ourselves. We do not set the salary scales for top talent, not even for Singaporean top talent. These salary scales are set in New York, London, Silicon Valley, and wherever else global companies hire their staff. It is a global market for talent.

Many talented Singaporeans are hired by global firms the moment they graduate, sometimes even before they graduate. The best Singaporean executives are being hired with packages that match their counterparts in developed markets. Local companies will not attract the best Singaporean talent if they pay less than their international competitors.

Neither can we restrict ourselves to Singapore talent if we want to build world-class companies and banks. We would be fooling ourselves to think so. Few Singaporean executives have had experience at the senior levels of a globally competitive bank, let alone run a major regional bank. Few have made a name for themselves in the most competitive financial centres like London and New York, and none have reached the top.

Singapore companies and banks therefore have to do what it takes to attract the best talent, local and foreign, and get them to work together in a team. If they deliver, they have to be rewarded. If they do not, they will either be replaced or have to accept reduced compensation.

The Government does not decide what DBS pays its executives. DBS does not seek Government approval on how it is run or what it pays its executives. It does so on a commercial basis and is answerable to all shareholders, including minority shareholders. But the Government, as a shareholder of DBS, has had no reason to complain about the salaries DBS pays out to its top executives based on their performance. The Government is satisfied to leave these commercial judgments to the Board of DBS.

DBS has stated that it rewards its staff when they achieve pre-set targets. 65% of the compensation paid to John Olds and Ng Kee Choe in 2000 was in the form of performance bonuses. They were paid these bonuses largely because they met their targets. Ng Kee Choe's compensation also included his 31 years' retirement gratuity scheme, which was commuted and made as a one-off payment in 2000. As for John Olds, DBS has stated that he had established a clear vision, guided the development of internal changes in systems and processes that improved the bank's financial performance, helped attract world-class talent at all levels, and laid a strong foundation for future growth.

Sir, we are in a new global market environment. We either go with the market, and bring in the best talent to help us compete, or we drop out and accept a mediocre future. Without top talent, we will not be able to build world-class companies that all Singaporeans can be proud of and benefit from. Singaporeans cannot afford to resent the remuneration packages that the top performers in banking, the professions and industry receive. The size of their remuneration is insignificant when measured against the value they create for shareholders, and the jobs and wages that successful Singapore companies will generate.

The competition for top talent is intense. If we are not prepared to pay, we will not get the best people, and not even the second best. They will go elsewhere. So if we work up public opinion against the high rewards that the top performers get, our companies are not going to make it, and Singapore is not going to make it.

Mr Jeyaretnam: Sir, in answer to a specific question, we have had the Minister go into a lot of generalities.

Mr Deputy Speaker: Can you ask your question, please?

Mr Jeyaretnam: Sir, as I now understand it, the payment to Mr Olds was compensation or gratuity, and not salary for the year 2000. If it was gratuity or compensation, may I ask whether there was any term in the contract of employment with him for the payment of gratuity, how long was he employed for, and why did he leave?

Mr Lim Hng Kiang: Sir, I thought I spoke quite clearly. For Mr John Olds, the payment in the year 2000 was largely in the form of performance bonuses for what he set out to achieve, a set of performance targets set up by the bank and the board. He exceeded these targets and the bank paid him accordingly. For Mr Ng Kee Choe, a significant portion of the payment in the year 2000 was his gratuity which was commuted into a one-off payment for 31 years of service.

Mr Jeyaretnam: Will the Minister please answer my questions? Has he got the contract between Mr Olds and the bank when he was first brought out here? Was there a term for the payment of a gratuity or compensation? And, if so, what were the terms? Could we have answers to these questions?

Mr Lim Hng Kiang: Sir, I thought I have already made myself clear. Mr John Olds was brought here on a term contract. He was paid a compensation package which includes a significant part in performance bonuses. The one who received the commuted gratuity for 31 years of service is Mr Ng Kee Choe, not Mr John Olds.