Lee Hsien Loong

The civil suit against the Workers Party MPs, Low Thia Kiang, Sylvia Lim and Pritam Singh and the shareholders of FMSS will wrap up in January and February next year with closing submissions by the Plaintiffs, the Aljunied Hougang Town Council (AHTC) and the Pasir Ris Punggol Town Council, and the Defendants. Given the admissions by the Defendants,  the probability of a scenario in which the Defendants are ordered to pay back most of the $33 million that FMSS was paid as managing agent has increased significantly.

I would like to say straight off that I have no axe to grind against either Sylvia or Pritam, both of whom are nice people, other than the disservice they do to the cause of democracy in Singapore. However I would not disagree if the Courts finds in favour of the Plaintiffs. Appointing your friends and relatives without independently evaluating other candidates or companies or carrying out a tender, even if those friends and cronies are qualified to do the job, is a breach of fiduciary duty  and the very definition of cronyism.

However there cannot be one standard for one person, family or group, and a different standard for another person, family or group because they are above the law and normal standards of accountability do not apply. If that happens then clearly there is no rule of law and the system is corrupt.

So how then can PM Lee get away with appointing his wife to be head of Temasek while at the same time WP are prosecuted for appointing their friends to run the Town Council? Of course the PM will say that he did not appoint his wife and that she rose purely through merit up the ranks, starting off as an engineer with Mindef after graduation. After her prudent decision to get married to Lee Hsien Loong in 1985 her career path definitely assumed a more vertical trajectory, like her husband’s. She joined Singapore Technologies as Director of Engineering before becoming President and CEO of Singapore Technologies in 1997. She joined Temasek as Executive Director in 2002 and then, suspiciously, 11 days before her husband became PM on 12 August 2004, she was appointed as CEO of Temasek.

Of course Lee Hsien Loong did not appoint his wife directly. The board of Temasek appointed her. Temasek says on its website that:

“Our shareholder’s [the Ministry of Finance] right under the Singapore Companies Act to appoint, reappoint or remove our Board members is subject to the President’s concurrence. The Board’s appointment or removal of the CEO is also subject to the President’s concurrence. These constraints are part of the “second key” concept, to safeguard the integrity of our Board and CEO in protecting Temasek’s past reserves.”

However as we know the President is a puppet who can be removed from office on a 2/3s vote of Parliament. When the PM is threatened by the election of someone who might provide the smallest shred of opposition to his wishes, he changes the rules as he did to ensure Halimah Yaacob was elected instead of  Dr. Tan Cheng Bock.

The Board of Temasek is similarly made up of people who are either ex-PAP ministers, MPs, civil servants and executives of GLCs with a few crony capitalists such as Philip Ng, whose property business depends on keeping on the right side of the PM, and a sprinkling of foreign CEOs and investors who would not wish to jeopardise the the tax benefits their investments in Singapore enjoy. I wrote about this in 2012 in “A Case of the Pot Calling the Kettle Black?”  All of these people, who are dependent on the PAP Government and the PM for patronage, would not stand in the way of his wife’s appointment. Was Ho Ching the obvious choice to helm Temasek? Her Wikipedia entry says she has a First Class Honours Degree in Engineering and was one of the top A level students in her year. But there must be thousands of others just in Singapore who have the same or better qualifications. She never worked in finance and therefore would not seem the obvious choice to oversee an investment company.

Nor would it be a defence to argue that Ho Ching had done a good job, or at least a competent one, as CEO of Temasek. WP have sought to defend themselves by saying that FMSS did not charge any more than the previous managing agents of AHTC and that they did a more-or-less competent job. However what matters is not whether the person or company did a good job but whether the MPs breached their fiduciary duty to the residents by not ensuring that they got the best possible value by putting the contract out to tender.

But even that defence is not available to Ho Ching. Her performance as CEO has been mediocre at best, disastrous at worst, over the fifteen years she has been allowed to remain at the helm.Temasek’s claimed 15% annualised return over the last forty years is a fraud since as I have written repeatedly since 2012, it depends on the fact that Temasek’s legacy assets were injected at below book value by the Ministry of Finance which produced enormous gains when the companies were subsequently floated.  We have no insight into how Temasek is really doing since it is under no obligation to publish accounts. About 40% of its portfolio is unlisted assets where valuations are often determined by the last price paid even where the buyer is the fund owning the asset.  Even on its own figures, Temasek’s average annualised return over the last ten years is only 5% p.a or just over 60% compounded. Over the same period the S&P500 has tripled, or an annualised return of a little under 12%. Along the way we have have had astonishing errors of judgement such as the decision to buy out Olam’s equity at a high price when the equity was probably worthless (see my articles on the subject in the links below).

In 2009, after Temasek suffered a loss of at least 40% in the financial crisis,  there was the charade of hiring Chip Goodyear as a successor to Ho Ching, who then left abruptly before taking over with an undisclosed payoff in return for a Non-Disclosure Agreement. In Parliament then Finance Minister Tharman famously refused to disclose why he left and what his payoff was.  In his last year as CEO of BHP Billiton he earned in excess of S$50 million. I suspect that this was nothing more than an elaborate benchmarking exercise to justify hiking Ho Ching’s compensation. I have long said that she probably earns in excess of S$100 million p.a. and possibly much more in the form of long-term incentive plans. Why did the Temasek Board not look for other better qualified candidates rather than taking the decision to reappoint Ho Ching?

So if WP are found guilty of breaching their fiduciary duty by not carrying out a tender before appointing FMSS and ordered to pay back all the payments made to FMSS, then surely the Board of Temasek should also be sued for not considering other much better qualified candidates when they appointed Ho Ching, presumably with her husband’s blessing. Like everything the PAP and their cronies help themselves to in Singapore, the justification is always that it is based on “meritocracy”, when what they really mean is “mediocrity”.

The Board  have a duty to disclose to Singaporeans who they considered for the role when Ho Ching was appointed and also whether they have ever considered replacing her with someone more able.  Since the Temasek Board is ultimately appointed by the PM and the Cabinet then the PM and his wife can and should be made parties to the suit.

This is why the PM is determined to ensure that no details of his wife’s compensation are ever made public. I promise that I will continue to press for full transparency, whether outside or inside Parliament. How  did we get such a high rating for incorruptibility (6th= and higher than either the UK or the US) according to Transparency International? We are worse than countries much lower on the index At least when the Turkish strongman, Erdogan appointed his son-in-law to be head of the central bank, there was an outcry. In Singapore any questions about the rightness of appointing family members and relatives to lucrative positions are drowned out by threats of defamation suits and cries of “meritocracy” as an explanation for the most blatant cronyism.

Links

Questions for the Prime Minister’s Wife on Temasek’s Olam Acquisition

Temasek Loses the Plot

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam