Temasek Holdings: transparency and accountability

Temasek's transparency won the organisation a perfect score on the Linaburg-Maduell Transparency Index and this is good news.

Transparency, however, is only one aspect of accountability. Corporate accountability calls for an independent board of directors which asks management tough questions about investment strategy and performance.

In Temasek's case, the board of directors comprises nine members, seven of whom have some nature of linkage with the Government. This is not necessarily a flaw per se.

Yet, others may argue that it inhibits their independence as directors. Consequently, the board's contribution to improving Temasek's corporate governance is reduced.

Certainly, one is conscious of the Government's desire to retain control over a strategic organisation such as Temasek. Nonetheless, there are approaches that may satisfy both board independence and government control.

The Ministry of Finance, Temasek's sole shareholder, should consider the structure of the California Public Employees' Retirement System (Calpers) board of directors.

Calpers, a body established by the state of California, has a 13-member board. Seven are appointed by the California government and six are elected independently. Thus, a board majority is retained by the Government.

Perhaps the Temasek board can be expanded in a similar manner. Seven directors appointed by the Government and six nominated by appropriate private sector bodies such as the Securities Investors Association (Singapore), Singapore Investment Banking Association and Association of Banks in Singapore.

It is useful to remember that all board members require the President's concurrence so any unacceptable nominees can be screened out.

Inducting significantly more independent private sector expertise into Temasek's board may not only improve its performance, but also sends a strong signal to Singaporeans that the Government and the people are in Temasek's investment journey together.

The above is the text of my letter published in the Straits Times on November 11, 2009 under the title, "Kudos to Temasek for transparency award - let's take it to next level."