Background and Context of Temasek Charter 2009
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Background and Context of Temasek Charter 2009 A Modest Beginning 1 Temasek Holdings was incorporated in 1974 as a private investment company by the Government of Singapore to separately hold and manage investments in companies, start-ups and joint-ventures. This is to provide a commercial focus through a clear structure of responsibility and accountability. 2 Several of Temasek’s successful portfolio companies have their roots in the history of Singapore’s modern economy. For instance, Singapore Airlines was formed through the de-merger of Malaysia-Singapore Airlines after Singapore’s separation from Malaysia in 1965, and SembCorp Marine evolved from the commercialisation of the naval dockyard facilities left by the British when they withdrew their forces from the Far East in 1971. In each case, the goals were to develop economically viable businesses on a sound commercial footing, to create and retain jobs, and to contribute to Singapore’s economic survival, progress and prosperity. 3 Over the years, Temasek has divested many of its initial holdings, listed several successful companies, and expanded its portfolio to cover a diverse range of blue chip Singapore, Asian and global companies, as well as promising emerging businesses. 4 The success of Temasek as well as many of its portfolio companies is anchored in a culture of integrity, meritocracy and excellence. A Robust and Comprehensive Governance Framework 5 A sound framework of governance founded on integrity, professional management and commercial discipline has been and will continue to be the cornerstone for the growth and success of Temasek and its portfolio companies. 6 Like the board members of all companies incorporated under the Singapore Companies Act, the Board directors of Temasek have a fiduciary duty to ensure the proper governance and management of their company. A Broad Base of Stakeholders 7 Companies do not exist in isolation. They are part of the socio-economic fabric with a responsibility towards society and the broader citizenry. Their success is derived from the support of the community, of their partners and customers, Page 1 of 5 Background and Context of Temasek Charter 2009 and of governments and regulators, who provide a conducive environment for growth and stability. In turn, companies can play a constructive role to support the well-being and progress of their community. 8 Temasek is a commercially-driven investment company and is responsible to its sole shareholder, the Singapore Government, for delivering sustainable long-term returns. As a Fifth Schedule company under the Singapore Constitution, Temasek is also responsible to the President of Singapore for the protection of Temasek’s past reserves. 9 Temasek is a responsible corporate citizen. It continues to work in good faith with its various stakeholders to foster responsible growth and stability for a shared future of opportunities and well-being. 10 Temasek’s broad base of stakeholders includes its shareholder, its institutional and other bondholders, its fellow shareholders and partners in companies, funds and joint ventures, its portfolio companies and their boards and management. It also includes Temasek’s employees, Temasek Trust and other non-profit philanthropic beneficiaries such as Temasek Foundation and Temasek Cares, the governments, authorities and regulators of the markets in which Temasek has investments, and the wider community. Relating to the President of Singapore 11 As the Singapore Government’s investment in Temasek forms part of the nation’s assets and Temasek has grown significantly over the years, it was designated a Fifth Schedule Company under the Singapore Constitution in 1991. This Fifth Schedule status for Temasek provides for the President of the Republic of Singapore, elected directly by the citizens of Singapore and acting in his discretion and independently of the Government of Singapore, to exercise certain powers over the Board and Chief Executive Officer (CEO) appointments and the operating budget of Temasek, as part of the President’s constitutional role to safeguard the integrity of key appointments and institutions and to protect the past reserves of the nation. 12 To ensure that the Board members and CEO are men and women of high integrity who will guide and manage Temasek professionally, the President’s concurrence is required for the appointment or removal of Board members and its CEO. Renewal of Board membership is also subject to the concurrence of the President. Page 2 of 5 Background and Context of Temasek Charter 2009 13 In addition, the Board of Temasek is required to ensure that Temasek’s annual operating budget or any proposed transaction does not draw on Temasek’s past reserves. The Chairman and CEO are required to report to the President every half year on the position of Temasek’s reserves. The President’s approval is needed for any transaction which may draw on the past reserves of Temasek. 14 The President of Singapore is not involved in the operations or business decisions of Temasek. Relating to Temasek’s Shareholder 15 Temasek is a professionally and independently managed investment company wholly owned by the Singapore Government through the Minister for Finance (Incorporated). It has the mandate to operate as an independent investment company to create and deliver sustainable long-term shareholder value. 16 Just as Temasek’s portfolio companies are accountable to Temasek and its fellow shareholders for their performance and results, Temasek is in turn accountable to its own shareholder for its performance and results. 17 Temasek is audited by international audit firms, and provides audited annual financial reports and periodic updates to its shareholder. 18 Temasek is a commercially managed investment company. In its business and strategic direction, Temasek is independently guided by its Board of Directors, with its investment, divestment and other business decisions taken by its Board and/or management. 19 The Singapore Government, as shareholder, does not involve itself in the operations and business decisions of Temasek. Neither does the Government direct or influence the investment or divestment decisions of Temasek. 20 Temasek manages the assets it owns. It does so independently of, and plays no role in, the management of Singapore’s official foreign reserves and other Government reserves. Relating to Temasek’s Portfolio Companies 21 Companies in Temasek’s portfolio are managed by their respective managements, under the guidance of their boards of directors. Their long-term success depends on their commitment to develop human capital, foster a strong culture of excellence and integrity, build sustainable competitive Page 3 of 5 Background and Context of Temasek Charter 2009 advantages, and maximise long-term shareholder returns, while acting as responsible corporate citizens. 22 Temasek places significant weight on the quality, competence, effectiveness and independence of the boards to guide its portfolio companies. They are instrumental in providing sound strategic directions and guidance to management, for instituting talent management and leadership review and succession planning, and for fostering sound corporate values of integrity, meritocracy and excellence. 23 These boards are accountable to all their shareholders in accordance with the relevant legislation or listing regulations in the respective jurisdictions. Temasek does not involve itself in the day-to-day commercial decisions or business operations of its portfolio companies. 24 As an active and constructive shareholder, Temasek will exercise its rights as a shareholder to help create sustainable value in a fair and equitable manner in accordance with the laws and regulations governing businesses and companies. Relating to the Community 25 Temasek has long been a contributor to the community in many ways. 26 Temasek decided in 2003 to put aside a share of the economic profit or positive wealth added that it has achieved each year for community purposes. This commitment was formalised with the launch of the Temasek Trust in 2007 with an initial endowment of S$500 million. Future contributions will depend on Temasek achieving positive wealth added. 27 Beneficiaries include non-profit philanthropic organisations such as the Temasek Foundation for building people and building bridges between peoples, the Singapore Millennium Foundation for research and education, the Singapore Technologies Endowment Program for exchange programs and the Temasek Life Sciences Laboratory for life science research. 28 In addition, Temasek’s staff are also active as a team and individually through their volunteer efforts to support communities and charitable needs in Singapore and elsewhere. Page 4 of 5 Background and Context of Temasek Charter 2009 Institutionalising Financial Discipline 29 Temasek has institutionalised its financial discipline by systematically enlarging its stakeholder base through its annual performance disclosures, credit rating, and an international bond program. Temasek has also instituted various governance, investment and risk management processes and systems, to ensure good governance and a culture of integrity and professionalism. As a professional and responsible investor, Temasek abides by the laws and regulations of the various relevant markets, and makes the necessary disclosures in accordance with the listing regulations. Page 5 of 5 Background and Context of Temasek Charter 2009 .