Temasek’s role and reputation as a trusted steward depends on our people and values, and our conduct and governance.
Our Temasek Charter defines who we are and what we do as a commercial investment company, and a corporate member of the wider community.
We own and manage our assets and portfolio. We are governed by the Singapore Companies Act and the Singapore Constitution. Our annual statutory financial statements are audited by a major international audit firm.
Under the Singapore Companies Act, Temasek is an exempt private company with our own Board.
Under the Singapore Constitution, Temasek is a Fifth Schedule entity with a constitutional responsibility to safeguard our Company’s past reserves.
Temasek’s past reserves are those accumulated by the Company before the current term of Government.
Neither the President of the Republic of Singapore nor the Singapore Government, our shareholder, is involved in our investment, divestment or other business decisions, except in relation to the protection of Temasek’s own past reserves.
Temasek does not manage Central Provident Fund (CPF) savings, Government budget surpluses, the foreign exchange reserves of Singapore, or the reserves of any other Fifth Schedule entity. These are independently managed by the relevant Fifth Schedule entities such as the CPF Board and the Monetary Authority of Singapore. Each Fifth Schedule entity is separately accountable for the protection of its own past reserves.
Relating to the President of Singapore
Our Board and CEO have the responsibility under the Singapore Constitution to protect our Company’s past reserves.
Our Board and CEO have a duty to seek the President’s approval before any draw occurs on our Company’s past reserves.
There is no draw on our past reserves if our total reserves equal or exceed our past reserves.
Mark to market declines on existing investments would not be a draw on past reserves.
Duties to protect our past reserves include ensuring that every disposal of investment is transacted at fair market value. A realised loss arising from such disposals at fair market value would not be a draw on past reserves.
Under the Singapore Constitution, our past reserves are those accumulated by Temasek before the current term of Government. Our current reserves are those accumulated by Temasek during the current term of Government.
The swearing-in of Singapore's new Cabinet on 1 October 2015 marked the start of a new term of Government.
On the eve of the first day of each term of Government, Temasek’s total reserves – comprising our past reserves and current reserves at the changeover – are locked up as past reserves. This cycle repeats every time there is a change of Government after each General Election.
Temasek does not manage CPF savings.
There is no draw on our past reserves if our total reserves equal or exceed our past reserves.
Protection of Temasek's Past Reserves
Relating to Our Shareholder
Incorporated on 25 June 1974, Temasek is wholly owned by the Singapore Minister for Finance. We own and manage our own assets as an investment company, and not as an asset manager for our shareholder.
Our shareholder’s right under the Singapore Companies Act to appoint, reappoint or remove our Board members is subject to the President’s concurrence. The appointment or removal of the CEO by our Board is also subject to the concurrence of the President. These constraints are part of the “second key” concept to safeguard the integrity of our Board and CEO in protecting Temasek’s past reserves.
Temasek declares dividends annually, based on the profits we earn, in accordance with our dividend policy. Our Board recommends the dividends for our shareholder’s consideration at the annual general meeting. The dividend policy balances the sustainable distribution of profits as dividends to our shareholder, with the retention of profits for reinvestment to generate future returns. The policy also takes into account our constitutional responsibility to protect Temasek’s past reserves.
Under the Net Investment Returns (NIR) framework, the Government is permitted to spend up to 50% of the expected long term real rates of return of GIC, the Monetary Authority of Singapore and Temasek. The NIR framework does not affect, change or impact Temasek’s dividend policy, strategies and operations as a long term investor, and our responsibility to protect Temasek’s past reserves.
Companies in our portfolio are the responsibility of their respective boards and management.
Relating to Our Portfolio Companies
We manage our portfolio as an active investor and owner. We increase, decrease or hold our investment positions to enhance our risk-adjusted returns for the long term.
The day-to-day management and business decisions of companies in our portfolio are the responsibility of their respective boards and management.
We promote sound corporate governance in our portfolio companies, even as we recognise that corporate governance practices and norms may vary in the different markets in which our companies operate. We support the formation of high calibre, experienced and diverse boards to guide and complement management leadership. This includes encouraging the boards of portfolio companies to identify and consider potential directors with relevant backgrounds and experience, and conduct annual reviews of their succession plans.
Board directors have a fiduciary duty to safeguard the interests of their respective companies. Accordingly, we advocate that boards be independent of management in order to provide effective oversight and supervision of management. This includes having mostly non-executive board members with the independence and experience to oversee management.
We advocate that the Chairman and CEO roles be held by separate persons, independent of each other, to ensure a healthy balance of power for independent decision making, and a greater capacity for management supervision by the board. In markets or industries where having Chairman CEOs is an accepted practice, we advocate that our portfolio companies appoint a lead independent director.
Companies in our portfolio are guided and managed by their respective boards and management. Temasek does not direct their business decisions or operations.
We regularly monitor the strategy and performance of our portfolio companies and keep abreast of industry developments that impact our companies. This informs how we exchange and share views and perspectives with the boards of our companies, so as to better understand their strategy and operating environment. We protect our interests by exercising our shareholder rights, including voting at shareholders’ meetings.
We comply with all obligations under Singapore laws and regulations, as well as those of the jurisdictions where we have investments or operations. Likewise, we expect our portfolio companies to comply with all laws and regulations of jurisdictions in which they have investments or operations.
We comply with all obligations under Singapore laws and regulations, as well as jurisdictions where we have investments or operations.
We expect our portfolio companies to comply with all laws and regulations of jurisdictions in which they have investments or operations.
Relating to Our Communities
As a Singapore exempt private company, Temasek is exempted from disclosing financial information publicly. However, we have published our Group Financial Summary and portfolio performance in our annual Temasek Review since 2004. As a trusted steward, our engagement with our communities in Singapore and around the world is based on the twin pillars of sustainability and good governance.
We support programmes that focus on building people, building communities, building capabilities and rebuilding lives. These programmes enable individuals, families and communities to have sustainable improvements and progress in their lives.
More than a decade ago, we instituted a policy of setting aside a share of our excess returns for community contributions in each year that we exceed our risk-adjusted hurdle. This policy is founded on the concept of sustainable and responsible contributions.
The skills and capabilities for the management of endowment funds and for developing and managing community and social programmes are very different. This was why we established Temasek Trust in 2007 to oversee the management and distribution of endowments and gifts from Temasek, which have been earmarked for specific non-profit philanthropic organisations (NPPOs).
The governance model separates the financial management of endowments from the NPPOs. This enables them to focus on what they do best – developing programmes for the community, knowing their endowments are professionally managed to give them a sustainable source of support over the years.
We comply with all obligations under Singapore laws and regulations, as well as those of the jurisdictions where we have investments or operations.
We follow developments in international investment and trade agreements, and engage with thought leaders and authorities. We also aim to promote a better understanding of how state owned entities like ourselves operate based on commercial principles, independent of government interference.
An example is our active participation with the International Monetary Fund and various sovereign investors from around the world to develop best practices under the Santiago Principles for sovereign investments. Temasek exceeds the applicable standards of disclosure and other guidelines under the Santiago Principles.
Our engagement with our communities is based on the twin pillars of sustainability and good governance.