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A Trusted Steward
Temasek is a Company with a corporate conscience, and a duty towards future generations.
Our Temasek Charter defines who we are and what we do as an investor, institution and steward.
We are governed by the Singapore Companies Act and the Singapore Constitution.
Temasek is an exempt private company under the Singapore Companies Act. Our Board has a fiduciary duty towards Temasek as a Company, with the full discretion and flexibility to guide the management of our portfolio as a long term investor and owner, and a responsible institution and steward.
Under the Singapore Constitution, Temasek is a Fifth Schedule entity with a constitutional responsibility to safeguard our Company’s past reserves.
Temasek has a constitutional responsibility to safeguard its own past reserves.
Temasek does not manage Singapore’s Central Provident Fund (CPF) savings; the budget surpluses or foreign exchange reserves of Singapore; or the reserves of any other Fifth Schedule entity. These are independently managed by the relevant Fifth Schedule entities themselves.
Temasek’s past reserves are those accumulated by the Company before the current term of Government.
Temasek does not manage Singapore’s Central Provident Fund savings.
Neither the President of Singapore nor the Singapore Government is involved in our investment or other business decisions, except in relation to the protection of our past reserves.
Our annual statutory financial statements are audited by a major international audit firm.
Relating to the President of Singapore
The Board and CEO of Temasek have the responsibility under the Singapore Constitution to protect our Company’s past reserves.
The Board and CEO of Temasek have a duty to seek the President’s approval before any draw occurs on our 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 are not a draw on past reserves. We have a duty to ensure every disposal of investment is transacted at fair market value. A realised loss arising from such disposals at fair market value is not a draw on past reserves.
We have a duty to ensure every disposal of investment is transacted at fair market value.
Protection of Temasek’s Past Reserves
Under the Singapore Constitution, Temasek’s past reserves are those Temasek accumulated before the current term of Government. Temasek’s current reserves are those Temasek accumulates during the current 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 a General Election.
Relating to Our Shareholder
Incorporated on 25 June 1974, Temasek Holdings is wholly owned by the Singapore Minister for Finance. As a commercial investment company, we are the owner of our assets – we are not a fund manager on behalf of 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 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.
We are the owner of our assets, not a fund manager on behalf of our shareholder.
Temasek declares dividends annually in accordance with our dividend policy. Our Board ensures that our 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. Our Board recommends the dividends for our shareholder’s acceptance at the annual general meeting.
Under the Net Investment Returns (NIR) framework, the Government is permitted to spend up to 50% of the expected long term real returns 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.
Relating to Our Portfolio Companies
We manage our portfolio as an active investor and asset owner. We increase, decrease or hold our investment positions based on our views on intrinsic values, 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. Temasek does not direct their business decisions or operations. Just as the Singapore Government does not guarantee our obligations, we do not guarantee the obligations of our portfolio companies.
We hold the boards and management accountable for the activities of their companies.
We hold the boards and management accountable for the activities of their companies. We expect companies to abide by sound corporate governance and codes of conduct and ethics. Boards should set the tone – effectively oversee management and ensure robust governance and compliance systems and processes are in place. These must be constantly reviewed and refreshed to ensure relevance.
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 to conduct annual reviews of their succession plans.
We expect companies to abide by sound corporate governance and codes of conduct and ethics.
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.
We advocate that boards be independent of management in order to provide effective oversight and supervision of management.
This is to ensure a healthy balance of power for independent decision-making, and a greater capacity for management supervision by the board.
We regularly monitor the strategy and performance of our portfolio companies and keep abreast of industry developments that impact them. This informs how we exchange and share views and perspectives with the boards and management of our portfolio companies, so as to better understand their strategies and operating environments.
We protect our interests by exercising our shareholder rights, including voting at shareholders’ meetings.
We comply with our 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 their obligations under the 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. We have nonetheless published our Group Financial Summary and portfolio performance in our annual Temasek Review since 2004.
We gift endowments for our communities based on the twin pillars of sustainability and good governance. These are funded by a share of our net positive returns above our risk-adjusted cost of capital.
These philanthropic endowments focus on building people, building communities, building capabilities and rebuilding lives. Their outcome-focused programmes enable individuals, families and communities to achieve sustainable improvements and progress in their lives.
We support improvements in social policies through evidence-based results from pilot programmes, and sustainable long term solutions.
We gift endowments for our communities based on the twin pillars of sustainability and good governance.
The skills required for the financial management of endowment funds are very different from those for developing and delivering community and social programmes. This was why we established Temasek Trust in 2007 – to oversee the financial management and distribution of endowments and gifts from Temasek, which have been earmarked for the six non-profit philanthropic Temasek Foundations.
This governance model separates the financial management of endowments from the programme design and delivery of the Foundations. This enables the Foundations to focus on developing programmes for the community, with the reassurance that their endowment fundings are professionally managed to provide them a sustainable source of support over the years.
Alongside the work of the Foundations, our staff volunteers also play an active role in contributing to their communities. Through our staff-driven volunteer T-Touch initiative, our employees commit ideas, time and money to support their chosen charities and community projects, and pursue philanthropic and public good causes.
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 we operate based on commercial principles, independent of government interference.
An example is our active participation in support of the International Monetary Fund, to develop best practices for responsible investing for investors and host countries, under the Santiago Principles for sovereign investments.
Temasek exceeds the applicable standards of disclosure and other guidelines under the Santiago Principles.
From time to time, we may seed institutions to develop capabilities which promote good governance and community stewardship. We also collaborate with like-minded partners, such as universities and multilateral agencies, to build these institutions.
