Remuneration Cap for Key Management Staff of Fifth Schedule Companies like GIC and Temasek Holdings

3 Mr Png Eng Huat asked the Deputy Prime Minister and Minister for Finance (a) whether there is a remuneration cap for key management staff of Fifth Schedule companies like GIC and Temasek Holdings; and (b) for the past five years, what is the range of total annual remuneration, including salary, annual and performance bonuses, paid to the top three higher paid executives in GIC and Temasek respectively.

The Second Minister for Finance (Mr Lawrence Wong) (for the Deputy Prime Minister and Minister for Finance): Mr Speaker, GIC and Temasek are commercially-run companies. The remunerations of their staff are therefore decided independently by their respective boards. The Government maintains an arms-length relationship with the companies and does not interfere in their operational decisions such as remuneration. Instead, we hold the boards accountable for their respective performances.

Broadly speaking, both entities adopt remuneration frameworks that are based on performance and industry benchmarks. The salaries are benchmarked to the relevant markets and sectors where the entities compete for talent. This ensures that they can attract and retain capable people.

The remuneration frameworks also aim to support and reinforce a prudent risk-taking culture. A portion of the remuneration in both entities is tied to long-term performance. This ensures that staff, including senior management, are rewarded for long-term sustained performance, rather than a focus on short-term gains.

Ultimately, the Government evaluates the performance of the two entities based on their long-term returns, net of all expenses incurred. These figures are published in their annual reports, and they show that both GIC and Temasek have performed creditably under challenging market conditions.

Mr Png Eng Huat (Hougang): Mr Speaker, just a quick question. The reason I asked is because these two entities are managing our reserves and the Government is the sole shareholder. Usually, the shareholders would know the remuneration packages for the company that they own. Does the Government or anyone in the Finance Ministry know the remuneration packages for the top brass in terms of the value of GIC and Temasek?

Mr Lawrence Wong: Mr Speaker, I think we should take a step back. As I have said, what we are trying to do is to design a system that best supports the mandate of GIC and Temasek, and that mandate is to secure good long-term returns on their overall portfolio. So, our focus should not be on one or two expense items, but on designing an overall system that enhances and maximises long-term performance, and that is what we have tried to do. As I have explained in this House before, the way we go about this is through a very rigorous process. When we look at expected future long-term returns, there is a thorough assessment of the investment environment, done by professionals. MOF reviews that assessment of the investment environment. The expected long-term returns for both GIC and Temasek that figure is proposed to the President and the President makes an independent assessment of that long-term expected return, together with the Council of Presidential Advisers.

So, that long-term expected return is the basis which both GIC and Temasek work to achieve over a period of time and their performances every year are published in their annual reports. That overall system is designed, as I have said, to maximise and secure our best chances of getting good long-term returns. That is the system we have today, which achieves that result.