Corporate Governance

Incorporated as a company under the Singapore Companies Act on 25 June 1974, Temasek is wholly owned by the Singapore Minister for Finance.

Under the Singapore Constitution, Temasek is a Fifth Schedule entity with a constitutional responsibility to safeguard our Company's past reserves. Temasek's reserves form part of the nation's reserves.

Temasek owns its assets — we are not a fund manager. We do not manage Singapore's Central Provident Fund savings, or the Singapore Government's assets, or the foreign exchange reserves of Singapore. Neither does Temasek manage the assets of any other Fifth Schedule entity: these are independently managed by the respective Fifth Schedule entities themselves.

Temasek is not state-directed. Neither the President of Singapore nor the Singapore Government is involved in or directs our investment strategies, investment decisions, or other business decisions, except in relation to the protection of our past reserves.

Relating to the President of Singapore

The Chairman, CEO, and each Board member have the responsibility under the Singapore Constitution to protect our Company's past reserves. Temasek's past reserves are those accumulated by the Company before the current term of Government. Temasek's current reserves are those Temasek accumulates during the current term of Government.

Our Board and the CEO 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.

Every year, the Temasek Board and senior management brief the President and the Council of Presidential Advisers on Temasek’s performance and investment strategies.

Relating to Our Shareholder

Our shareholder holds the Board accountable for our overall performance by assessing Temasek's long-term returns. In turn, the Board delegates the day-to-day management of Temasek to Temasek's senior management.

While the Board Leadership Development & Compensation Committee is responsible for recommending Board and management leadership plans, our shareholder has the right under the Singapore Companies Act to appoint, reappoint, or remove our Board members, 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.

Temasek declares dividends annually in accordance with our dividend policy. Our Board sets our dividend policy, balancing 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 dividend payout 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 rates of return of GIC, the Monetary Authority of Singapore, and Temasek. The NIR framework does not affect, change, or impact Temasek’s responsibility to protect our past reserves; our dividend policy; and strategies and operations as a long-term investor.

Every year, the Temasek Board and senior management meet with the Finance Minister and officials from the Ministry of Finance to review Temasek's performance and investment strategies.

Our Internal Governance Approach

Temasek is an exempt private company under the Singapore Companies Act which is exempted from disclosing its financial information publicly. We have nonetheless published our portfolio performance in our annual Temasek Review since 2004, and our consolidated group financials in our bond offering circulars. As a commercial investment company, our annual statutory financial statements are audited by a major international audit firm.

We comply with our obligations under Singapore laws and regulations, as well as those of the jurisdictions where we have investments or operations.

Our Board has a fiduciary duty towards Temasek as a Company, with full discretion and flexibility to guide the management of our portfolio.

Temasek Board

Our Board provides overall guidance and policy directions to management.

Our Board operates on a commercial basis, with the added constitutional responsibility, together with our Chairman and CEO, of protecting the Company's past reserves, given Temasek's status as a Fifth Schedule entity under the Singapore Constitution. There are no nominees of the Government on our Board.

The annual Board schedule includes quarterly two-day meetings, and additional meetings as needed, such as for significant large investments. 

The Board has reserved the following matters for its decision:

• overall long-term strategic objectives
• annual budget
• annual audited statutory accounts
• major investment and divestment proposals
• major funding proposals
• CEO appointment and succession planning
• Board changes
• portfolio risk appetite and profile

The following Board committees, each chaired by a non-executive Director who is independent of management, have been set up with specific delegated authorities:

• Executive Committee
• Audit Committee
• Leadership Development & Compensation Committee
• Risk & Sustainability Committee

The Board has separate and independent access to information to assist it with its deliberations, including the opportunity to request supplementary or explanatory information from management. Management provides information to the Board on an ongoing basis, including minutes of key management committee meetings, to allow the Board to effectively discharge its responsibilities.

Board Governance

Decisions at Board and Committee meetings are based on a simple majority of the votes, including those made via telephone and/or video conference. Where a Board resolution is obtained via circulation, the resolution becomes effective upon approval by at least two thirds of the Board.

Board members with interests that may conflict with specific Temasek interests are recused from the relevant information flow, deliberations, and decisions on the matter on which they are conflicted.

Quarterly Board meetings include Executive Sessions for non-executive Directors to meet without management presence. The discipline of our annual CEO succession review is a part of these deliberations.

Temasek Senior Management

Senior management sets the tone and culture of our institution, leading the delivery of Temasek's vision and mission.

In line with global best practices of international investment companies, Temasek International (TI) was set up in 2011 as the management arm of Temasek. Today, TI houses all our management and staff, except the Temasek CEO who continues to be employed under Temasek Holdings.

Operating as OneTemasek, our management team implements the strategy and policy directions set by the Temasek Board to fulfil our mandate to deliver sustainable returns over the long term. Levels of authority for investment, divestment, and other operational matters are defined according to our Board's delegation.

For more information, see Our Leadership.

Relating to Our Portfolio Companies

As stewards of our assets, we engage our portfolio companies to enhance shareholder value and advocate good governance and sustainability practices.

Governance

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.

Effective board governance is fundamental to a company's success and long-term viability. Board directors have a fiduciary duty to safeguard the interests of their respective companies and those of shareholders as a whole. We rely on the boards of portfolio companies to set the company's strategy, supervise management's performance, exercise effective oversight, and be accountable to stakeholders for their decisions and outcomes of their actions.

We support the formation of high-calibre and effective boards. An effective board is one that displays independent judgement, a good mix of competencies and expertise, as well as diversity and accountability. We encourage our portfolio companies to conduct regular reviews of board succession plans, taking into consideration the changing needs of the company.

We support boards which are predominantly independent, comprising individuals with the requisite skills, experience, and attributes to significantly contribute to the success of the company. We advocate that the Chairman and CEO roles be held by separate persons, independent of each other, to ensure a healthy balance for independent decision-making, and a greater capacity for management supervision by the board.

As a shareholder, we vote to express our opinion on how a portfolio company should be governed and managed, and to hold its board and executives accountable for their actions, decisions, and performance. Voting also assists us to align our investments with our ethical and environmental values and promote sustainable and responsible business practices. When we exercise our vote, we seek to promote sound governance and long-term financial value creation, and to protect our interest as an investor.

We do not provide any financial guarantees for the obligations of our portfolio companies, just as the Singapore Government does not provide any financial guarantees for Temasek's obligations.

Engagement

While we do not direct the business decisions and operations of our portfolio companies, we interact with them as an engaged shareholder to enhance shareholder value and advocate good governance, sustainability, and corporate practices. We believe in constructive engagement and are committed to working with our portfolio companies to promote a close alignment between strategy and performance, and returns and rewards.

We add value as a shareholder by exchanging ideas, sharing best practices, and organising roundtables and networking events in areas such as corporate governance, cybersecurity, industry and technology trends, legal and regulatory, reputational risk management, and sustainability. We also keep track of industry developments and trends that may impact our portfolio companies, and share our expertise and knowledge in these areas with them.

Expectation

As part of our constructive engagement, we share our shareholder expectations with the boards of our portfolio companies. We encourage them to be agile and innovative, and to be prepared to face disruptions while tapping on new opportunities. They are key to helping us build a resilient and forward-looking portfolio as part of our T2030 strategy, and ultimately, to deliver sustainable returns over the long term.

We expect companies to comply with applicable laws, and to abide by sound corporate governance and appropriate codes of conduct and ethics. We do not condone any form of misconduct and malfeasance and hold the boards accountable for the activities of their companies.

Boards should set the tone — in the pursuit of governance excellence — to effectively oversee management in the development and implementation of strategies and ensure robust governance, compliance systems, and processes are in place. These must be constantly reviewed and refreshed to ensure they are appropriate and relevant.