Corporate Governance of State-Owned Enterprises: An Empirical Survey of the Model of Temasek Holdings in Singapore

This paper explores the effect of Temasek Holdings Pte Ltd, one of Singapore’s two prominent sovereign wealth funds, on the corporate governance of its target companies in Singapore. It compares companies associated with Temasek with the other listed companies on the Singapore Exchange that form the components of the Straits Times Index. Based on these companies’ 2012 annual reports, this paper finds that the companies in which Temasek has direct stakes have a higher proportion of independent directors and are more likely to have an independent director serving as chairman, indicating a higher quality of corporate governance. However, Temasek’s success is not necessarily a result of law, but may have more to do with its self-disciplinary nature and the hands-off approach of the Singaporean government. This means that the Temasek model may not easily be copied by state-owned enterprises in other countries. However, the fact that Temasek plays like an active investor and complies with corporate law may prove that state-owned enterprises may still enjoy a higher quality of corporate governance, and that sovereign wealth funds may behave akin to responsible investors.