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Chip Goodyear rejects CEO appointment and resigns; Ho Ching to remain head

with 11 comments

Former BHP Biliton CEO Chip Goodyear has rejected his upcoming appointment of CEO of Temasek Holdings.  He was supposed to take over Ho Ching on 1st Oct 2009.  Ho Ching will now remain CEO. In addition, Goodyear will be stepping down from Temasek’s board on 15th August.  Temasek’s press release says that his resignation is due to irrecouncilable strategic differences:

Four months into the leadership transition, the Temasek Board and Mr Goodyear have concluded and accepted that there are differences regarding certain strategic issues that could not be resolved. In light of the differences, both parties decided that it is in their mutual interests to terminate the leadership transition process and hence the executive relationship with effect from 15 August 2009. Mr Goodyear will also step down from the Temasek Board effective the same date.

The Financial Times notes there has always been the question of how much freedom Goodyear would really have had in pursuing his preferred investment strategies:

But there has been considerable speculation in Singapore about how much independence Mr Goodyear would be given in pursuing his goals in light of the fact that Temasek owns most of the city-state’s leading companies.

It’s hard to tell what exactly drove Goodyear to resign, but the WSJ quoted the following from an unnamed source:

As CEO-designate, Mr. Goodyear pushed to instill a tighter sense of discipline within the company, say people at Temasek. People who didn’t show up on time for internal meetings were fined for each minute they were late, they say. Typing messages on BlackBerrys during meetings was prohibited.

Already, some of Mr. Goodyear’s initiatives to bring about change had met with a poor reception. His proposals for the firm’s new strategic direction were considered too risky by some, a person familiar with the situation said.

In addition, this person said Mr. Goodyear planned changes in senior management that weren’t well received by Temasek’s board.

Hmm, could Goodyear’s investment strategies really be more risky than Temasek’s ill-thought purchases of Merill Lynch and Barclays last year before dumping both in a fire sale resulting in estimated combined losses of over S$5 bn?

I wouldn’t be surprised if Goodyear felt that all that Temasek wanted to do was put a new friendlier face on its state-owned image without ceding him any real power to effect genuine changes as he saw fit.

And as for what kind of appointment changes Goodyear proposed which didn’t go down well, I guess that says a lot about how serious they ever took Goodyear in the first place.  As I said elsewhere before, don’t expect drastic change in Singapore.  More of the same is the norm.

Update: NYT is finally reporting on this.  Here’s some juicy quotes:

“This is not good news for Temasek,” said Carl Linaburg, co-founder of the Sovereign Wealth Fund Institute in Roseville, Calif., which tracks data on the investment funds. “Prior to Chip’s arrival, Ho Ching had been widely criticized for Temasek’s major losses in financials. Chip’s departure makes people wonder why Temasek can’t seem to make firm decisions with sound judgment, which is essential for managing the assets of a country.

S. Dhanabalan, Temasek’s chairman, hinted in a statement on Tuesday that the reason for the split might lie beyond the differences on strategy. “The differences in and of themselves are not the issue, but they have helped both the board and Chip to assess that it is in our mutual interest not to continue with the planned leadership transition,” he said.

Update 2: The WSJ has updated their article, in turn so have I updated the quoted passage from their article.  So it seems that Goodyear couldn’t tolerate sloppiness on Temasek’s board?  And they reacted by restricting his independence and blocking his appointments?  Ok I’m probably over-playing this snippet.

The Straits Times is reporting this as well, quoting the WSJ. Isn’t it odd that despite the fact that Temasek is a local company, the Straits Times couldn’t even get its investigative journalists to prise out this fact first hand whilst the Dow Jones could?  What does this tell you about the state of journalism in Singapore?

Apart from the above, there’s also this from the Straits Times which quotes analysts as saying:

Mr Goodyear was widely expected to trim Temasek’s financial holdings and move aggressively into commodities and energy and into emerging market infrastructure and consumer retail sectors, analysts and investment bankers said. They cited his appointment as a clear move that Temasek was angling for more resources deals.

In other words, he tried to bring about too much change and was stymied.

Written by defennder

July 21, 2009 at 8:53 PM

Posted in Singapore affairs

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11 Responses

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  1. defennder,

    nice post, especially the inclusion of the FT and WSJ quotes. i also agree that drastic changes in sg are pretty rare or perhaps non-existent, though i don’t see that as necessarily a bad thing.

    but i thought this was a bit of an unfair snipe: “could Goodyear’s investment strategies really be more risky than Temasek’s ill-thought purchases…”

    20/20 hindsight, no? or maybe you’re warren buffett incognito? (and even then…) =)

    Doesnt Matter

    July 21, 2009 at 11:20 PM

  2. Hi DM,

    Yes, 20/20 hindsight I’ll admit. This blog didn’t exist in 2008 and I didn’t warn against Temasek’s purchases then, but others did. Then again I personally do not take big investment risks and leverage on Singaporeans’ hard earned money.

    I don’t recall paying myself millions annually as well.

    defennder

    July 21, 2009 at 11:33 PM

  3. the fact that some people having warned against those purchases doesn’t mean squat unless they showed that the risks clearly outweighed the potential benefits, and that no sane investor would have gone ahead. these things are all probabilistic, no?

    also, unless u’re telling me that everyone (with considered opinions) other than temasek thought those were bad purchases, otherwise in the end, someone’s gonna be right, someone’s gonna be wrong. some fella turning out to be correct this time doesn’t mean squat. let’s look at his investment record. and even warren buffett makes mistakes right.

    i’m not saying that it was the right decision, nor even that temasek is any gd at what it does. my pt was simply that that sentence disregarded any wider context that should have been included. it made for good rhetoric though, which i guess was the intent, so i’m just quibbling lah.

    as for paying millions, that’s a whole other minefield. a blog post from you some time, perhaps?

    Doesnt Matter

    July 22, 2009 at 12:33 AM

  4. Dear DM,

    Every sentence written, so long as you’re willing to surgically dissect them, would inevitably disregard some context of which it speaks. That is the nature of language. Now if I should include all the possible viewpoints for every sentence and point I made, each post would be millions of words long. Go read some Derrida if you’re bored.

    By your logic above, analysts are all useless since they may make mistakes. Opinions don’t matter at all because no one can be 100% correct, not even the Sage of Omaha. Heck why bother investing? Go gamble at IR lah.

    Two can play a game of quibbles.

    defennder

    July 22, 2009 at 12:47 AM

  5. Doesn’t Matter:
    “someone’s gonna be right, someone’s gonna be wrong. some fella turning out to be correct this time doesn’t mean squat. let’s look at his investment record. and even warren buffett makes mistakes right.”

    I agree with you that it is unreasonable to expect Temasek to be correct all the time. However, with the pay they are getting, we would expect them to perform far better than others on the average. Otherwise, how do we justify their high salaries?

    Bringing in Warren Buffett is interesting because Buffett has himself admitted he made quite a few mistakes in this episode.

    Contrast this to the deafening silence from Temasek and Ho Ching. Our local mouthpiece even had the nerve to argue that Temesek performed better than Berkshire Hathaway. That was just totally amusing.

    It Matters

    July 22, 2009 at 4:13 AM

  6. Hi IM,

    Thanks for reading and commenting.

    I’d like to add that even investment demi-gods like Buffett were grilled by shareholders when Berkshire made losses last financial year, all of which was declared in a transparent manner. Temasek on the other hand, enjoys the extra privilege of having its sole shareholder, MoF’s Tharman defend its fledgeling performance by fudging statistics and making dubious comparisons.

    Clearly Berkshire and Temasek are worlds apart both in terms of transparency and investment performance.

    defennder

    July 22, 2009 at 8:49 AM

  7. i agree, re: the pt abt surgical dissection. as u might as felt, my usage of “doesn’t mean squat” was really for rhetorical effect lah, doesn’t stand up to scrutiny.

    but i dun think “my logic” leads to the assertions that you stated. i think we agree that analysts make mistakes, and nobody’s perfect. re-reading my comment a couple of times, i dun think i implied that analysts and opinions are useless. perhaps it could have been better stated, but the pt was merely that the particular outcomes for these purchases isn’t necessarily a gd indicator of Temasek’s competence, unless those conditions i stated were true.

    or perhaps i’m missing the flow of logic of my own statements, in which case people could help me out by elaborating.

    Doesnt Matter

    July 22, 2009 at 1:21 PM

  8. Just to clarify in case it’s misunderstood, the pseudonym “doesnt matter” wasn’t meant to be a statement regarding this issue. i chose it (and used it before this post) simply to say that my name/identity doesn’t matter. but perhaps i should come up with a better pseudonym.

    i wonder what the Temasek pay is, in relation to other fund managers (or whatever the correct term is). i don’t know if theirs is actually higher than average. if it does, then the “expect them to perform better than others” argument holds.

    in any case, my personal take is that fund managers are overpaid in general. plus their “heads i win, tails you lose” terms of compensation seems a little ridiculous to me, at least with my little understanding of how these things work.

    Doesnt Matter

    July 22, 2009 at 1:32 PM

  9. eh, sorry but how do u edit comments after they’ve been posted? i’m a little disturbed to see my own grammatical mistakes and not be able to correct them.

    Doesnt Matter

    July 22, 2009 at 1:36 PM

  10. Just to clarify my stand, I think the questions and doubts abt the Temasek figures raised by defennder and others are valid and valuable. (as far as I can tell, since I’m not knowledgeable abt such things).

    I also have little doubt that the official Temasek statements contain merely the most positive statistics that they can muster to try to allay public fears (etc etc).

    it would be interesting to hear what people would do in their shoes… go the Obama-style route perhaps, and hope that a combination of frankness/modesty/admitting mistakes would sit better with sgporeans (not just bloggers) as a whole?

    also, what would make for an interesting future post/discussion, is how much transparency an entity like Temasek should have.

    Doesnt Matter

    July 22, 2009 at 1:53 PM

  11. Hi DM,

    Please take a look at my latest post on the fallacy of false equivalence.

    As for editing comments, you can’t because WordPress doesn’t allow it. If you do feel the need to make some changes, please highlight the changes you want to make and I’ll edit it for you (if I have the time that is).

    defennder

    July 22, 2009 at 2:51 PM


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