Depends on which hat you wearing PM

In Corporate governance, Political governance on 25/07/2011 at 7:20 am

“Our interest is not to help the transport companies make big profits. There is no reason for us to do that,” so said the PM on Saturday.

Correct if the cabinet is wearing its politicial hat. SMRT and Comfort Delgro making big profits by gorging commuters lose the PAP votes. Ask Raymond Lim.

But if the cabinet is wearing its shareholder hat, then it is in the interest of the  government to allow these companies to squueze the last cent from the commuting public.

SMRT is a TLC, Temasek owning 54%. “Temasek is an active value-oriented investor … to create and maximise shareholder value,” says its charter.

The S’pore Labour Foundation, a statutory board linked to the NTUC, holds 12% of Comfort Delgro. SLF is Delgro’s single largest shareholder. We all know how stat boards and NTUC affiliates try to maximise their profits.

Whether the PM and his cabinet want the companies to make big profits or not, depends on which hat they are wearing.

  1. I find the whole situation to be rather amusing, since this is a classic case of misaligned incentives – SMRT and SBS are obviously fishing for more profits to satisfy the Singapore Inc desire for more money. What is not amusing is that they are just doing it via the easiest way – i.e. increasing fares.

    With monkeys like this behind him, PM Lee need not look across to the opposition bench to sabotage his political party. He is being sabotaged daily by his own people.

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  3. Do you know that these companies are regulated? They need to satisfy very specific service standards. Their fares are capped by a formula.

    Temasek will squeeze them for returns. The regulator will squeeze them for low cost service. At the same time, their employees also want to have raise and bonus every year. They are represented by powerful Unions. SMRT and SBS is squeezed in many ways.

    The system is there. It’s just a matter of balance. Which vise do you want to turn and squeeze the company? Be careful not to squeeze the life out. That serves nobody any good.

  4. Which is precisely the reason why our public transportation should be nationalised.
    Conflict of Interest!

  5. anon@12am, what “powerful Unions”?

    Public transport should not be a profit center. Any profit is just a tax on the poor.

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