atans1

Why we have so few world class GLCs

In Corporate governance, S'pore Inc, Temasek on 03/01/2015 at 5:39 am

We only have three, Keppel, SembCorp and SIA.

Here’s a possible reason from the letters page of the PAP’s bible, the Economist:

State-owned failings

* SIR – No long analysis is needed to understand why state-owned firms underperform (“State capitalism in the dock”, November 22nd). Two main mechanisms exist for accountability in modern society: market pressure and political control. State-owned firms fall between the two. They lack the degree of competition that private firms typically face but also do not have the direct political control that applies in conventional government.

Lack of accountability means lack of performance. Effectiveness is best secured by either keeping ventures with classic government agencies, instead of with state-owned firms, or by placing ventures in fully privatised companies with full market exposure, whichever best suits the activities in question. A bit of each is not enough, but instead creates a grey zone with grey results, which is what we see for state-owned firms.

Bent Flyvbjerg
Said Business School
University of Oxford

 

  1. A very good one for CCP which uses PAP as their model which makes MM/PM Lee extremly proud. I expect the collapse of China CCP economy to finally become apparent to the world in 2015.

  2. Apart from the two main mechanisms for accountability mentioned in the letter, there is a third and more crucial one with respect to our GLCs – and that is the management which often consist of military personnel parachuted into leadership positions. The recruiting process will fail any international standard and practice. Take Ms. Saw being recruited to head SMRT with her experience only in Duty Free for example. The disastrous results are a testimony to the pathetic situation in the GLCs.

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