We aim to foster a high performing and responsible culture where our employees think and act as owners, sharing gains and pains alongside our shareholder.
We balance short term performance and long term value creation in our compensation framework. Our base salaries reflect market benchmarks. Short term bonuses are driven by annual targets. Our returns above or below our risk-adjusted hurdle determine our Wealth Added (WA) incentive pool. Longer term incentives are deferred up to 12 years and subject to market risks and clawbacks, to account for sustainability of returns over market cycles.
Our bonus plans include clawback features. We have exercised clawbacks six times in the last decade, including two carry-forward clawbacks.
Annual Cash Bonuses – Our Short Term Incentive
Annual cash bonuses are driven by company-wide, team and individual performance, and capped within budgeted limits. One annual performance target requires our three-year Total Shareholder Return (TSR) to exceed our three-year cost of long term debt.
(as at 31 March)
Rolling S$ Total Shareholder Return (%)
WA Bonus Bank – Our Medium Term Incentive
Positive or negative, a portion of our WA incentive pool is distributed into the individual notional WA bonus bank accounts, based on each individual’s performance and relative contributions over a period.
If WA bonus bank balances are positive, senior management receive payouts of no more than a third of their WA bank balances. Payouts are half for mid-level management and two thirds for other staff. The retained balances remain at risk of clawbacks in future.
Co-ownership Grants – Our Long Term Incentive
Our staff may be awarded co-investment grants with performance or time-based vesting conditions. These units grow or decline in value with our yearly TSRs, reinforcing the ownership culture in our team. Co-investment units lapse after 12 years.
Part of our positive WA incentive pool funds the Temasek co-investment (T-Scope) grants with stringent multi-year portfolio performance conditions to trigger a five-year vesting. Another portion is held as a company-wide reserve for three to seven years. When WA is negative, the clawback will first be made good from this reserve. Any reserve balance is released progressively for time-based co-investment (U-Scope) grants, which vest in five annual tranches after date of grant.
Our annual operating budget funds limited time-based staff co-investment (S-Scope) grants, which vest over five years, starting in the third year.
Co-ownership Alignment in Practice
When our portfolio returns fell below our risk-adjusted hurdle for the year ended 31 March 2014, no new T-Scope units were awarded and a negative WA incentive pool was added to the accumulated clawback balance carried forward from prior years, to be made good in the future.
For the year ended 31 March 2015, with a WA of S$25.5 billion, we will have an incentive pool that allows us to clear the full clawback pool carried forward from prior years, with a balance for distribution to employees.
This framework for sharing gains and the associated risks and pains through market cycles has been tested during the Global Financial Crisis and its aftermath, reaffirming our ownership ethos.
(for year ended 31 March)