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Goodbye, Mr Chip

July 21, 2009

The official line why Charles “Chip” Goodyear will not become chief executive of Temasek Holdings as planned is that the American executive and the board of the giant Singapore investment fund did not quite see eye-to-eye on strategy. If that’s the case, it’s hard to understand why it took them five months to discover the yawning gulf between them.

Whatever the reason, a rare opportunity to shed some of the image problems that have plagued Temasek and other sovereign wealth funds has now been lost.

When the financial crisis erupted in 2007, sovereign wealth funds, in particular those in the Persian Gulf and Asia, were viewed with a mixture of envy, condescension and fear — envy, of course, because of the mammoth hoards of cash they held, and yet condescension as many in the West saw the funds as naive investors throwing money into weak U.S. and UK banks. The fear was that the SWFs had ulterior motives in extending the influence of their governments.

Billions of dollars in losses later, and with no signs of increased influence, many of the worries about SWFs have faded. But they are still seen as political creatures, not yet willing to become full-fledged, sophisticated global financiers.

Temasek went a long way toward changing that perception with its announcement in February that Goodyear, a former CEO of mining giant BHP Billiton and a onetime investment banker at Kidder Peabody, would take the reins of the fund on October 1. Goodyear would be replacing Ho Ching, the wife of the Singapore prime minister and the daughter-in-law of the founder of the nation. Temasek has been among the more established and respected of the SWFs.

But after losing some $4 billion on investments in Merrill Lynch and Barclays, it opted for change. Goodyear, it was thought, as Temasek’s first foreign CEO, would shift the fund away from its heavy exposure in financial services toward investing more in natural resources.

Today, Temasek, the smaller of Singapore’s two SWFs, said in a statement that “the Temasek Board and Mr. Goodyear have concluded and accepted that there are differences regarding certain strategic issues that could not be resolved.” Ho will continue as chief executive and Goodyear will depart.

There may have been a real clash over strategy, to be sure. Or given the wave of deal-making in mining, one might wonder whether Goodyear has been tempted by the prospect of a return to the CEO suite in his former business.

Yet Goodyear’s departure gives the appearance of local politics trumping business considerations. That could be costly if Temasek ever decides to pursue high-profile deals in markets like the United States, where SWFs have become ensnared in controversies in the past. Suspicions will cling to these funds until they can demonstrate that they are truly independent investment managers.

Comments

Singapore’s appetite for vetting all applications for jobs likely collided with the American appetite of bringing in friends to management whether qualified or not, might have led to the split. The typical example of Americans hiring incompetent people is the recent hiring of Dan Mudd to a top post at the Forrester Group after he single-handedly destroyed Fannie Mae. Temasek did not want to risk that situation by allowing Goodyear free hand in hiring his buddies.

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