According to McKinsey, executives at failing companies continue to make mistakes because of cognitive biases like seeking information that supports their point of view. I disagree. Problems will always occur. They can be corrected only if they are known. The real issue is the enormous personal and economic disincentives in admitting the loss. If an agent, manager or board discovers that they are knee deep in a failing business, their inclination is to either conceal or deny. To err is human, as is weaselling out of it. In contrast, if the owners or investors are aware of the problem, they could take immediate corrective action

This problem becomes critical when the owners and investors are a country. In that case the free rider problem and asymmetry of information in addition to other issues from law and economics makes it almost impossible for a state owned company in any country to make money.

Singapore has a highly protected reputation for its clean corporate affairs and efficient legal system. However even in Singapore, government controlled companies will run into problems. Singapore’s main investment vehicle the destination for mandatory pension contributions is the Temasek holding company which is 100% owned by the finance ministry.

The chief executive of Temasek is Ms Ho Ching wife of Lee Hsien Loong, the Singapore prime minister and son of legendary Singapore founder, Lee Kwan Yew. This level of incest is bad enough. What makes matters worse is that Ms Ho and other Temasek executives do not give interviews, which has created an atmosphere of distrust and highlighted the need for transparency.

For many years Temasek has been unusually successful for a state run company. However, lately it has tried to invest internationally. When it was unable to control the rules of the game it has run into trouble.

Temasek has numerous subsidiaries. Two of its most successful subsidiaries are Singapore Telecommunications and Neptune Orient Lines. Both had problems with overseas acquisitions, so the management of both companies wisely decided to distribute profits as dividends. Their parent, Temasek, has not shown similar wisdom.

Their recent investments have included two insolvent Chinese banks. It also purchased the Shin Corp, the Thai telecommunications, from the former Thai Prime minister Thaksin Shinawatra. The purchase caused a political maelstrom in Thailand. Temasek has been accused of colluding with Mr. Thaskin. Temasek’s investments have provoked regulatory ire in Korea, Indonesia, India and even China. Despite its protests of independence, the regulators suspect political motivations in Temasek’s actions. Not the type of motivation for a company that is supposed to protect its citizens’ retirement funds