The Commons public accounts committee has questioned whether the BBC’s governance model is fit for purpose in a damning indictment of its handling of severance payments to 150 senior managers.
The committee’s chairman, Margaret Hodge, said its investigations into the pay offs – which included cross-examination of BBC chairman Lord Patten and director general Lord Hall – had uncovered a culture of cronyism that allowed the liberal use of licence fee payers’ money. This had led to 22 of the 150 payments exceeding contractual limits.
And MPs have also raised questions whether some of the eight BBC staff who gave evidence to the committee may have deliberately misled their inquiry.
The Daily Mail reported that Tory committee member Steve Barclay was angry that Mrs Hodge had watered down elements of the findings and in particular that it had failed to criticise BBC chairman Lord Patten for refusing to name all of the BBC staff who had received pay offs.
These are the full conclusions and recommendations of the committee:
1. As part of its efforts to cut costs, the BBC has significantly reduced the number of senior managers it employs, from 624 in March 2010 to 445 in March 2013. In the course of our inquiry into the departure of the BBC’s former Director General, George Entwistle, we became increasingly concerned about the scale of severance pay for departing senior BBC managers. We therefore asked the National Audit Office to carry out a review of severance payments. The National Audit Office found that in the three years to December 2012, the
BBC gave 150 senior managers severance payments totalling £25 million.
2. It is unacceptable for the BBC, or any other public body, to give departing senior managers huge severance payments that far exceed their contractual entitlements. The BBC paid more salary in lieu of notice than it was obliged to in 22 of the 150 severance payments for senior managers in the three years to December 2012, at a cost of £1.4 million. Some of the justifications put forward by the BBC were extraordinary. For example, the former Director General, Mark Thompson, claimed that it was necessary to pay his former deputy
and long-term colleague Mark Byford an extra £300,000, not because the BBC was obliged to, but to keep Mr Byford ”fully focused’ instead of “taking calls from head hunters”. This increased Mr Byford’s severance payment to more than £1 million. Recommendation: The BBC should ensure that severance payments do not exceed what is absolutely necessary.
3. There was a failure at the most senior levels of the BBC to challenge the actual payments and prevailing culture, in which cronyism was a factor that allowed for the liberal use of other people’s money. We were not able to account for every case in which a manager who approved a settlement in excess of contract entitlement themselves later benefitted from a similar arrangement. We believe this contributed to the prevailing culture at the top of the BBC whereby giving inflated severance payments to departing managers was an acceptable way of cutting senior manager numbers and salary costs. We share the view of the BBC’s Director General, Lord Hall, that the BBC had “lost the plot” in its management of severance payments in recent years. We welcome the changes that he has made to cap severance pay.Recommendation: The BBC should remind its staff that they are all individually responsible for protecting public money and challenging wasteful practices.
4. The checks that the BBC Executive applied to severance pay for senior managers were totally inadequate. The non-executives who sat on the BBC’s Executive Board Remuneration Committee failed to provide an effective check on severance pay for the BBC’s most senior staff. In turn, the Executive failed to exercise sufficient oversight of the 40 BBC staff involved in authorising severance payments to departing senior managers. For example, senior BBC executives were seemingly unaware, until it was brought to their attention by the National Audit Office, that one departing manager received £141,000 more than their contractual entitlement. Responsibility and accountability must be clearly defined and transparent, not only at senior levels but across the organisation, to satisfy the licence fee payer that public money is being used appropriately.Recommendation: To protect licence fee payers’ interests and its own reputation, the BBC should establish internal procedures that provide clear central oversight and effective scrutiny of severance payments.
5. It beggars belief that the BBC Trust could not locate key documents about the most significant restructuring in recent years of the BBC’s Board and the associated severance payments. These documents, which included proposed payments to the BBC’s former Deputy Director General, Mark Byford, came to light after the BBC Trust Unit had concluded it held no such documents. The documentary evidence also suggests that the BBC wrote to Mr Byford to confirm his severance terms before these terms had been approved by the
Executive Board Remuneration Committee. Poor documentary records contributed to the confusion and lack of transparency about what had been proposed, discussed and approved. Recommendation: The BBC Executive and the BBC Trust need to overhaul the way they conduct their business, and record and communicate decisions properly.
6. By choosing not to challenge very large individual severance payments, the BBC Trust and its officials failed to fulfil one of its primary duties, which is to ensure the rigorous stewardship of public money. The BBC Trust approves the strategy for executive remuneration but does not examine its implementation in detail. The witnesses from the BBC Trust told us that they do not question individual payments as they are operational decisions for which the BBC Executive Remuneration Committee is responsible. In our view, this is too narrow an interpretation of the BBC’s Trust’s responsibilities. Recommendation: Given its overarching responsibility for the stewardship of public money, the BBC Trust should be more willing to challenge practices and decisions where there is a risk that the interests of licence fee payers could be compromised.
7. Our examination of severance payments exposed a dysfunctional relationship between the BBC Executive and the BBC Trust that casts doubt on the effectiveness of the BBC’s governance model. The unedifying disagreements between witnesses and the conflicting accounts of what was disclosed about individual severance payments are symptomatic of a wider breakdown in the relationship between the BBC Trust and the Executive. At present the governance model is broken. The Trust and the Executive have a limited amount of
time to demonstrate that the current governance model can be made to work. Recommendation: The BBC Trust and the BBC Executive need to ensure that decision-making is transparent and accountability taken seriously, based on a shared understanding of value for money, with tangible evidence of individuals taking public responsibility for their decisions.
