Examination of Witnesses (Questions 53-59)
13 JULY 2004
Mr Michael Grade, Dame Pauline Neville-Jones and
Professor Fabian Monds
Chairman: Mr Grade, welcome and many
congratulations on your appointment which I am sure you are too
bashful to acknowledge has been very widely welcomed.
Q53 John Thurso: I want to ask some questions
about corporate governance and some of the things you have been
doing in that regard or intend to do. Before I do that, may I
ask one short question. In many companies, when people are looking
at strategy, looking at brand building and so on, they use the
phrase of "big, hairy and ambitious goal" to describe
where they are going in 10 years or so. Do you have a big, hairy
and ambitious goal for the BBC?
Mr Grade: We published 137 pages
of it last week, which sets out a vision for the BBC role in a
very much expanded and expanding media sector, called Building
Public Value in which we set out the role which we hope will
form a key part of the national debate on whether there should
be a future for the BBC going forward. We believe, and I believe
passionately and I know I share this with all my colleagues at
the BBC, that broadcasting, which traditionally, because of spectrum
shortage and scarcity, has been very much a highly regulated public
service driven set of services for the public, first of all through
the BBC, which was set up as a public service, as opposed to America
where they set up broadcasting using the mass medium as a vehicle
for commerce and advertising, which is fine, it was their choice
. . . Britain chose a public service, the BBC. Then ITV came along.
ITV was given a monopoly on advertising revenue. In return for
having that monopoly, they were required to produce a really brilliant
regional and national federal system of public service broadcasting
to compete with the BBC. The end of spectrum scarcity means that
the private sector is now incredibly crowded, getting more crowded,
very, very competitive. Programmes and audiences are becoming
products and audiences are becoming commodities really and the
BBC stands as a bastion—not the last bastion but a bastion—against
the total regard for programmes as commodities. When we make programmes
for viewers, the viewers' and listeners' interests are paramount
and they are not shared with anybody. When you make programmes
for ITV or Channel Four or Sky, the interests of the viewers and
listeners are shared with shareholders, advertisers, the need
to drive subscriptions and so on. I believe that it is much easier
in the modern age of multi-media to make the case for a publicly
funded BBC than it would have been 20 years ago when, as I recalled
in a speech I made recently, I remember scheduling Glyndebourne
live on ITV on a Sunday night in peak time. It could not happen
today.
Q54 John Thurso: To sum it up in a word:
survival.
Mr Grade: Survival in the public
interest.
Q55 John Thurso: On page 86 of the report,
talking about corporate governance, it says "The BBC recognises
the importance of, and is committed to, applying the highest standards
of corporate governance and voluntarily complies with the Combined
Code to the extent that it is applicable" and there are two
very reasonable exceptions to that, which I do not want to go
into. Who takes the lead in ensuring compliance with the code
and what is the review process through which that compliance is
reviewed?
Mr Grade: Obviously the governors
are responsible for that. The Audit Committee chaired by Dame
Pauline obviously takes the lead on that and will have considerable
input; the auditors, who are independent of the BBC, will have
a great deal to say about our compliance with best practice.
Q56 John Thurso: The code recommends
that in addition to a chairman, there is a senior independent
non-executive. Is that an area which the BBC governors would seek
to replicate in any way?
Mr Grade: I would venture to suggest
that the vice-chairman fulfils that function in the BBC and it
may be sensible for us and for the Audit Committee to consider
whether it wishes to nominate the vice-chairman as the senior
independent director.
Dame Pauline Neville-Jones: I
have been effectively performing that role during the period when
we have not had a vice-chairman.
Q57 John Thurso: The code this year—it
may have been last year—requires the introduction of a board
appraisal system, whereby the board must appraise itself and each
member must be appraised in some way. There are various forms
of compliance with that, which range from some pretty comprehensive
ones down to everybody going through the motions. What sort of
system are you thinking of putting in and how will that work?
Mr Grade: This is part of that
process today.
Dame Pauline Neville-Jones: Michael's
predecessor used to do what is absolutely customary these days
and that was to have a session with individuals. I would imagine
that the current chairman would wish to do that. I must say that
it is something we have not yet talked about. I agree with the
implication of your question, which is that both at the level
of the Audit Committee, and we do have Sir Robert Smith on our
Audit Committee, and also at the level of the board as a whole
we do need to devise a system whereby we have a collective discussion
of whether we consider we are meeting our obligations. We certainly
have every intention of doing that. I cannot tell you that we
have done it yet. We have actually been in transition for some
time. It is something we would find valuable to do.
Q58 Michael Fabricant: Welcome back to
the Committee and welcome back to broadcasting. As well as producing
the BBC's annual report there has been another publication today
and that is the National Audit Office report which was an inquiry
into the BBC's investment in Freeview. Actually the BBC came out
rather well in this. They said their overall conclusion was "Since
the launch of Freeview, take-up of digital terrestrial television
has significantly exceeded the BBC's projections and this has
helped make progress towards digital switchover". So you
have had a pretty good, clean bill of health. Yet up until recently
the BBC has resisted the National Audit Office, or indeed any
other organisation getting involved in BBC's affairs. Was this
such a bad experience?
Mr Grade: The first thing to say
is that it is right that the governors of the BBC, after all one
of the reasons they are there is to protect the independence of
the BBC, are concerned about anything which erodes the authority
of the governors, because that goes to the central role of the
BBC which is its independence. It is inevitable that in tinkering
with the role of the governors it is right that the governors
be very circumspect about any attempt to erode the authority of
the governors. It was in that context that the debate was had.
This is not about not wanting to be accountable: it is in essence
about the role of the governors. I know that Dame Pauline was
involved in those discussions and I hope she will agree with me.
Dame Pauline Neville-Jones: I
do. We are not a department of state and we were not just keen,
but adamant that that confusion should not arise. Where we have
arrived at with the National Audit Office after considerable discussion
is agreeing with them that they and we together should agree on
a programme of value for money studies, which is a variation on
a theme, but from our point of view the variation is important
and we think that the outcome of doing studies of that kind will
be helpful and we hope will raise confidence generally in the
good management of the BBC. That study is the first in the line
and we both agreed that would be valuable to do that because it
was a recent example of an investment decision with direct implications
for the licence payer and one which they would be able to accomplish
in a reasonable length of time, that is to say quite quickly,
so you could actually see, know now, the fruits of the system.
They will obviously go on to do other things as well.
Q59 Michael Fabricant: Are you saying
that unlike departments of state the BBC will set the agenda really
as to which areas of the BBC the NAO will be allowed to look at?
Dame Pauline Neville-Jones: It
will be in agreement and that means we will have discussions.
I am quite certain the NAO will have thoughts to put to us. This
is not an attempt somehow to keep the NAO out of an area they
might want to get into but we will have an agreed programme and
it extends over a period of time so that they have an assurance
that they are going to be able to look at a range of things and
it is quite varied. It will serve the purpose which you would
like to see it serve.
Mr Grade: The thrust of the governance
reforms which we recently outlined suggests that the governors
themselves are anxious that policy decisions they make are based
not so much simply on information supplied by management but on
information which they glean for themselves independently. They
are also very keen to take outside expert advice and decisions
and policy decisions and the evidence upon which those decisions
are made are much more likely to be made publicly in future. So
I hope that we are making great strides as a matter of urgency
to address the concerns which are behind your question.
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