Examination of Witnesses (Questions 260-279)
21 JULY 2004
SIR ANTHONY
CLEAVER AND
MR JOHN
BEAUMONT
Q260 Chairman: And that was the person
who was still employed until the company was—
Mr Beaumont: Until after the HEFCE
decision.
Q261 Chairman: This was the one who got
a 3% bonus?
Mr Beaumont: Yes.
Q262 Chairman: Was there any suggestion
that the kind of information that—was it a he or a she?
Mr Beaumont: He. Martin Bannister.
Q263 Chairman: — he and his team
were giving you, the kind of information that they were coming
back with from the markets, was unpalatable, and therefore you
ignored it?
Mr Beaumont: Not at all.
Q264 Chairman: There was no evidence
at all, if we had him in front of the Committee, which we might,
that the sort of information that was feeding back to you two,
if it was unpalatable, you disregarded?
Mr Beaumont: The recurrent theme
that Nigel and his team wanted was more business courses, particularly
a flagship MBA, and we went round to make sure that we could get
one from the top international business school. We were in the
process of signing a Cass business school up for delivery in October
2004—
Q265 Chairman: Sir John Cass?
Mr Beaumont: Yes, City University,
and we had already got some sponsorship from the BBC for students
in India for that. We had to be able to persuade the university
that they wanted to do it for us; we could not go and say "We
need that course, please do it", so you had to build the
relationship and make sure they felt it was win/win, so I felt
we were taking on board the information. The other aspect I think
that was fed back quite commonly from the market was about English
language constraints, for instance, I think in the original PwC
list of countries Brazil was mentioned. Except for, let's say,
a specialist technology course or an MBA you would have to have
the courses in Portuguese, which immediately causes a problem
because, let's say, it is a course in bioinformatics, the staff
in the UK university would not be able to mark the Portuguese
and therefore it would break the quality assurance regime and
therefore you would not be able to offer the degree. So language
was an issue so we were getting English language courses, and
the final feedback was the blending, because the original model
was wholly online, particularly for undergraduates, but as soon
as you go down the blended route, because it was seen as a degree
from a specific university and not UKeU, that university in the
UK has to accredit any partner in an overseas country, quite rightly,
for quality purposes, and that involves visits, looking at staff,
and so forth.
Q266 Chairman: I do not say this in the
spirit that I am trying to blame you for this but I get the feeling
from what you are saying that the market was not there yet for
what you had to offer. Would it be fair to say you were too far
ahead of the game? That the market is not mature enough for this
product, and that is why really you have had this difficulty getting
the numbers?
Mr Beaumont: I think the market
is there. I think there is a timing issue, and I think it is quite
understandable, particularly with parents and students paying
serious amounts of money for courses, that they do not necessarily
want to be on the first course that is run, and when the decision
was made by HEFCE, we were just starting to get what were market-driven
courses and we had only one series of intakes.
Q267 Chairman: But the product range
is not that inspiring, is it? Looking at it and the universities
that are offering them, they are not riveting, are they? I am
a governor of the London School of Economics, and we have a very
strong international global brand. People like it because it is
associated with quality and we provide courses that people seem
to want. If I am looking at your range of products, firstly, you
are a disparate group of institutions—some are well known,
some less well known. With all the will in the world, if you have
got some poor chap going round the rest of the world selling these
products, it is not exactly a riveting bunch of products, is it,
yet?
Sir Anthony Cleaver: No, and this
is what you would find in any market place, is it not? In order
to get the top brand universities on your roster, they want to
see that it is going to work and so on. They are the people who
have built an international brand already, like the London School
of Economics, and they will come in once they see it is fine and
working well and so on. They do not feel the need to come in at
the embryonic stage, so our job was to take the best courses we
could get as early as possible, get the thing up and running,
and then build the quality which is what we were doing if you
look at the ones we say were just coming. It will, of course,
please you to know that I did lunch with Howard Davies in order
to discuss whether LSE could come on board and it was something
he said he was prepared to look at, but these things take time
to build.
Q268 Chairman: I understand that, but
you keep coming back to the three items: marketing, product and
platform. There are problems on each of those. You can make
excuses and say "earlier development, "have not had
time" and all the rest, and I understand that, but then when
I turn over, the area that I can get no agreement on at all is
this bonus. You said governments are risk averse and that the
Government has to justify to taxpayers but I still cannot understand
it. What do you describe yourselves as? Are you civil servants?
Public servants? Private buccaneers? What are you?
Mr Beaumont: My role was chief
executive of a company.
Q269 Chairman: What sort of company?
Mr Beaumont: A limited company.
Q270 Chairman: A not for profit company?
Mr Beaumont: No. A for profit
company.
Q271 Chairman: Limited by guarantee but
profit making?
Mr Beaumont: Yes.
Q272 Chairman: But not a normal commercial
company?
Mr Beaumont: I felt it was to
be a normal commercial company.
Q273 Chairman: Normal commercial companies
are not limited under guarantee.
Sir Anthony Cleaver: I do not
think we were limited by guarantee.
Q274 Chairman: What is the status of
this company?
Mr Beaumont: I need to check that.
Q275 Chairman: Are you telling me you
do not know the status of your company? Come on, Sir Anthony,
what sort of company is this?
Sir Anthony Cleaver: This is a
company owned by the holding company funded by HEFCE through their
holding company, and the intention was that over time we would
bring in private investors and therefore it had to conform to
all the normal company requirements, and that was the way we ran
it in accordance with all corporate governance, etc.
Q276 Chairman: But, Sir Anthony, you
are the expert on this. Is it a company limited by guarantee or
not? Is it a company that could go belly up? It cannot, can it?
The only way is if the Government takes your funding away, or
HEFCE takes your funding away?
Sir Anthony Cleaver: It is a company
funded through the holding company by HEFCE, as it says, principally
financed by HEFCE, entirely financed by equity, and has no borrowings.
That is the status of the company.
Q277 Chairman: And the universities only
put up a pound share?
Sir Anthony Cleaver: I believe
that, yes.
Q278 Chairman: So come on, John, you
are not a buccaneer entrepreneur in a risky environment, getting
up every day thinking "What's my bottom line going to be
tomorrow", are you? That has not been your role over the
last two years, has it?
Mr Beaumont: We have had targets
to meet both in terms of financial and platform delivery. It is
no different from the drivers I had when I was a director of a
plc company.
Q279 Chairman: Surely it is different
if you are lastminute.com when you are struggling to be survivors.
It is a bit different if you are chief executive of that from
being chief executive of this. You did not worry that you were
not going to get paid next week, did you?
Mr Beaumont: I think the profile
is different—
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