5 Remuneration
61. Channel 4 states that the aim of its remuneration
policy is to "attract, motivate and retain high calibre staff
and executive Board members by rewarding them with competitive
salary and benefit packages."[107]
We do not disagree with this, but were struck by the size of former
Chief Executive Andy Duncan's remuneration in 2009—a grand
total of £1.481 million. By comparison, Mark Thompson, Director-General
of the BBC, received 'only' £838,000 in financial year 2009/10.
Mr Duncan resigned as Chief Executive in November 2009. The breakdown
of his remuneration for 2009 is as follows:
£514,000 in salaries and fees
£225,00 in long term incentive payments
£731,000 in pay in lieu of notice
£11,000 in benefits
It is noteworthy that the long term incentive payment,
which required Mr Duncan to stay for only two years (from 1 July
2007 to 30 June 2009) and to meet certain performance criteria,
was originally higher—a maximum of £445,000. The Channel
4 Annual Report records that "Andy offered to waive 50% of
his entitlement to his long-term loyalty scheme payment due and
this offer was accepted by the Remuneration Committee."[108]
62. During our oral evidence session, we put it to
Lord Burns that this level of remuneration was unjustifiable.
Lord Burns observed that remuneration was "an extraordinarily
difficult issue."[109]
He mounted a partial defence of high salary levels, arguing: "that
is just the commercial reality of life. You pay people not what
is necessary to get them out of bed but what is necessary to get
them out of bed and come and work for you rather than go and work
for somebody else."[110]
He did though suggest that the days of salaries at the level of
Mr Duncan's were in the past, observing that:
some of the numbers you are looking at and some
of the figures that you are quoting do go back and relate to a
period when the whole culture sector was in a much healthier economic
situation than it is today [...] some of the salaries that you
quote reflect a period when there was enormous competition and
people were being bid from one channel or one company to another
[...] I would expect the days of those very high salaries are
gone for the time being."[111]
63. When pressed on the details of Mr Duncan's payment
in lieu of notice, Lord Burns placed the blame on the previous
regime, explaining that: "I was not at Channel 4 at the time
that those decisions were taken so I am not in a position to be
able to explain it."[112]
Chief Operating Officer Anne Bulford, who was there at the time,
confirmed that, even though Mr Duncan had resigned, Channel 4
was legally obliged to pay him £731,000 "under the terms
of his contract."[113]
The Channel 4 team refused to be drawn on our speculation that
one implication that could be drawn from the settlement was that
Mr Duncan's departure had not been entirely voluntary.
64. Not for the first time—see paragraph 16—Channel
4's deputy Chairman Lord Puttnam was rather more forthright,[114]
asserting baldly that salaries at Channel 4, in common with those
at the BBC, had got out of control "in a moment of madness."[115]
He made clear, though, that the deals for Mr Duncan and Channel
4's former director of television Kevin Lygo, had already been
done when he arrived on the Board.
65. The current Channel 4 team was on safer ground
outlining the measures in train to curb previous excesses. As
Lord Burns noted, "David [Abraham]is being employed on a
lower salary than his predecessor"[116]
and said that "if you compare it with the chief executive
of ITV and the chief executives of the other commercial broadcasters
I think you will see that it is significantly lower."[117]
Mr Abraham is on a basic salary of £490,000, which is £180,000
below Mr Duncan's basic salary at its height.[118]
Mr Abraham further explained that he had been recruited "without
a long-term incentive package (LTIP) [...]there has been a correction
in salary and there has been the removal of LTIP so there has
been quite a significant correction in the benchmarks that have
been used so far."[119]
He is, though, entitled to a performance related bonus of up to
50% of his basic salary.[120]
66. Mr Abraham also promised to be firmer on other
top salaries at Channel 4, affirming that: "I can guarantee
that we will not be hiring the senior programming executive at
the same level as the individual who has occupied that role until
recently."[121]
In addition, Mr Abraham observed that fewer people were now earning
higher salaries at Channel 4, explaining that: "one of the
things I have done since my arrival is to look quite carefully
at the number of people in senior management at Channel 4 and
recently announced my intention to reduce that by around 25% at
the end of the year." In response to our questioning, he
told us that there were previously around 90 people at Channel
4 earning in excess of £100,000, but that this had now been
reduced to "around 70 people, so the direction of travel
is significantly lower."[122]
Mr Abraham summed up Channel 4's overall approach as follows:
we are seeking to create the right trade-off
between that attraction [of working for Channel 4] and being reasonably
competitive but never paying top dollar.[123]
67. The remuneration package that Mr Duncan received
was unacceptably high. The award of a loyalty bonus for only two
years service was wrong and should not be repeated. We deplore
the decision process that previously inflated the remuneration
packages of top Channel 4 management to indefensible levels, and
welcome signs that Channel 4 is now taking steps to adjust senior
remuneration downwards. We will continue to keep a close eye on
senior remuneration in future Annual Reports.
107 Channel 4 2009 Annual Report, p 132 Back
108
Ibid, p 133 Back
109
Q 35 Back
110
Ibid. Back
111
Ibid. Back
112
Q 41 Back
113
Q 44 Back
114
Radio 4, The Media Show, 22 September 2010 Back
115
Ibid. Back
116
Q 35 Back
117
Q 49 Back
118
Channel 4 2008 Annual Report, p 129 Back
119
Ibid. Back
120
Q 53 Back
121
Q 49 Back
122
Q 35 Back
123
Q 53 Back
|
