BBC severance packages - Public Accounts Committee Contents

2  Governance

8. The BBC's Executive Board Remuneration Committee, which comprises non-executives, is responsible for scrutinising and approving severance pay for Executive Directors, except for the Director General.[22] Marcus Agius, who was the Chairman of the Committee until November 2012, considered that senior BBC managers 'suffered' a discount in their salary compared to what they could get in the commercial sector, and that the decision to inflate Mark Byford's severance pay by around £500,000 represented value for money.[23] However, the BBC Trust considered that the non-executives had been 'completely out to lunch' with respect to what they thought was acceptable pay in a public body.[24]

9. Documents seen by this Committee suggested that the BBC reached agreement with Mark Byford on his severance pay before the Executive Remuneration Committee had authorised it. The Executive Board Remuneration Committee approved the proposed payment on 11 October 2010.[25] However, the BBC Trust gave us a copy of a letter to Mark Byford dated 6 October 2010, which had been signed by the BBC's Director of Human Resources, that confirmed the terms of the severance pay that were ultimately agreed.[26] The BBC's Director of Human Resources told us that she had been advised by colleagues that the letter was 'incorrectly dated' and had 'probably' not been sent until 12 or 13 October 2010.[27] That may or may not be true. Taken at face value, the letter was signed off before the Remuneration Committee approved the proposed payment, suggesting that the decision had already been taken.

10. The BBC acknowledged that it had given divisional directors too much autonomy and applied insufficient central oversight of severance payments. For senior managers below the Executive Director grade, BBC divisions had delegated authority to approve individual severance payments up to £500,000. More than 40 people in the BBC were involved in authorising severance pay for senior managers, with limited central oversight.[28] For example, one departing manager received £141,000 above the individual's contractual entitlement, but senior BBC executives were seemingly unaware of this payment until it was brought to their attention by the National Audit Office.[29]

11. We asked the BBC Trust about its role in scrutinising severance payments for senior BBC managers. The BBC Trust has a duty under article 33(7) of the Royal Charter to approve the strategy for executive pay.[30] It also has a duty to protect the licence fee payer's interest. It received regular reports from the Executive on progress in reducing senior manager numbers. Despite having these duties and condemning the scale of severance pay for senior managers, the BBC Trust told us that the provisions of the Royal Charter mean that it had neither the responsibility nor power to intervene in decisions about remuneration, except that for the Director General.[31] Accordingly, when it was informed about the proposed £1 million payment to Mark Byford and severance for another BBC Executive, Sharon Baylay, it did not question the detail as it considered that the Executive Board Remuneration Committee was responsible for scrutinising the proposals.[32] Yet the BBC Trust has a wider responsibility for value for money and its constitutional duties include stewardship of the licence fee, upholding the public interest and ensuring the BBC observes the highest standards of openness and transparency.[33]

12. The BBC Trust was told about the severance pay for Mark Byford and Sharon Baylay because their departures were part of a proposal to restructure the BBC's Executive Board.[34] However, in February 2013, officials from the BBC Trust had concluded that the Trust had not received any documents about these payments. They later found in June 2013 that the Trust had in fact been told about the payments in a note from the former Director General, Mark Thompson, dated 7 October 2010.[35] After our evidence session in July 2013, the BBC Trust uncovered another document setting out options for Mark Byford's severance pay, which had been sent by Mark Thompson to Sir Michael Lyons in September 2010. The Head of the BBC Trust Unit attributed the initial failure to identify key documents to these documents not being submitted for approval by the Trust and also naming conventions. Given the significance of the proposals set out in these documents, we found this explanation incomprehensible.[36]

13. The witnesses disputed each other's account of discussions that had taken place and how some of the documentary evidence should be interpreted.[37] Most significantly, the witnesses from the BBC Trust considered that the former Director General, Mark Thompson, had withheld important information about the terms of Mark Byford's severance pay.[38] However, Mark Thompson considered that in his written and verbal advice to the Trust he had been clear on all aspects of the proposed payments.[39] The absence of a clear audit trail means that it is not possible to determine how much individual members of the Trust knew about the terms of the payment.[40]

14. The BBC's Director of Human Resources stated in her testimony on 10 July 2013 that she did not believe that she had seen or been involved in preparing the note sent to the BBC Trust on 7 October 2010 about the restructuring of the Executive Board and the £1 million severance package for the Deputy Director General. We expressed scepticism about this at the time.[41] She wrote to us nearly two months later, on 2 September, to clarify that she had been involved in preparing the note.[42] The same witness made statements during our follow-up session in September 2013 that appeared to contradict earlier statements; and described the use of "sweeteners" as a strange term to apply to severance, despite asking in an email disclosed to a member of our Committee for a 'sense of the scale of the sweetener'.[43]

22   Qq 7, 10, 16, 24, 56-57, 256 Back

23   Qq 67, 304, 408 Back

24   Q 45 Back

25   Q 309 Back

26   ibid Back

27   Q 314, 323 Back

28   Qq 89, 104, 111 Back

29   Q 99 Back

30   Qq 2,13; Department of Culture, Media and Sport, Copy of Royal Charter for the continuance of the British Broadcasting Corporation, CM 6925, October 2006 Back

31   Qq 2, 7, 10-11, 14, 75-76 Back

32   Q 283 Back

33   Q2, 17; Department of Culture, Media and Sport, Copy of Royal Charter for the continuance of the British Broadcasting Corporation, CM 6925, October 2006 Back

34   Q 62 Back

35   Q 291-292 Back

36   Q 310, 339-344 Back

37   Q 210 Back

38   Q 3, 8, 12, 18, 274, 271, 280, 353, 366 Back

39   Qq 269, 313 Back

40   Q 366 Back

41   Qq 26-29 Back

42   Qq 238-240  Back

43   Qq 379-387, 403 Back

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Prepared 16 December 2013