House of Commons Committee of Public Accounts
BBC severance packages
Thirty-third Report of Session 2013–14
Volume 1: Report, together with formal minutes and oral evidence
Written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/pac
Ordered by the House of Commons to be printed 4 December 2013
HC 476 Published on 16 December 2013 by authority of the House of Commons London: The Stationery Office Limited £13.50
Committee of Public Accounts The Committee of Public Accounts is appointed by the House of Commons to examine ‘‘the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure, and of such other accounts laid before Parliament as the committee may think fit’’ (Standing Order No 148).
Current membership Rt Hon Margaret Hodge (Labour, Barking) (Chair) Mr Richard Bacon (Conservative, South Norfolk) Stephen Barclay (Conservative, North East Cambridgeshire) Guto Bebb (Conservative, Aberconwy) Jackie Doyle-Price (Conservative, Thurrock) Chris Heaton-Harris (Conservative, Daventry) Meg Hillier (Labour, Hackney South and Shoreditch) Mr Stewart Jackson (Conservative, Peterborough) Fiona Mactaggart (Labour, Slough) Austin Mitchell (Labour, Great Grimsby) Nicky Morgan MP (Loughborough, Conservative) Nick Smith (Labour, Blaenau Gwent) Ian Swales (Liberal Democrats, Redcar) Justin Tomlinson (Conservative, North Swindon)
Powers Powers of the Committee of Public Accounts are set out in House of Commons Standing Orders, principally in SO No 148. These are available on the Internet via www.parliament.uk.
Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/pac. A list of Reports of the Committee in the present Parliament is at the back of this volume. Additional written evidence may be published on the internet only.
Committee staff The current staff of the Committee is Adrian Jenner (Clerk), Claire Cozens, (Committee Specialist), James McQuade (Senior Committee Assistant), Ian Blair and Yvonne Platt (Committee Assistants) and Alex Paterson (Media Officer).
Contacts All correspondence should be addressed to the Clerk, Committee of Public Accounts, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5708; the Committee’s email address is [email protected]
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Contents
Report Page
Summary 3
Conclusions and recommendations 5
1 BBC severance policy and practice 7
2 Governance 9
Formal Minutes 12
Witnesses 13
List of printed written evidence 13
List of Reports from the Committee during the current Parliament 14
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Summary
The creative talents of the many thousands of people who work for the BBC have helped maintain its reputation as the world’s leading public service broadcaster. The BBC Executive and the BBC Trust have vital roles to play in protecting this reputation whilst providing value for money for licence fee payers. We were therefore dismayed to find that many departing senior managers received ‘sweeteners’ in their severance packages that far exceeded their contractual entitlements. Both the BBC Executive and the Trust have let down licence fee payers by allowing this culture to develop. The unedifying spectacle of witnesses from the BBC Executive and the BBC Trust disputing each other’s evidence on severance pay revealed a serious breakdown in governance, record-keeping and accountability.
We welcome the decision taken by Lord Hall, shortly after he took up post as Director General of the BBC in April 2013, to cap severance payments at £150,000. Lord Hall also assured the Committee that pay in lieu of notice would be removed. These are very welcome steps towards more control and responsibility over severance payments that we hope will be administered in the interests of licence fee payers. These changes need to be matched by the BBC Trust addressing its failure to provide rigorous scrutiny and challenge, on behalf of licence fee payers, of the Executive’s management of severance payments. Those recent revelations have left us with concerns about the effectiveness of the present governance arrangements at the BBC.
The doubts we expressed about some of the oral evidence given by witnesses during our hearing in July 2013 proved well-founded. We were very sceptical when the BBC’s Director of Human Resources told us in July 2013 that she did not believe she had seen or been involved in preparing a note on the departure of the BBC’s former Deputy Director General, Mark Byford. Around two months later, in September, the Director of Human Resources confirmed that she had in fact been involved in preparing the note. We remain concerned about the veracity of other parts of the oral evidence we heard. Misleading a select committee constitutes contempt of Parliament, which can have very serious consequences. Witnesses must ensure that their evidence is free from misstatement and where a correction is necessary, inform the Committee immediately.
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Conclusions and recommendations
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
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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.
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1 BBC severance policy and practice
1. The creative talents of the many thousands of people who work for the BBC have helped maintain its reputation as the world’s leading public service broadcaster. However, during our examination of the severance package awarded to the BBC’s former Director General, George Entwistle, we became increasingly concerned about the scale of severance pay for other senior managers and the impact of this on public trust in the BBC.1 We therefore recommended that the National Audit Office carry out a review. The National Audit Office examined an initial sample of 60 severance payments in the three years to December 2012,2 before extending its review to include all severance payments to senior BBC managers during this period.3
2. In the three years to December 2012, the BBC spent £25 million on severance pay for 150 departing senior managers.4 The BBC told us that the significant number of severance payments during this period reflected the steps it took to reduce senior manager numbers, from 624 in March 2010 to 445 in March 2013.5 The BBC estimates that reducing senior manager numbers resulted in a cumulative saving of £35 million in the three years to December 2012.6
3. In 22 of the 150 severance cases in the three years to December 2012, the BBC paid more salary in lieu of notice than it needed to, at a cost to licence fee payers of £1.4 million.7 For example, the BBC paid its former Deputy Director General, Mark Byford, around £500,000 more salary in lieu of notice than it needed to.8 The BBC announced in October 2010 that it would make Mr Byford redundant. However, it chose to delay giving Mr Byford his formal notice until he left in June 2011, so that he could receive his maximum entitlement of 12 months’ salary in lieu of notice. In practice, Mr Byford was given eight months’ notice and the BBC need only have paid him the shortfall of four months’ pay in lieu of notice.9 The BBC’s former Director General, Mark Thompson, told us that the BBC agreed to pay Mr Byford the extra eight months’ pay in lieu of notice, worth around £500,000, to keep him “fully focused” instead of “taking calls from head-hunters”.10 Mr Byford received more than £1 million when he left the BBC.11
1 Committee of Public Accounts, British Broadcasting Corporation: Off–payroll contracting and severance package for the Director General, Twenty-second Report of Session 2012–13, HC 774, December 2012. 2 C&AG’s report, Severance payments and wider benefits for senior BBC managers: Report by the Comptroller and Auditor General presented to theBBC Trust Finance Committee, July 2013 3 C&AG , Severance payments for senior BBC managers: supplementary note September 2013 4 Q 96 5 Qq 203, 233, C&AG’s report July 2013 Figure 6 6 Qq 95, 168, 210 7 C&AG report, Severance payments for senior BBC managers: supplementary note September 2013 8 Q 215 9 Qq 8, 17, 22, 65, 249, 313, 318 10 Qq 216, 220 11 Q 65
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4. The BBC claimed that it had been ‘custom and practice’, but not a legal requirement, to add salary in lieu of notice to departing managers’ standard redundancy entitlement, regardless of whether they worked their notice.12 However, this was not applied consistently. Of the 150 senior managers who received severance pay in the three years to December 2012, 62 received payments equivalent to the BBC’s standard redundancy policy and 17 received less.13
5. The BBC included other types of non-contractual payments in some severance packages. For example, it included £49,000 for training and equipment in a severance package to improve a departing manager’s career prospects; in another case it committed to purchasing at least £60,000 of consultancy services from a departing manager.14 One senior manager who was working on a part-time basis had their severance payment calculated on a full-time basis.15
6. The BBC’s severance arrangements allowed departing managers to receive large payouts even if they had had secured job offers before leaving the BBC.16 For example, the BBC agreed to pay severance to a senior manager who had a job offer, on the basis that if it did not do so it would cost more to remove him if his post was subsequently made redundant. This individual subsequently elected to repay his severance payment on learning of deficiencies in the way the payment had been authorised.17 The BBC has not asked any senior managers to return non-contractual payments on the grounds that it has no legal grounds to do so.18
7. The BBC attributed the payment of non-contractual ‘sweeteners’ to a prevailing culture where offering generous payouts was considered to be a good way of managing severance cases.19 Lord Hall, who took up post as Director General of the BBC in April 2013, concluded that the BBC had ‘lost the plot’.20 He announced on his second day in post that he would tackle the issue of severance pay and subsequently announced that he would cap individual severance payments at £150,000. Severance payments in excess of £75,000 must now be approved by the BBC’s Senior Management Remuneration Committee. The BBC is also removing the use of payment in lieu of notice on the grounds that senior managers should work their notice and then leave.21
12 Qq 80-83, 241-251 13 Q 126 14 Q 95 15 Q 136-7 16 Q 129-33 17 Qq 107-110, 147, 374 18 Qq 134-135, 149 19 Qq 81-82, 383, 389 20 Qq 196-8 21 Qq 170-1, 183, 206
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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
22 Qq 7, 10, 16, 24, 56-57, 256 23 Qq 67, 304, 408 24 Q 45 25 Q 309 26 ibid 27 Q 314, 323 28 Qq 89, 104, 111 29 Q 99 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
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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
31 Qq 2, 7, 10-11, 14, 75-76 32 Q 283 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 34 Q 62 35 Q 291-292 36 Q 310, 339-344 37 Q 210 38 Q 3, 8, 12, 18, 274, 271, 280, 353, 366 39 Qq 269, 313 40 Q 366
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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
41 Qq 26-29 42 Qq 238-240 43 Qq 379-387, 403
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Formal Minutes
Wednesday 4 December 2013
Members present:
Mrs Margaret Hodge, in the Chair
Mr Richard Bacon Fiona Mactaggart Stephen Barclay Nick Smith Guto Bebb Ian Swales Meg Hillier Justin Tomlinson
Draft Report (BBC severance packages), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 14 read and agreed to.
Conclusions and recommendations agreed to.
Summary agreed to.
Resolved, That the Report be the Thirty-third Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.
Written evidence was ordered to be reported to the House for printing with the Report (in addition to that ordered to be reported for publishing on 10 July and 9 September 2013.
[Adjourned till Monday 9 December at 3.00 pm
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Witnesses
Wednesday 10 July 2013 Page
Lucy Adams, Director, Human Resources, Lord Hall of Birkenhead, Director General BBC, Lord Patten of Barnes, Chairman, BBC Trust and Anthony Fry, BBC Trustee Ev 1
Monday 9 September 2013
Mark Thompson, former Director-General, BBC, Marcus Agius, former Chairman of the BBC Executive Board Remuneration Committee, Lord Patten of Barnes, Chairman BBC Trust, Anthony Fry, BBC Trustee, Sir Michael Lyons, former, Trust Chairman, Lucy Adams, Director, Human Resources, BBC and Nicholas Kroll, Director, BBC Trust Ev 27
List of written evidence
(published in Volume II on the Committee’s website www.parliament.uk/pac)
1 BBC Ev w1;2;3;14 2 BBC Trust Ev w10;11;12 3 Mark Thompson Ev w15;37 4 Marcus Agius Ev w51;56 5 Sir Michael Lyons Ev w53
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List of Reports from the Committee during the current Parliament
The reference number of the Government’s response to each Report is printed in brackets after the HC printing number.
Session 2013–14 First Report Ministry of Defence: Equipment Plan 2012-2022 and Major HC 53 Projects Report 2012 Second Report Early Action: landscape review HC 133 Third Report Department for Communities and Local Government: HC 134 Financial sustainability of local authorities Fourth Report HM Revenue & Customs: tax credits error and fraud HC 135 Fifth Report Department for Work and Pensions: Responding to change HC 136 in jobcentres Sixth Report Cabinet Office: Improving government procurement and HC 137 the impact of government’s ICT savings initiative Seventh Report Charity Commission: the Cup Trust and tax avoidance HC 138 Eighth Report Regulating Consumer Credit HC 165 Ninth Report Tax Avoidance – Google HC 112 Tenth Report Serious Fraud Office – redundancy and severance HC 360 arrangements Eleventh Report Department of Health: managing hospital consultants HC 358 Twelfth Report Department for Education: Capital funding for new school HC 359 places Thirteenth Report Civil Service Reform HC 473 Fourteenth Report Integration across government and Whole-Place HC 472 Community Budgets Fifteenth Report The provision of the out-of-hours GP service in Cornwall HC 471 Sixteenth Report FiRe Control HC 110 Seventeenth Report Administering the Equitable Life Payment Scheme HC 111 Eighteenth Report Carrier Strike: the 2012 reversion decision HC 113 Nineteenth Report The dismantled National Programme for IT in the NHS HC 294 Twentieth Report The BBC’s move to Salford HC 293 Twenty-first Report Police Procurement HC 115 Twenty-second Report High Speed 2: a review of early programme preparation HC 478 Twenty-third Report HM Revenue & Customs: Progress in tackling tobacco HC 297 smuggling Twenty-fourth Report The rural broadband programme HC 474 Twenty-fifth Report The Duchy of Cornwall HC 475 Twenty-sixth Report Progress in delivering the Thameslink programme HC 296 Twenty-seventh Report Charges for customer telephone lines HC 617 Twenty-eighth Report The fight against Malaria HC 618
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Twenty-ninth Report The New Homes Bonus HC 114 Thirtieth Report Universal Credit: early progress HC 619
Committee of Public Accounts: Evidence Ev 1
Oral evidence
Taken before the Committee of Public Accounts on Wednesday 10 July 2013
Members present: Margaret Hodge (Chair)
Mr Richard Bacon Fiona Mactaggart Stephen Barclay Austin Mitchell Guto Bebb Nick Smith Chris Heaton-Harris Ian Swales Mr Stewart Jackson Justin Tomlinson ______
Amyas Morse, Comptroller and Auditor General, Gabrielle Cohen, Assistant Auditor General, Peter Gray, Director, National Audit Officer and Marius Gallaher, Alternate Treasury Officer of Accounts, were in attendance.
Examination of Witnesses
Witnesses: Lucy Adams, HR Director, BBC, Lord Patten of Barnes, Chairman, BBC Trust, Lord Hall of Birkenhead, Director General, BBC and Anthony Fry, BBC Trustee gave evidence.
Chair: Welcome to you all. I start by declaring an executive, but you have overall responsibility for interest: I have a daughter who works for the BBC. Do value for money, and your constitutional duties any other Members have relatives who work there? include stewardship of the licence fee and upholding Mr Bacon: I should declare an interest, as my wife the public interest—we can agree on that. Do you feel used to work for the BBC. I also once took a payment that you failed in this regard properly to exercise your from the BBC when I took part in a general election overview of the executive and, if so, why do you think rehearsal when I was a parliamentary candidate in that happened? Vauxhall. I succeeded in doubling my opponent’s Lord Patten of Barnes: I do not think—you would majority, and I was paid £50. probably expect me to give this answer—that this is a Lord Patten of Barnes: I hope it was my election. problem of the overall structure of governance at the BBC. I think that problems arose in the way that Q1 Chair: You were paid for doubling your policies were delivered by the executive, but let me opponent’s majority? make a very obvious point at the outset: there is We have an awful lot to get through, so I would be plainly a dilemma if you are responsible for value for immensely grateful to you all if you could be succinct money, but the charter, Ministers and White Papers in your answers; if I interrupt you, it is because I think make it absolutely clear that you are not responsible that you are going away from the purpose of the for running things. question that has been asked. Thank you all for Operationally or, on the other side of the sheet, attending. editorially, the charter is absolutely explicit about I will start with the Trust, so this is to you, Lord where responsibility for executive pay, remuneration Patten. Did you know about all these severance and numbers lies. Since 2007, and particularly since payments to BBC staff? 2009, the Trust has been pressing for a reduction in Lord Patten of Barnes: We knew that severance pay overall at the BBC and of numbers of senior staff payments were being made. We assumed, and were at the BBC. That has had some pretty good results, told regarding two specific cases—this was the only but at a price that was greater than should have been time, I think, when the director general talked to us the case. about them—that they were being made on contractual terms. If I may say so, without Q3 Chair: In your response to this particular NAO contradicting what you have just suggested we should Report, you explicitly say that the executive should do, we asked for the Report because we were implement the recommendations of the NAO and that concerned about the overall size of severance it should “report back to us on progress”. So you do payments, and wanted to see if we could reduce them, see a legitimate role on monitoring the albeit that they were contractual. It was a question of implementation of a strategic policy set by the Trust, shock and dismay for us to discover how many had or set by the Trust in concert with the executive, as been beyond contractual and had therefore been even being part of your function. higher than they needed to be. Lord Patten of Barnes: Certainly, and I understand that, before I became chairman, there were five Q2 Chair: It is the shock—the size of them and the different meetings in 2009 between our remuneration fact that they are non-contractual—that is exercising committee, the Trust and the BBC about the the Committee and the public. I know that you strike implementation of the policy on pay. There were three a balance between your proper duties and those of the meetings in each of the following years, so we have Ev 2 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry had a continuous dialogue with the executive about have been before us and, with the greatest respect— the implementation of the policy. We have had regular you are a very credible witness—you come and presentations of figures that have shown what excuse yourself on Entwistle, you come and excuse purported to be value-for-money studies of each stage yourself on the DMI, and you are going to come and of the redundancy and severance programmes. excuse yourself today on these things. One begins to As I said earlier, there was one case involving two of wonder: what on earth have you been doing? Why the people who are covered in case studies. The then haven’t you picked up these outrageous—to us and to director general contacted the Trust about two people the general public—wastes of licence fee payers’ who were being made redundant under “contractual money? terms”, as it said in his letter. I totally agree with the Anthony Fry: Without going into ancient history, it is findings of the NAO on both those cases, which seems fair to say that I did not come to excuse myself on to me to be clear and helpful to the Committee, and Entwistle; I came to tell you how we had reached the helpful to us. conclusion that we had reached—
Q4 Chair: So you think that you should have known. Q9 Chair: No, you always come and say, “This is I completely understand that those within contractual terrible; I am really sorry.” obligations are an executive decision but, where they Anthony Fry: To be fair, on George Entwistle, I did exceed contractual obligations, should the Trust have not come and say, “This is terrible; I am very sorry.” known? I said to you, “I am coming here to explain to you Lord Patten of Barnes: Yes, and if you call a previous why we reached the decision we took on that director general of the BBC in due course, I will be particular evening and that weekend,” which is very as interested as you in why we didn’t know. different. In regard to this particular case— Chair: With respect, that was not how you said it, but Q5 Fiona Mactaggart: Did you think to ask any we will let that go. questions on those memos when they said “in contractual terms”? Q10 Fiona Mactaggart: You said: “Did I feel good Lord Patten of Barnes: I am not trying to cop out of about it? Absolutely not. Do I feel good about it answering the question, but the two cases that I am now? No.” talking about were before I became chairman of the Anthony Fry: But, if I may say, I did finish by saying Trust. that it was still the right decision to take. There is a difference between, “Do I feel good about spending Q6 Fiona Mactaggart: Perhaps Mr Fry should large amounts of licence fee payers’ money? answer. Absolutely not”—I made that consistently clear to the Anthony Fry: I would be happy to. Those cases were Committee—and whether I would take the same put to us. We were assured that they were within decision if I was asked to do it again, to which the contractual terms. We were told that they had been answer is yes. signed off in the proper fashion by the remuneration Going back to the question you asked in regard to committee of the BBC executive board which, as you October 2010, The Trust has no locus in regard to know, comprises solely non-executive directors. setting remuneration for people other than the director general. That is the fact. We were informed, and we Q7 Fiona Mactaggart: Actually, you got those notes were informed on two bases: first, “This is within before the remuneration committee signed them off. contractual terms,” and, secondly, “It has been Anthony Fry: Absolutely, and specifically we were approved by the body that is designated to approve told about them for information, because it was remuneration.” recognised in those notes that we had no power to intervene. It was a matter for the executive Q11 Chair: Did you look at the details? remuneration committee, made up of a set of non- Anthony Fry: We are not in a position, as the Trust, executive directors from outside the BBC, and we to examine the individual details of the executive were assured that they had signed them off as being remuneration. There is nothing we can do about it. We appropriate payments. are not authorised under the role—
Q8 Chair: This is a very simple thing. The note of 7 Q12 Chair: Did you look? I am just asking a October 2010 refers to Mark Byford, and you are told monitoring question. that it is within contractual obligations. You are then Anthony Fry: We did not look. If you are asking me told at the end that he has to stay for another eight whether I read the contractual letter that passed months because there are critical functions that he between Mr Byford and the BBC, no, I did not. must deal with and there is no one better placed to advise on the design of a failsafe new system, so there Q13 Fiona Mactaggart: But the problem is that is a further four months to do that. You know all that article 33(7) of the charter says that the “strategy” for from reading this letter. You also know, because you executive payment that the remuneration committee were told, that he was going to get a year’s pay in lieu has to fulfil must be “approved by the Trust”. of notice, although the decision to part company with Anthony Fry: The strategy does. him was made at this time. I cannot understand why you did not spot it, Mr Fry. Q14 Fiona Mactaggart: So you approve the strategy, I cannot understand. This is the third time that you but I think what you are trying to suggest to us is that Committee of Public Accounts: Evidence Ev 3
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry you do not have any responsibility for making sure are paid in exactly the same way as you would in a that the strategy that you agree is carried out. We find public company. The responsibility for setting those that hard to believe. We think that if you approve a terms and conditions, like with a public company, are strategy, you have to make sure that it happens. set by the executive board remuneration committee Anthony Fry: Okay. I actually think there is a comprising non-executive directors. difference. The BBC executive was under The questions about the terms and conditions, with considerable pressure from the Trust, for a period of respect, could as easily, and probably as appropriately, nearly two years, to address the fundamental issue of be directed to those non-executive directors as to the number of senior managers and the total cost of members of the Trust. They are the people who are the payroll. The papers that were presented to us in ultimately responsible and ultimately accountable. regard to the strategy going forward, when we got to 2009, therefore looked at the planned reduction in the Q17 Chair: Article 23(f) of the charter states that the total number of senior managers, the total costs BBC should observe the highest standards “of involved in making those reductions and the impact openness and transparency.” If we look at the Mark of that on the overall finances of the BBC. Byford case, was it part of his contract that he take The NAO Report makes it very clear that, in strategic pay in lieu of holiday for seven years previously? Was terms, that direction of travel was implemented and it part of his contract that he got payment in lieu of represented in terms of the reduction in the number of notice when he was actually working for another eight mangers, and was an appropriate strategy to be months? Was that in his contract? Why was that not adopted. You may be asking me, as a strategic body, whether you then go down into the individual weeds. open? Why didn’t the Trust meet its obligations on If the numbers that you are getting collectively add up public accountability and transparency? I think, Mr to the numbers that you have approved in terms of the Fry, with the greatest respect, that you have failed. overall strategy document, I do not believe that that is Stephen Barclay: Could we just have an answer to the job of the strategic authority. Indeed, I think we that point? Were those two points within the are specifically barred—and should be—from getting contractual entitlement to Mr Byford? involved, not least because one of the reasons this was Anthony Fry: I have not seen Mr Byford’s contract. I set up under the royal charter was to exclude the cannot comment on that. governing body of the BBC from the sort of detailed involvement that had been around during the time of Q18 Stephen Barclay: Did you ask the director the governors, which was why the remuneration was general whether the payment to Mr Byford was on extracted— contractual terms? Chair: It is one thing to be involved in decisions; Anthony Fry: Yes, and that was confirmed by the doing monitoring is another thing. I would suggest director general and by the executive remuneration that monitoring to protect the interests of the licence committee. fee payer—exercising proper oversight—did not occur. Q19 Mr Bacon: Can you confirm which director general you are talking about? Q15 Mr Bacon: I don’t understand how you can Anthony Fry: Mr Thompson. comply. Ms Mactaggart mentioned article 33(7) of the charter. The second sentence states: “The terms on Q20 Chair: And who else worked with him, Ms which such members are appointed”—executive Adams? Were you involved in that? members—“must be compatible with this Lucy Adams: I was involved in that. requirement”, which is the requirement of the remuneration committee to “determine the Q21 Chair: Why did you agree it outside the remuneration of executive members in accordance with a strategy approved by the Trust.” How can you contract? Why did you write a letter? Presumably you evaluate whether that has happened? How can you were part of writing a letter that states these evaluate whether members are appointed in a way that redundancies will take place on the basis of the terms is compatible with the requirement if you do not set out in their contracts, and then proceeded to check? ignore it? Anthony Fry: Because, as you will be aware, if you Lucy Adams: Mr Byford had a letter confirming that are a member of the executive board of the BBC, your he would receive 12 months’ redundancy— remuneration, and terms and conditions, will be set out clearly in the annual report of accounts, among Q22 Chair: Everybody now accepts that you settled other places. outside the terms of the contract. Why, in this letter that went to the BBC Trust, did you say that you did Q16 Mr Bacon: You are just saying that putting it in a settlement in the terms of the contract when you an annual report of accounts means that you have absolutely blatantly did not? fulfilled— Lucy Adams: What we did was to provide Mark Anthony Fry: We, by definition, see the information Byford with 12 months’ redundancy entitlement, that will go into the annual report of accounts. That is which he was entitled to, and payment in lieu of public information available to anyone sitting in this notice. room and anyone sitting outside. Licence fee payers Chair: But he worked for eight months. can see how much members of the executive board Fiona Mactaggart: He got paid twice. Ev 4 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Q23 Mr Bacon: With respect, the question was: why paragraph on page 2: “This serves to underline that did you allow a letter to go to the Trust saying that it this was an institutional rather than an individual was in accordance with the contractual terms? failing. It also demonstrates the need for more Lucy Adams: Forgive me; I am not aware of the letter rigorous Executive oversight and simpler processes that went to the Trust. I did not actually write that going forward.” Lord Patten, I would like to ask you letter. What I am trying to explain to you is that— some questions relating to George Entwistle. Was George Entwistle your favourite candidate to become Q24 Mr Bacon: Who did? director general? Lucy Adams: I believe it was Mr Thompson who Lord Patten of Barnes: He was the unanimous choice wrote that letter. of the Trust. Mr Bacon: Mr Thompson wrote that letter. It is all coming back to Mr Thompson, isn’t it? Q31 Mr Jackson: That is not an answer to my Lucy Adams: And this was an arrangement that was question. Was he your favourite for appointment to signed off by the executive remuneration committee director general? Was he your preferred choice? chaired by Marcus Agius, with two other non- Lord Patten of Barnes: By the time we had executives on it. interviewed all the other candidates, clearly. He was the unanimous choice. Q25 Mr Bacon: For HR matters, wouldn’t the director general have relied on you? Q32 Mr Jackson: How much did the BBC spend on Lucy Adams: Yes. consultants to obtain his eventual employment as director general? Q26 Mr Bacon: Didn’t you have a hand in drafting Lord Patten of Barnes: We had two exercises. First, the letter? How would Mr Thompson have known we had a trawl of who might be available in the whether it was in contractual terms? marketplace, then we had a specific effort to secure Lucy Adams: Can I just answer your question? In candidates from outside as well as inside the BBC. As terms of actually providing the arrangement for Mr I recall—if I have got this figure wrong, I will correct Byford to leave the organisation, I was involved in it as soon as possible—we spent about £180,000 with advising Mr Thompson. I don’t think, as the NAO Egon Zehnder1. pointed out, that it was acceptable for him to get such a large payment in lieu of notice. I am not trying to Q33 Mr Jackson: For a candidate who was already defend that; I am trying to explain that the situation potentially identified? at the time was that Mr Byford was aware of custom Lord Patten of Barnes: No, for one of scores who and practice with regard to other executives. We applied. He was one of four from inside the BBC who wanted to enable a smooth transition with minimum got to the shortlist, and one of eight from inside and disruption. Mr Thompson was very keen that Mr outside the BBC who got to the shortlist. Byford stayed on to cover the royal wedding and so on but, as the NAO pointed out, this was eight Q34 Mr Jackson: Do you regret your decision to months’ notice that could have been avoided. refuse the National Audit Office permission to audit the Entwistle pay-off at the time? Q27 Chair: Ms Adams, are you telling us that you Lord Patten of Barnes: No. never saw the memo dated 7 October 2010? You never saw it? Q35 Mr Jackson: Why not? Lucy Adams: I don’t believe so, but what I did do Lord Patten of Barnes: I will explain. The National is provide— Audit Office came to us. We thought that since Anthony Fry was appearing in front of this Q28 Chair: You don’t believe so? Either you did or Committee, since I was appearing in front of the you didn’t. Select Committee on Culture, Media and Sport in the Lucy Adams: I don’t believe so. I can’t say with next couple of weeks, since we were going to make absolute certainty. all the literature available to this Committee, which we duly did, it was better to ask the NAO to look Q29 Chair: I can’t believe, knowing how at severance payments in general, including George organisations work, that it didn’t go around as a draft Entwistle’s. They did that, and I think the report is and wasn’t shared with you, as director of HR. I find excellent. that incredibly difficult to believe. I don’t believe it. Lucy Adams: But I did put forward advice on drafting Q36 Mr Jackson: Did your decision in that respect the arrangement with Mr Byford that we put forward have anything to do with the fact that—I think this is to the executive remuneration committee. on the public record—at the time of Entwistle’s Chair: Okay. I’ve been hogging it. Stewart, then resignation, or just before, you had had a conversation Austin, then Justin, then Fiona wants to come back. with him about the rather tumultuous circumstances that led to his resignation. He asked you, it is alleged, Q30 Mr Jackson: The director general has written to whether he should resign as director general, and you us today, and it is an astonishing letter in many said, “We are not urging you to go but we are not respects. It makes the point that poor procedures and urging you to stay, either.” a lack of central oversight took place in the period 1 Note by witness: The cost of the work carried out by Egon we are looking at. Particularly striking is the fourth Zehnder was £186,000 plus VAT. Committee of Public Accounts: Evidence Ev 5
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
The importance of that, if it is true—I would like you being a Pollard review witness to George Entwistle. to confirm whether it is true or not—is that he was Do you think that was appropriate and good value then in a position to engage expensive lawyers to for money? possibly move forward with a constructive dismissal Lord Patten of Barnes: What it represents is, first of case against the BBC as a direct result of your all, the payment that was made to lawyers and comments. Therefore, you are principally responsible secondly, the fact that HMRC regards such a payment, for the fact that he was paid £25,000 extra for the 20 we understand, as a taxable benefit. I think, perfectly days that he did not work. That was money that should reasonably, we met the cost of that tax plus VAT. If I not have been paid out, and was certainly above any am asked whether I think that lawyers are well paid contractual obligation to Mr Entwistle. in this country, then the answer is yes. If we had done Lord Patten of Barnes: I hope you won’t regard this what some people suggested we should do and gone as an unfair comment, but I find it difficult to follow for a full-scale public inquiry led by a judge, I think the logic of that argument. Let me straight away that the lawyers’ fees would have been even higher. confirm that I did have that conversation with him. Indeed, there were other trustees present. As I suspect Q39 Mr Jackson: That would be a compelling Mr Fry has told this Committee, because I read all of answer were it not for the fact that you have not his evidence on Entwistle, and as I certainly told the published the full cost of the Pollard review. We CMS Committee, we had that conversation during a cannot see within the context of how that £107,000 teleconference call that we had with George Entwistle was spent or whether it was good value for money. on the day that he left. I think that encapsulated the That is a point that you have not actually answered. position in which we found ourselves with George Lord Patten of Barnes: I can be helpful. We will Entwistle. I do not think that that conversation led to publish those figures in full in the annual report and any expectation on his part that he would be able to accounts next Tuesday, and I can probably let the proceed straight away to a constructive dismissal or Committee have them before the end of this meeting unfair dismissal scenario with lawyers. if you would like. It is, of course, perfectly true that if we had not reached a compromise agreement, as the Baker- Q40 Mr Jackson: Okay. Please do. McKenzie letter which I gave to the Committee makes Two quick questions if I may. For doing 20 days work pretty clear, the likelihood is that we would have got above his contractual obligations, Entwistle was paid landed with a constructive dismissal case, and with an more or less the equivalent of what one of my unfair dismissal case, and would have fetched up constituents earns as an average annual salary. What paying more than in fact we had to pay him. did he actually do in those 20 days? You said in your Therefore, I do not think that those things follow. letter that the “few days between stepping down as The other issue about the £25,000 is a separate point director general and finishing his employment with the on which I think Mr Fry has written to the Committee. BBC enabled him to undertake these tasks.” How We never hid from the Committee the fact that George many hours did he work? Entwistle was paid until the end of November, Lord Patten of Barnes: Very little. We started the although Mr Fry has said—and I accept this—that clock from the end of the month because we were perhaps we should have been more explicit in drawing worried that there might be issues during the period that to the attention of the Committee. On behalf of of handover to Tim Davie, who was acting director Mr Fry and myself, I want to apologise for the fact general. But the fact of the matter is that Tim Davie that we were not more explicit about the fact that the coped brilliantly on his own, and within 12 days we pay-off started from the end of November. had appointed the next director general, Lord Hall, whose appointment was extremely well received, I Q37 Mr Jackson: I think it reveals a casual disregard think. for public money. One could say that there was an element of disingenuous grandstanding here in that Q41 Mr Jackson: So he did not do anything? you resisted his request for £30,000 and yet you were Lord Patten of Barnes: As it happened, he was not not very clear about the £25,000 that you did pay him. required to do anything, but I thought it was— Lord Patten of Barnes: I think that you would agree, Mr Jackson, that we at no stage hid that fact from Q42 Mr Jackson: So you paid the outgoing director the Public Accounts Committee. I have said that we general £25,000 of public money to sit on his backside apologise that we were not more explicit in drawing and do nothing for 20 days, and you are quite happy it to the attention of the Public Accounts Committee. that that is a satisfactory and appropriate use of I would not suggest that the fact that the Public licence payers’ funds? Accounts Committee or the NAO were surprised by Lord Patten of Barnes: I think that the whole package the figure suggested that people had not done their that we negotiated as a compromise agreement with homework and looked at the figures themselves. It George Entwistle was—I was not unaware that this was an oversight on our part in not making that figure was not going to be the most popular thing I have explicit, and perhaps an oversight by others. ever done in my life. I am not that naïve. But I thought—and as far as I know the legal advice has Q38 Mr Jackson: Lord Patten, you seem to be never, ever been challenged—that the alternative coping admirably with my logic in answering my would have been more expensive and would have left questions very clearly. May I ask you about the a gap at the top of the BBC, which would have been £107,000 paid in legal and related costs as a result of extremely embarrassing and awkward. Ev 6 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Q43 Nick Smith: Have you asked for that money to obligations were paid on this sort of scale? No, I did be returned? not. Frankly, the BBC and the policy that was being Lord Patten of Barnes: No. adopted to reduce senior managers were already in the context of considerable pressure on the finances. Q44 Mr Jackson: My final question: are you going to seek a second term as chairman of the Trust? Q46 Chair: Did Mark Thompson lie to you? Lord Patten of Barnes: So that I can enjoy appearing Anthony Fry: That is a question that you would in front of the Public Accounts Committee more have to— regularly? I have not even considered going beyond the next couple of years. Q47 Chair: Did Mark Thompson lie to you? Anthony Fry: All I can say is that on the basis of the Q45 Austin Mitchell (Great Grimsby) (Lab): I want information provided in the letter to the trust on 7 to ask Mr Fry about the point that the Chair initially October, and the terms of that letter, which we have raised. Today’s issue of Private Eye, which is a discussed earlier, and what emerged subsequently, document I read almost as avidly as I read the there is some disconnect which has never been National Audit Office’s Reports, says that you, Mr explained to me— Fry, were there from 2008. You were billed, we are told, as having more than 20 years’ experience of Q48 Chair: Did Mark Thompson lie to you, Mr Fry? advising companies and Government, both in the UK Anthony Fry: I can’t say he lied. I am just saying and internationally. The Trust approves the what I know happened and what I have seen in the remuneration strategy for executive directors, and I letter. make the further point that the Trust is there to manage relations between the wider public and the Q49 Chair: Did he lie to you? We just want a straight BBC. You must have had some idea of the stink that answer because then we might begin to undercover— would be produced when it emerged that people such we are about responsibility and accountability. Did as Mark Byford were being paid a million quid to go. Mark Thompson lie to you or were you negligent? Why did you not raise this earlier? You raised it with Anthony Fry: I have a copy of the letter or note that the NAO, that is true, and we are grateful to you for came to the trust and I have the information in the that. But why did you not raise it earlier? National Audit Office Report. Those two do not Anthony Fry: I think there are two separate issues. connect. The first is the question of quantum, and the second is the question of process. I would like to separate Q50 Chair: So Mark Thompson lied to you? them out. It is absolutely the case that from the time Anthony Fry: I am not going to make a comment I joined the Trust I was in the vanguard of people about whether somebody lied. That is a matter for you within the Trust, and more importantly the executive to address to him. board, arguing that the size of contractual obligations, including pay, was simply totally out of kilter with Q51 Stephen Barclay: But, Mr Fry, in essence your what the public and licence fee payers expected. It evidence has. Paragraph 3 of that letter dated 7 is fair to say that there were a series of particularly October 2010 says: “These redundancies”—the unpleasant discussions that took place with members deputy director general—“will take place on the basis of the remuneration committee of the Trust, including of the terms set out in their contracts”. Your evidence myself, and members of the executive remuneration says that they didn’t take place like that. committee—the non-executive directors. Frankly, not Anthony Fry: It is not my evidence. It is the National to put too fine a point on it, I thought they were Audit Office evidence, with respect. It is not my completely out to lunch in regards to what they evidence. thought was acceptable pay in a public body. I make no bones about that. I was extremely vociferous. Q52 Stephen Barclay: Therefore what your evidence The fact of the matter is that there are two separate is saying is the Mr Thompson gave false information issues. I thought that the level of pay—and remember to the Trust. Ms Adam’s evidence is saying that he that the new director general is paid nearly half of wrote this letter without even sharing the details with what Mr Thompson was being paid when I joined the the head of HR. That suggests Mr Thompson was Trust—in the public sector broadcaster was incompetent. unreasonable. I was absolutely convinced that, Anthony Fry: I suggest that when he comes in front regardless of whether or not these payments were in of you, which I believe he has agreed to do—I don’t line with contract or outside of contract, these were know, but I believe he has—I am sure that that and numbers that were completely unacceptable to people other matters will be among those you want to ask outside of this room, and indeed in this room. I think him about. huge moves have been made to reduce the scale of the salaries and the scale of payments. Now, that is Q53 Chair: Let me just ask you another question. It one whole issue. If you ask me whether I expected is really frustrating. We get this a lot in a range of that when people like Mr Byford and others left the civil service departments. I don’t want to get it in BBC, the scale of payments they received would relation to the BBC, which is an institution I really cause considerable public comment: absolutely. Did I believe in. Lord Patten, you said in your evidence to expect to find out that in addition to what were already the Culture, Media and Sport Committee, “I think that huge payments, payments above contractual you can’t on the one hand argue the case for public Committee of Public Accounts: Evidence Ev 7
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry service broadcasting, and the public paying for the there is a real issue about the distinction between BBC, and at the same time assert the ambition of BBC oversight, and delivery and implementation. Maybe employees to be paid almost the same as if you were you can’t make it work. working for Barclays.” Lord Patten of Barnes: That went down well with the Q58 Mr Bacon: The trouble with that, Lord Patten, senior independent director of the BBC. is that the alternative of giving it to Ofcom is even more unpalatable, given its performance and ability to Q54 Chair: I was going to come to the ex-CEO of lard its own budgets and hide things. We have looked Barclays, Marcus Agius—sorry, chairman. He was the at it specifically. If that is not going to work, and this non-executive director who signed off not just the present arrangement is not going to work, what would Byford settlement but all these excessive, over-the-top you suggest? severance settlements. So is he culpable? Lord Patten of Barnes: Can I address that? I am sure Lord Patten of Barnes: Well he was chairman of the there will be opportunities in a “post-chairman of the committee that signed them off. Trust” role for me to offer observations about the governance of the BBC. Clearly, a unitary board is Q55 Chair: So is he culpable? not necessarily the answer, because it was the board Lord Patten of Barnes: And before my time. My of governors at the BBC that helped to produce the principal discussions with the non-executive directors culture in which some of these huge payments were of the BBC when I became chairman of the Trust were being made. about the proposal I had to introduce the Will Hutton I think what is absolutely imperative is to have a idea of capping the multiple of senior pay to median chairman of the Trust and a director general who trust pay. I have to say that, initially, that went down like a one another. I believe that I have that relationship with cold rice pudding. But we made it stick and we also Tony Hall, who I think understands all these issues. dealt, as the Committee knows, with the car allowance I also think that it may be that in the future, when for new senior members and private health insurance Parliament looks at the terms of the charter, you need and senior members. But those weren’t easy to look at whether there should be more involvement discussions. But the non-executive directors, who on the part of the strategic oversight body on issues have all changed since then, eventually went along such as senior executive pay. I do not think that you with what we were proposing. would want the Trust or the oversight body dealing with every issue of pay and remuneration, but maybe Q56 Chair: Everybody has conveniently changed. I it should at least deal with the pay of the executive accept that. I have no doubt when we talk to Lord board. Hall we will want to talk a little bit more about those private health and car allowances. I am asking both of Q59 Chair: But you did say when you came in that you direct questions because it would help us in trying you would do a root-and-branch review of to understand the story. These severance payments governance, didn’t you? Two years ago, you said that. that the NAO looked at, in the sample of 60 they I just wonder where on earth that had landed, or looked at a quarter were in excess of the contractual ended up. obligations. They were signed off by Marcus Agius, Lord Patten of Barnes: It landed with trying to who I have never met. Was he therefore culpable? distinguish, among other things, between the role of Who is accountable? Who is accountable to us? Who the non-executive directors and the role of the Trust. is accountable for the licence fee payers’ money? I am extremely pleased with the relationship we have Lord Patten of Barnes: Well, the non-executive with Fiona Reynolds, the new senior independent directors should be publicly accountable to licence fee director of the BBC, and her colleagues among the payers and to us. So if you are asking who was non-executive directors. responsible for making these payments, the responsibility is for the senior members of the Q60 Chair: But you can’t build institutions just executive and for the executive remuneration board. around personal relationships. Lord Patten of Barnes: No, you can’t. Q57 Stephen Barclay: But they weren’t signed off by the Trust, were they? I thought— Q61 Chair: You have to have institutional structures Anthony Fry: They were signed off by the executive that will survive beyond personalities. remuneration committee, which has non-executives. Lord Patten of Barnes: Yes and no. I spent five years They were the people who were responsible. of my life in Brussels— Chair: Which was chaired by Mr Agius. Chair: That’s even worse. Lord Patten of Barnes: Can I make one point now, Lord Patten of Barnes: So I have a certain amount of which I promise not to make again and which I did belief in individuals, not just institutions. not make at the outset? I have half an hour of quotes from charters, from White Papers, from the excellent Q62 Austin Mitchell: Thank you, Chair, for your speeches of the former Secretary of State, who intervention. I am afraid that, by asking my haymaker decided on this system of governance, and from Select question, you have deprived me of the Paxperson Committees about the role of the Trust, about how we award as the most persistent, populist prober on the should not be involved in remuneration and about how PAC and relegated me to obscurity. Chris Patten has there must be no sharing of roles between the Trust emphasised the importance of trust in the director and the executive. I will not go through all those, but general. The impression I would get from the Ev 8 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry correspondence of 7 October is that the Trust was not when you looked at the quantum, you would come up told the truth about contractual arrangements. Would with real and serious problems about the process and that be your impression? the extent to which the quantum had been increased Lord Patten of Barnes: I would ask Sir Michael unnecessarily in order to get people out of the door. Lyons, if I were you. May I remind the Committee of two other things, Q64 Austin Mitchell: Can I ask a final question which have not come up in relation to that which relates to historical experience? I am one of the correspondence? The first is that the correspondence few great television personalities of the 1970s who was triggered because the Trust’s endorsement is has not yet been arrested by the police. I have vivid required not of the pay of the executive board, but of memories of walking up and down a picket line its structure. What the then director general was doing outside Yorkshire Television with a sign that read “We was proposing to drop two members of the executive demand parity with the BBC”. Frankly, I am appalled board, which was why he wrote to the Trust. I am by the scale of these payments. Some of these people advised that, following that letter, the Trust contacted have already got well-paid jobs, and yet they claim the director general to confirm that the executive massive redundancies. Nearly a million quid went to board remuneration committee was happy with the Mark Byford. This discredits the licence fee, because figures, which apparently were included in the we are facing a situation in which a lot of people—it contractual terms. Those are both quite significant is very high now, at 145 quid, or whatever it is. points in distinguishing between the role of the Trust Chair: You can take this as a comment, because we and the role of the executive. are going to come back to the— Austin Mitchell: Some people are in prison for not Q63 Austin Mitchell: Can I summarise it like this? paying it, and yet it is doled out through such massive The Trust had been put in a difficult position. An sums—that is so many licence fees. Lord Patten, agreement had been reached with the Government in would you condemn the scale of these payments out those five days in August for a cut in the licence fee of the licence fee to BBC executives? and for the BBC to take on various other services. As Lord Patten of Barnes: Yes, and it is not only the part of that, the director general was under a duty and licence fee payer who has been shocked by what has a responsibility—an inevitability—to fire a happened; it is people who work for the BBC and considerable proportion of the management staff, have been told for the past couple of years that they whether useful or useless. It was therefore a situation have not got money to make this or that programme in which desperate and quick action had to be taken that they want to make, and that they cannot get a pay to get rid of managers, so everybody was prepared to rise for this year. Then they read this Report and see sanction more than usually high payments—payments some of the payoffs that people were given. That is above the normal contractual arrangements—just to why I so strongly endorse the decisions that Tony Hall accomplish that as quickly as possible. The took from the outset, because it is terribly important calculation was made that the savings in salary would for us to be aware of our responsibilities towards more than outweigh the outgoings in compensation. Is people who work within the organisation to that an accurate portrayal of the picture you faced? demonstrate to them that it is not only efficiently run, Lord Patten of Barnes: Not entirely—actually, not. I but run with a sense of fairness. think the issue is a bit more complicated than that. Chair: We have to move on and ask Lucy Adams The Committee may want to look at bit more at the some questions. I have Justin, Fiona, Ian, Guto and history, but I understand that when the Trust first Richard, and then we must move to Lucy after that. insisted on 25% cuts in numbers of senior managers Justin Tomlinson: I was going to lead into that. and pay, the executive came back with proposals that Chair: Okay, I promise I will come back to you. Does back-loaded the cuts in numbers and pay. I think that, anyone else have questions for the Trust? in the Trust’s view, rather like years four and five in public spending rounds, the last years never come. I Q65 Stephen Barclay: Can I just get something on think I am right in saying that Tony Fry and his the record? The payment to Byford was more than £1 colleagues on the committee insisted that, far from million, if you include the payment for holiday from being back-loaded, the figures should be front-loaded seven years earlier, so he was actually paid £1.22 and that we should get on with this reduction. million, not less than £1 million. Is that correct? It may be that in pursuing that, the executive thought, Anthony Fry: I do not have the figure in front of me, “The big game is to get the numbers down and to but perhaps we can send a note.2 get the bill down,” and it did that, in many respects admirably. However, the NAO Report shows that Q66 Fiona Mactaggart: I am still trying to nail the corners were cut in doing that, and that the whole responsibility here. Mr Fry has said, “We didn’t have process did not lead to as big savings as should have the power,” and so on, but the issue that we really been achieved if people had simply stuck to have to address is responsibility. We have heard it is contractual terms. possible that the director general did not tell the Trust What worried us when we first asked the NAO to deal the truth. We have heard that the approval of the detail with this is that in light of my experience in dealing of these settlements was through the remuneration with the George Entwistle payment, and in view of committee, which was chaired by Marcus Agius. the payment to his deputy director general, I was When he had to stand down from Barclays in July worried about the quantum size of pay, which Anthony mentioned earlier. We did not realise that 2 Note by witness: Mark Byford was paid £1,022,000. Committee of Public Accounts: Evidence Ev 9
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
2012, did it occur to you, Lord Patten, to ask him to am deeply worried and concerned, and I remain stand down from the BBC at the same time? deeply worried and concerned.” On the digital media Lord Patten of Barnes: He did stand down from the issues, you have been very worried. We don’t want BBC— worry; we want clarity of action. Fiona Mactaggart: No, he continued— I accept Lord Patten’s suggestions that there are flaws Lord Patten of Barnes: Shortly afterwards. in the construction of the royal charter, potentially, and I am happy to follow them up, but what were the Q67 Fiona Mactaggart: He continued until initiatives taken by the Trust to ensure value for November. His term of office ran out in November. I money in executive pay and redundancy? have not heard that he stood down before the end of Anthony Fry: If you read the National Audit Office his term of office. Report, it absolutely confirms that the strategy set Lord Patten of Barnes: All right: he stood down four down by the Trust to reduce to the number of senior months afterwards. I think I am right in saying that we managers was the right thing to do and, of itself— are consulted about the appointment of non-executive Chair: Nobody is arguing that. directors, but we do not decide who non-executive Anthony Fry: The question is the scale of value for directors should be. money. The idea that this whole programme ended up being a loss of value to the licence fee payer is simply Q68 Fiona Mactaggart: That was exactly why I the wrong characterisation. Could the licence fee asked whether you thought to ask him. I understand payer have got more benefit? There is no question. that you probably did not have the power to sack him, The question you asked— but I am certain that someone in that role who was asked by the chairman to retire— Q71 Chair: I am going to have to interrupt you Lord Patten of Barnes: What I did do was to make it because this issue is at the heart of our work. Value clear that we thought his successor should be for money does not mean that you are spending less somebody who had experience of working in the today than you were doing yesterday. public sector and knew some of the pressures within Anthony Fry: Absolutely right. the public sector on issues such as pay and overall Chair: Value for money means that, in the actions expenditure. you take, you get the best value for, in this case, the licence fee payers’ pound. The accusation that you Q69 Fiona Mactaggart: You suggested that the face today is that, whether it is the executive or the National Audit Office Report was a response to the Trust, there is a failure in the severance payments, as Trust itself seeing a crisis, but wasn’t it actually a analysed by the NAO, in securing the best value for response, Mr Fry, to this Committee’s the licence fee payers’ pound. recommendation that that should be done? I don’t Anthony Fry: And in the comments made by the think you took the initiative; I think we were pushing Trust we have not disagreed with that. you rather hard to take it, were we not? On the broader question I have been asked about the Anthony Fry: I think the actual sequence of events position of the Trust and value for money generally, I was that after the George Entwistle resignation— would contest the accusation. If you take the totality whatever we want to call it—there was a discussion. At the time I came in front of this Committee, we of the Reports produced over the last five years—for discussed the role of the National Audit Office. I think some of that period I have been directly responsible we said that we would welcome this, but the reason to this Committee on value for money for licence fee we had suggested that there should not be a National payers, and on other times I have sat on the finance Audit Office review of George Entwistle alone was committee, the strategic accounts committee and the that there should be a broad look at severance within remuneration committee—I would argue that, as I the BBC, and that George Entwistle should be seen in have said before at this Committee, in an organisation that context. of the size and scale of the BBC, you will not solve Frankly, from my viewpoint, it does not really matter all the issues outstanding from the past in one go. whether it was due to pressure from you, pressure The direction of travel, particularly around financial from me or pressure from anyone else. The good management, as demonstrated in the NAO Report last thing, in my view, is that this is precisely what the year on financial management, has been positive. National Audit Office should be doing. The Report is Is there more work to do? Of course there is. When I very helpful and I am delighted that the leave the Trust, the work will not stop; somebody else recommendations are going to be adopted in full by will be sitting in front of you. They will bring up the executive. issues and you will be dissatisfied with stuff. You are doing your job and I believe that the Trust is doing its Q70 Fiona Mactaggart: I think it provides for the job. If you look at the condition of the BBC today future, but I am still looking at the issue of across a whole raft of areas, it is massively improved accountability. We have had you before us—since from the position that existed even five years ago. before I was on the Committee—telling us, “I’ll be hot on this issue.” You must be a very worried Q72 Fiona Mactaggart: The issue before us today is organisation, because if you look at the NAO Report the way in which executive severance pay was and your introduction to it, you talk about how the negotiated. It took the Trust more than six years to get Trust is worried about these issues. You were worried a handle on that and, indeed, as far as I can see, it was in November 2012 in evidence to this Committee: “I not until the appointment of the new director general Ev 10 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry that a plan for the future was developed. It took this that you were ahead of target in the grand scheme of body to press the Trust to take action. things in terms of the savings that were set. Did that Your excuse that you have provided good value for mean that you had your foot off the pedal and you did money elsewhere is good—we welcome that and we not need to keep pressing, because you had a busy are glad of that—but it sounds a little like some of board meeting, the pressure was on, you were keen to those companies that we are concerned have not been get home and there were other items on the agenda? paying their corporation tax telling us how much VAT This potential minefield was fine, because you were and national insurance they pay. Frankly, we are glad ahead of schedule. Is that what could have happened? of that, too, but at the moment we are looking at how Anthony Fry: I think that is mischaracterising it. The you settle severance. We cannot understand why it Trust has been extraordinarily aware that of all the took six years to get to a situation where there was issues that could be regarded as toxic in the public proper oversight and grip on this issue. During that service generally the question of pay is one of them. time, we were told that it was someone else’s fault. Lord Patten is right to highlight this. At one level, it Have you got an answer to that? was precisely the Trust insisting strategically that Chair: And it does damage the reputation of the BBC. larger numbers were taken out earlier in the Lord Patten of Barnes: Yes, of course it does. I am programme that actually caused some of these not going to go back on my promise to avoid reading problems. I freely admit that. Do I think it was the chunks of the charter at you, but the charter is right thing to do? Absolutely. Was I very worried absolutely clear about what our responsibilities are. I about proposals that back-ended all of this to years come back to a background in which, before my time, four and five? Do I regret that? No. It is very difficult the Trust, with Sir Michael Lyons, started the business when you have a group of external people who are of reducing numbers and pay. That was speeded up in non-executive directors and run a committee, and who 2009. We have continued to have success on that are directly responsible under the charter for doing front, albeit—this is a very big albeit—still paying that for the Trust. When you are assured that they are more than we should have paid to get severance of following policies and doing the right thing to achieve employees. the strategic objective, there is a very difficult balance as to the extent to which you watch the watchers and Q73 Justin Tomlinson: I have a few general things spend your whole time revisiting all the work. and then I will gently move it on because we need to I will be absolutely honest with you. I would be drill a bit beneath the Trust board. Just so that I am delighted if you had the former director general in absolutely clear in my mind, you are not meant to deal here actually to talk about this issue for the very with things operationally, are you? simple reason that there were a number of occasions Lord Patten of Barnes: That is true. when—not to put too fine a point on it—people like me were asked in not particularly pleasant terms to Q74 Justin Tomlinson: But you rely on get back into our box, because these were not matters organisations such as the National Audit Office to do that were appropriate for us to be dealing with under drilling for you. the royal charter. There is a very difficult balancing Lord Patten of Barnes: And others. act when you are trying to achieve big strategic objectives. At some point, you have to believe that Q75 Justin Tomlinson: Ms Mactaggart made a good people are going to do what they say they are doing. point that perhaps six years to investigate this was You have to believe that. probably a little too slow. But then who is responsible? The licence fee payers are in theory Q77 Justin Tomlinson: I am just coming to that. Just relying on you and would presume that you get access to be clear, because you are not meant to be dealing to everything. If you do not, because you get access with operational issues—I absolutely understand that, to certain information only if a report is but there is a question mark as to whether there is a commissioned, we would then presume that we have gap; but that is a debate for another day—why did full transparency, yet it is clear from point 13 that you not object to getting involved with the Sharon much of the severance pay comes under Baylay and Mark Byford cases? Why did you not put confidentiality clauses. We have the two case studies, your hand up and say, “This is operational”? but we cannot look at the others today and presumably Anthony Fry: Because, as the chairman has already you do not look at them because you are not involved said, the only reason we were consulted was not the operationally. Who holds to account the professional subject of the pay, but rather because it was a advice that you are given? restructuring of the executive board. That is Lord Patten of Barnes: We got regular reports— something that, in terms of the overall structure of the Anthony may like to add to this—on the progress that executive board, they were consulting about. There was being made in reducing numbers and in reducing was a division about what they were consulting on, the overall pay bill. We did not get involved in which was, “We are proposing to do this. Do you have individual cases except in those two incidents in a view?” and “This will have the following impact in 2010—Mark Byford and Sharon Baylay—because the value-for-money terms and this is what we will save executive board was being restructured. That is why over x amount of time.” we were involved on that occasion. Q78 Justin Tomlinson: Obviously, those things Q76 Justin Tomlinson: You keep referring back to came forward and alarm bells rang, because, as you the fact that things could have been done better, but said, one of the things that you keep an eye on is Committee of Public Accounts: Evidence Ev 11
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry severance pay and pay in general, as they are what the Lucy Adams: There was custom and practice at that media are interested in. As you said, however, you are time to suggest that that was a good approach. relying on the professional advice that you are given. We are hoping that Mark Thompson will come and Q83 Chair: Custom and practice that you, as head of answer some very serious questions on that. We HR, had some responsibility for. accept all that, whether it was lies and you were Lucy Adams: Yes, I absolutely accept that my role hoodwinked or whether there were professional was to challenge and— mistakes. This is where I begin to get worried. Lucy, I will turn to you. Earlier, you said there was a Q84 Justin Tomlinson: That is the point. To what debate about whether the letter said that everything extent did you challenge that? It was not in the was fine in terms of the contract terms. The Trust contract, so what was your advice? therefore would have ticked it off, although it might Lucy Adams: My advice was that the important thing have thought, “That’s not very good, but those are the was to get Mark Byford out of the organisation. He contract terms.” You are saying you didn’t see that had 31 years’ service. We wanted to take the benefit letter. What conversations did you have with Mark of the restructuring as early as possible. In Thompson about the deal that was being done? conversations with Mark Thompson, he was very keen Presumably, as the highly paid director of human that Mark stayed to deliver the royal wedding and the resources who was ultimately responsible for making restructuring of the journalism board. What I was sure you were abiding by the legal contracts, you must trying to do was to find a way, with Mark, to enable have given advice. a negotiated settlement with Mark Byford to enable Lucy Adams: We were having many conversations him to leave with minimum disruption, and to deliver about the way in which we could reduce not just all the savings as quickly as possible. senior managers, but the very highest level of senior managers. The restructuring of the journalism group Q85 Chair: Did he threaten to take you to a tribunal? that removing Mark Byford’s post presented was a Lucy Adams: No. real target for us. It enabled us to save about £1.37 Chair: So it wasn’t much of a negotiation. million per annum, when you take into account the office— Q86 Justin Tomlinson: Your professional advice was that it was acceptable to go outside the Q79 Chair: Can you stick to the severance payments, contractual terms? Ms Adams? We are here to talk about the severance Lucy Adams: My advice was that he would be entitled payments. to 12 months’ contractual entitlement for redundancy, Lucy Adams: I understand that, Madam Chairman. I that there was custom and practice around payment in am just trying to explain the context. lieu of notice, and although it was uncomfortable, Chair: We have a lot to get through, so it is much there was custom and practice to suggest that this more helpful to stick to the issues. could be acceptable.
Q80 Justin Tomlinson: He would have come to you, Q87 Justin Tomlinson: So you were supportive of what Mark Thompson ultimately did? and he would have said, “This is what I am proposing Lucy Adams: What I was supportive of was getting to do.” You are highly paid, you have expertise, and Mark Byford out of the organisation after 31 years’ you would have given professional advice about service to enable us to take advantage of the savings. whether that was acceptable or not and whether it would have cause and effect. Did those conversations take place? Q88 Justin Tomlinson: Yes, but you could have done that within the contract terms. You were happy Lucy Adams: Yes, they did. The conversations went to go beyond the contract terms. It wasn’t that you along the lines of saying that Mark was entitled to 12 were saying to Mark Thompson, “Don’t do that”— months’ severance for redundancy. He had an Lucy Adams: Sorry to interrupt. I absolutely accept expectation—I appreciate that is not the same as a that looking at that deal with hindsight, there were contractual term—of a payment in lieu of notice of 12 eight months that we could have asked Mark to work. months, because of the custom and practice with other executives. Mark Thompson was very keen. Q89 Justin Tomlinson: Putting that to one side, why were you so busy that you were happy to delegate Q81 Mr Bacon: Can you repeat that last bit? There anything up to £500,000 of severance pay, and allow was an expectation, not a contractual entitlement, that people who do not have your expertise to make the he would get 12 months in lieu of notice—is that what final decision on them being signed off. You are paid you said? a considerable sum of money, and you have expertise. Lucy Adams: Yes, I did. There was very much a Why was it acceptable that people without your prevailing culture that payment in lieu of notice was expertise and knowledge were in a position to sign off an acceptable way of managing severance severance payments of up to £500,000? The Trust, as arrangements. was made clear, were relying on professional advice. You are the most professional person in this area, and Q82 Mr Bacon: Even if they didn’t actually leave it was delegated. Why did that happen? at that point, you could still give them pay in lieu Lucy Adams: If I could, I will explain the way in of notice? which restructuring and redundancy cases are Ev 12 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry approved within the BBC. Up to £250,000 can be was his decision. He would have come to that approved at a local level—a head of department, a hearing.” It seems you were every bit as much in head of finance and a head of HR. Up to £500,000 agreement as he was. requires not just myself to sign it off, but the CFO as Lucy Adams: If I can come to the question about well. Anything over that goes to the finance challenging, over the last four years that I have been committee. One thing that the NAO has highlighted— at the BBC, I have tried incredibly hard to reduce the it is an absolutely valid criticism—is that the level of amount of money spent on senior managers. Over delegated authority was too high. 30% reductions have been made, in terms of both salary and senior management numbers. I have also Q90 Justin Tomlinson: Did you not think that was been involved in leading a raft of changes around the the case before the recommendations? Presumably, removal of cars, removal of private health care for with your professional knowledge, you would have new joiners, taking away pension supplements for been uncomfortable that people were making serious senior people, and putting in place pay freezes for legal decisions and negotiations of sorts without executives and senior managers. necessarily passing your desk. Mr Jackson: Yes, but you have also— Lucy Adams: It is a valid criticism that the NAO Lucy Adams: Let me finish the question— makes: in the finance committee approval and the financial approval process for restructuring and Q95 Mr Jackson: No, let me jump in there. You redundancy, there was too much delegated authority. have also overseen giving a departing manager £49,000 for training and IT equipment to improve Q91 Mr Jackson: Why didn’t you seek legal advice? their individual skills and career prospects on leaving Did you seek legal advice on this particular case? the organisation, and an agreement to buy another Lucy Adams: On Mark Byford? person at least £60,000 in consultancy services from Mr Jackson: Yes. the departing manager over two years at a daily rate Lucy Adams: We obviously discussed it with the in- of £1,000. If this was any other organisation, that house lawyers at the BBC. They provide advice about would be called corporate fraud and cronyism, and what we are contractually entitled to pay. As I said, you presided over it. there was an eight-month period in which Mark Lucy Adams: I would also say, going back to the level Byford was paid in lieu of notice when he could have of challenge that I provided to the prevailing culture, been working. I accept that. that I proposed to the management board in 2011 that a redundancy cap be put in place. I was well aware Q92 Mr Jackson: In what other organisation in the that this was unsustainable. What I tried to do was public or private sector does the director of human balance the need to exit long-serving senior managers, resources sanction double redundancies for senior who often did not want to leave the BBC, in a way officials as “custom and practice”? Do you not think that meant that we were able to expedite it as quickly it was a dereliction of your duty on value for money? as possible and ensure that we were taking £19 million You used the word “challenge”. You did not challenge in savings year on year in senior management salaries. at all. You did not even sign it off. There is no audit trail, as far as the evidence shows, between you and Q96 Chair: Ms Adams, you keep coming back to Mark Thompson. That was £500,000 in public money. that. I am sure you have done lots of good things. You Don’t you think that is pretty appalling? Given that are paid a lot of money; you are paid over £300,000 you will have had a hand in suspending the chief as an executive of the BBC. The thing that really technology officer over DMI, don’t you think you sticks in our gullet is that in all these cases—25% should consider your own position? according to the sample from NAO—you paid over Lucy Adams: In terms of the answer to your first the contractual commitment. We can cut it all sorts of question on whether I should have challenged harder ways. In the three years since you have been and whether it is acceptable for an HR director to go responsible, there have been 150 senior managers and along with custom and practice, there is something £25 million. I think I am right in saying that is half around going into an organisation where you have to the budget of Radio 4. It is two thirds of the budget take into account the way that things have been of Radio 1. It is a heck of a lot of money that you done— have allowed to go out of the door, which could have been used to produce good public service Q93 Mr Jackson: No, that is HR flim-flam. That is broadcasting. not the issue. I am asking you specifically: you are in Lucy Adams: In the vast majority of those cases in a position, as a responsible person, to challenge a the £25 million they were being paid, admittedly culture when it is not in the best interests of taxpayers. significant, amounts of money based on their You did not challenge it. You ticked a box, passed it contractual entitlement. In a number of cases— on to someone else and allowed someone to take twice what they were contractually entitled to receive in Q97 Chair: No, you went above that. The contract public money. That is a serious issue. was lousy; we know that. But what is particularly galling is that you went above that. We can’t Q94 Justin Tomlinson: I wanted your answer to be: understand why you went above it. Mark Thompson “With my professional advice, I advised Mark will come and he will give evidence. We might even Thompson that this was the incorrect way to do it. have Mr Agius come and give evidence, too. What I That is why I was paid that money, but ultimately it cannot understand from you, with all of your Committee of Public Accounts: Evidence Ev 13
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry experience—you were at Eversheds beforehand so Lucy Adams: Are you suggesting that the person you have not come out of an easy organisation—is involved in signing that payment off, then benefited why you did not just put your foot down? You are from a payment in the future? That is not the case. head of HR. Lucy Adams: I think the overwhelming focus was to Q105 Stephen Barclay: No. I am asking whether get numbers out of the door as quickly as possible there were conflicts of interests in people approving to save— payments when they themselves subsequently benefited from such payments. Q98 Chair: But it is public money. It is the licence Lucy Adams: I understand. Obviously, in any fee payer’s money. It is not your money; it is our situation and any governance structure, the individuals money. making decisions at a senior level may at some future Lucy Adams: I understand that, Madam Chairman. I point be made redundant. I don’t honestly believe that accept, as the BBC has accepted, many of the people would be making those kinds of payment with criticisms in the NAO Report that too often we were an eye to their own future. too generous.
Q99 Stephen Barclay: If I could go to a specific Q106 Stephen Barclay: That sounds rather naive. To thing that builds on what the Chair is saying. I take be clear, you were aware that people who had you to page 26, paragraph 2.12, of the Report: “A approved beyond contractual payments were then severance payment of £219,000, which was £141,000 going forward themselves for consideration for more than the individual was entitled to.” Did you payments beyond contractual entitlement, and you regard that payment as value for money? raised no objection to that. Lucy Adams: I was unaware of that particular Lucy Adams: Because of the way in which the payment until I saw the Report. The other comments organisation restructures at the BBC have taken place, about lack of oversight that the director general has there are senior individuals who have left the made in a letter today are absolutely valid. organisation who at some point have approved payments, but not at the point where they were Q100 Mr Bacon: If you were not aware of it, who negotiating for themselves, but they negotiated them authorised it? to let others go. Lucy Adams: In this instance, it was authorised within the governance rules of the time by the head of Q107 Stephen Barclay: Did you approve the Roly department, the head of HR and the head of finance. Keating payment? I am not trying to defend the payment; I am merely Lucy Adams: Yes, I did. trying to explain the decision making behind it. Q108 Stephen Barclay: You did. Why did you think Q101 Stephen Barclay: As the person at the head that was value for money? of the function, were you concerned that the people Lucy Adams: I was approached by Roly after a approving these pay-offs beyond contractual terms conversation he had had with Mark, when he had been were in some instances themselves benefiting from talking to the British Library about another job. He pay-offs beyond contractual terms? asked me whether he would be considered for another, Lucy Adams: Sorry, could you repeat that question, bigger role at the BBC, and in my view I did not think please? that was going to be the case. He then explained that the role that he was being asked to consider at the Q102 Stephen Barclay: Were you concerned that the British Library was going to be on a considerably people approving payments beyond contractual terms lower sum than the salary he was on at the BBC, and then benefited themselves from payments beyond he asked whether there would be an opportunity to get contractual terms? That is a policy issue that would a severance arrangement or a deal. apply to the head of function. Lucy Adams: Clearly, there were members of the What I did, and I consulted with my line manager at management board who were subsequently made the time, Caroline Thomson, was to go through a redundant, who due to their level of seniority were simple equation, which was that if we were to make approving payments. Roly redundant—and he was on a list of roles that I had identified as a real possibility—we would be Q103 Stephen Barclay: Were you aware of that paying him £500,000 redundancy, plus £125,000 in instance? Were you aware that people approving these terms of his notice, plus the salary to get us to the themselves were benefiting subsequently from beyond point where he was leaving. contractual term payments? Were you aware of that? Lucy Adams: I am not sure what you are suggesting. Q109 Chair: Why? He had got a job to go to. Lucy Adams: What I am saying, Madam Chairman, Q104 Stephen Barclay: I am saying that there were is that if he stayed in the organisation, because I knew 40 people involved in signing these off. You say in that we were potentially making him redundant— your evidence, to take the first one, that someone was Chair: Yes, but he had a job. He had a job offer. paid £141,000 more than they were entitled to, but He could have gone off on a job offer, like normal you were not aware of it. people do. Ev 14 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Q110 Stephen Barclay: Can we stick to the payment Q113 Ian Swales: I can understand that you have of contractual terms? Could you explain why he was changed the compromise agreements—we have not paid— spoken about those yet. Are you saying that at no Chair: He should not have had anything. point in the last four years, other than compromise Lucy Adams: Just to be clear I consulted with agreements, did you suggest to any of your Caroline but she didn’t sign it. executives—you are in charge of HR—that there Stephen Barclay: Indeed, and the fact that he was should be a better process for authorising severance? signed by Caroline Thomson—and uniquely, the BBC You have never suggested that. then said that the chief operating officer role was not Lucy Adams: Only more recently from January, necessary, and therefore she could get a payment. But insofar as I proposed to the senior management that is a side issue. Could we be quite specific? Could remuneration committee that we look at severance you explain, please, why, in your professional deals over £150k. judgment, it was value for money to pay Roly Keating beyond his contractual term? Q114 Ian Swales: And even at that level, the NAO Lucy Adams: Because I believed that if we did not are saying that it is too high. Do you accept that? pay him the money to go, he would stay. We would Lucy Adams: Sorry, I beg your pardon. then be making him redundant, and in fact his role was then closed 12 months later, and therefore it Q115 Ian Swales: Even at the new level that you would cost us, in addition to what I had paid him, a agreed in January, the suggestion from the NAO is that that figure is too high. further £550,000. Lucy Adams: That is something that Tony, as new director general— Q111 Ian Swales: Lucy, could I stay with you please? You have been at the Trust four years, I Q116 Ian Swales: Do you accept it? I am talking to believe. you as the head of the HR function. Do you accept Lucy Adams: At the BBC. that? Ian Swales: Sorry—a Freudian slip. You have been Lucy Adams: I think it is really important that we at the BBC four years. The letter we have received have senior managers who are able to make decisions today from Lord Hall, who has been very patient within their own organisations, within their divisions, today, contains a sentence saying: “…I believe the but we have to balance that with a greater level of BBC lost its way on this issue in recent years. Poor scrutiny, so the new— procedures and a lack of central oversight helped to Chair: Ian, the NAO have not suggested that it is create a climate where the wrong culture was allowed too high. to flourish.” That is today’s view from the director general. You have been head of HR for all those recent Q117 Ian Swales: Apologies. I withdraw that. I think years. What is your response to that accusation, in a the problem that we all have with this, both us in this sense? You have been responsible for all HR Committee and the public, is that the taxpayer’s pound processes in that time. How do you react to that that you spend is the same as the taxpayer’s pound accusation? I want to talk about the system issue. that anybody else spends. You are paid more than Lucy Adams: Yes, certainly. The way I react to it is twice as much as the Prime Minister. In the civil to say that I think it is a valid criticism. I think that service, the Chief Secretary to the Treasury is now we have, as an organisation, made a number of signing off all salary deals—not severance deals, decisions which were not in the best interests of the salary deals—of £150,000 or more. Do you think that licence fee payer. That, in part, was due to lack of some sort of culture like that should take place in central oversight—about divisional directors having your organisation? too great a level of autonomy. As the letter goes on to Lucy Adams: That is what we have introduced. We say, there were over 40 people involved in making introduced a senior management remuneration decisions over the last few years, and therefore this is committee, with a non-executive, chaired by Tony, to more of an institutional than an individual failure. look at salaries—anything over £150,000. Q118 Ian Swales: What benchmarking are you Q112 Ian Swales: But you are head of HR. In that doing, again from your professional point of view, on four years, have you at any point suggested that this the type of contracts that you are giving people, and should be changed—that a new structure or set of the severance arrangements that are contractual? authorisations should be put in place? Indeed, what benchmarking are you doing on levels Lucy Adams: No, I haven’t individually suggested of pay? You have just given an example where that there should be a new governance process for somebody’s alternative employment was on a lot finance arrangements. The governance and process lower pay, and I do not believe for a minute that those around financial controls rests with the CFO. We have 450 senior managers would walk out of the door made a number of changes, so compromise deals over tomorrow if a lot of them were paid quite a lot less. £75,000 came to me in many instances—admittedly, How are you dealing with that issue? not in all. But what I was mostly focused on was Lucy Adams: On severance arrangements, we reducing the amount spent on senior management pay, commissioned benchmarking from three different and also proposing a change to introducing a cap some sources: Towers Watson, PwC and Deloitte. They time before. indicated that our severance arrangements were Committee of Public Accounts: Evidence Ev 15
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry roughly in line with the public sector but higher than the evidence that of 150 cases, 62 were paid on the private sector. In terms of the benchmarking we contract and 17 under contract for various reasons. do on salaries, which we have done for a number of There was a total of 71, so almost half were being years, we benchmark with a variety of different paid above contract. A little block highlighted by the organisations because we cover so many different NAO at the bottom shows that people were being paid sectors, but obviously we benchmark executive very large sums of money, who had actually only been directors to ensure that we continue to pay a discount with the organisation, if I read rightly, from one to against the market. four years approximately. When you see that scatter of data, what is your response as head of HR? Q119 Ian Swales: Am I right in saying that in your Lucy Adams: Of the 71 who got more than the business, most of the alternative arrangements people standard redundancy, 60 of those were as a result of would have would be in the private sector? We get receiving payment in lieu of notice. Payment in lieu told, and it is true, that BBC people often go off to of notice is not necessarily in itself a bad thing; it is the private sector, so is your benchmarking with the just a different way of paying notice. private sector? Lucy Adams: We benchmark on salaries against both Q127 Chair: It is. It is a fiddle to get more money. the public sector and the private sector, but as you It was a fiddle to give them more money. For heaven’s rightly point out, the vast majority of the people we sake. It was the easy way of getting them out. We employ tend to move between other media know from the people we have had here that they organisations and ourselves. worked on and they still got their year’s payment in lieu. It was a fiddle to increase the amount of money Q120 Ian Swales: Exactly. I think I am right in people walked out of the door with. saying that your comment about the severance Lucy Adams: In 14 of those cases, they had time to arrangements benchmarking was that they were in line work their notice, and they should have been asked to with the public sector, but more generous than the work their notice. private sector. Chair: Out of 60? Lucy Adams: That is correct. That is, they were; we Lucy Adams: Out of 60. In the majority of the other have obviously changed them as a result of that cases, payment in lieu of notice can actually be a benchmarking. cheaper way of doing it. Q121 Chair: Who’s we? Have you been told to by Q128 Chair: Lord Hall or is that your initiative? Can? Was? Lucy Adams: No, this is something that was started Lucy Adams: You don’t know whether they are going before Lord Hall had arrived, before Tony arrived. to get another job, so you are making an up-front This was started in September. payment as opposed to keeping them on the payroll.
Q122 Q122 Ian Swales: Do you think the people Q129 Ian Swales: Of the people who left, how many who are now benchmarked against the private sector were leaving the BBC on a Friday and starting another for pay also have similar severance arrangements to job on the Monday—to put it in perhaps exaggerated those they would have in the private sector? terms? In other words, how many people went straight Lucy Adams: Could you say the question again? I to another job after leaving the BBC? do apologise. Lucy Adams: I do not have the level of detail for all of the 150. Clearly, in a number of the higher profile Q123 Ian Swales: If you are benchmarking one of cases, there were people who were going to get your top executives against the private sector for their another job. People getting another job who are not pay, are you also benchmarking their contractual getting payment in lieu of notice, but who are getting arrangements around severance to the private sector? their redundancy entitlement, is not something wrong. Lucy Adams: Right, I understand. We ensure that our You are obliged to pay that, whether they get another senior managers are paid less than their commercial job or not. counterparts. We have a clear discounting policy. Q130 Chair: As I understand it, in the compromise Q124 Chair: Out of interest, which FTSE 100 pays agreement is a clause saying that you have not got over £300,000 for their HR director? another job. Isn’t that right? You are the HR expert. It Lucy Adams: I can assure you, Madam Chairman, is my understanding, from talking to an HR lawyer, that the vast majority of HR directors are earning that most compromise agreements have a clause in significantly more, once you add in their bonus and them, whereby the employee says, “I haven’t got their incentive schemes. I took a significant drop to another job.” come to the BBC. Lucy Adams: It depends on the nature of the compromise agreement, but some do. Q125 Chair: Most FTSE 100? Lucy Adams: Absolutely. Q131 Chair: If that was in the clause, why did they get the extra money and walk into another job? Q126 Ian Swales: Finally, I refer to figure 9, on page Whether it was Loughrey, whether it was Keating or 24. We are now talking about a system that you are whether it was John Smith, they all walked into claiming has changed, but that figure really brings up other jobs. Ev 16 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Lucy Adams: The compromise arrangements that we basis of a full-time equivalent. According to the BBC, had with those individuals did not prevent them from the individual in question had recently agreed to getting another job. become a full-time member of staff, so the payment was calculated on the basis of that person working Q132 Chair: Did you have a clause that said, “You full-time. In other words, the person never worked must not have another job”? full-time and always worked part-time, but when it Lucy Adams: No. came to working out their redundancy payments, the payment was made on a full-time basis. How can that Q133 Ian Swales: Exactly. That is what enrages the be justified? public. Let us accept the fact that they might be due Lucy Adams: Again, I am not seeking to justify it; I redundancy payments, but your earlier example am seeking to explain how— showed the idea of people receiving money in lieu of notice and then actually working in another job during the period when, in effect, they are still being paid by Q137 Guto Bebb: But the decision was made, so it the BBC. Why should people not be enraged by that? should be justified. The difference between what that I am guessing that some of those people were actually person should have received, which was £145,000, making career moves, going to higher paid jobs. They and what that person did receive, which was had the kind of conversation you referred to earlier, £233,000, is £88,000. I bring it back to licence fee and you paid them to go in order to manage the payments. That represents 607 households paying for numbers. In both those cases, the general public are a discretionary payment that was not necessary right to be enraged if a large amount of public money according to the contractual agreement that that has headed to those individuals. Am I right in saying individual had. You need to justify it. that you have examples of both cases? There are Lucy Adams: I go back to what I said earlier: in each people being paid money in lieu of notice, who have of these negotiated settlements, severance actually started another job during that notice period, arrangements were arrived at with a view to moving and people who have effectively made a career move, the individual out of the door and getting the savings perhaps to a private sector media organisation, and as quickly as possible. who you have paid off, and they may have been negotiating that new job in advance of your agreeing the figure with them. Q138 Guto Bebb: If the aim was to get that person Lucy Adams: We certainly have an example where out of the job, why had that person recently agreed to people will have got another job at the point when work on a full-time basis? If the aim was to move they were being made redundant. We have an instance them out of the organisation quickly, that does not when somebody got payment in lieu of notice and correspond with the BBC explanation that they had then was successful in getting another job in that recently agreed that that person would work on a full- period of time. time basis. It does not stack up. Lucy Adams: Because obviously a drive to restructure Q134 Ian Swales: Do you ask for the money back? followed swiftly after the agreement for the individual If you give somebody pay in lieu of notice of six to move from working four days a week to working months, and they end up in another job in three five days a week. months, do you get any money back from them? Lucy Adams: No, we have no legal ability to do that. Q139 Guto Bebb: The other thing I wanted to say You are paying them their notice period, but you are was that Lord Patten referred to the fact that these choosing to pay it in one lump sum. figures have not only horrified the licence fee payer, but many members of staff within the BBC. The £5.3 Q135 Ian Swales: But if you give somebody a notice million paid to 10 executives is equivalent to 50% of period, it means that they work until the end of the the cuts being demanded of BBC Wales over a five- notice. They should surely not be allowed to start year period. That is the scale of the BBC’s generosity another job in that period without some financial towards senior members of staff. redress. On the part-time issue and going back to the issue of Lucy Adams: No, a payment in lieu of notice is a full and final settlement, which means that they walk us and them, why did you not follow the redundancy away, having had their notice paid up front. You have and reorganisation policy of the BBC? If you are no means of recourse. working at floor level in the BBC in Cardiff on Ian Swales: That is why we are here. £40,000 a year and you work on a part-time basis, your compensation would be calculated on the basis Q136 Guto Bebb: Going back to the £25 million, of that policy. Yet if you happen to be a senior which the Chair referred to, the reason why that figure executive and are able to have a cosy chat with the is important is that it reflects the licence fee payments HR director, it would appear that you get a better deal. of 172,000 households, so we are talking about a Is that acceptable in terms of the morale of BBC staff? significant sum of money. You made the point that the Lucy Adams: No, I fully accept that the payment in vast majority will have been in line with contracts, but this instance was too generous. All I can say is that to bring you to another example, in paragraph 2.12 on they were a highly litigious individual and the page 27, the payment for a senior executive who was decision and the negotiated settlement was to avoid working on a part-time basis was calculated on the future legal claims and to create minimum disruption. Committee of Public Accounts: Evidence Ev 17
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Q140 Guto Bebb: But if the contractual position said felt it would be inevitable that over the coming years £145,000, surely you must be confident that any legal there would be massive pressure on the public sector. action would have failed. I believe I have said in front of this Committee before Lucy Adams: No, because clearly there are cases that I very much regret that—I may have got the dates where people can take action over unfair selection for wrong on this—it took the BBC some further 18 redundancy. In this case, it was a choice between two months to take action with regard to senior pay. In my individuals and it was very possible that we would be view, the BBC would have been much better had it open to a legal challenge. taken that action when we were suggesting it should. I think it was on that issue. Q141 Guto Bebb: On the basis of this advice, if any member of the BBC staff in Wales facing redundancy Q145 Nick Smith: Lord Patten, you gave evidence as a result of BBC cuts engages a lawyer, they will earlier. I think most people out there in Ebbw Vale get a better deal. in Blaenau Gwent—in my constituency—would think Lucy Adams: This individual did not engage a lawyer. that if you discover an obvious wrong, an open-and- They were a highly litigious individual who shut case, how you respond is really quite important. understood the law themselves. I go back to the fact It says something about you and it says something that I am not seeking to defend and justify all these about the organisation. It is often the simple stories payments. What I am trying to do is to explain that that tell a lot about what is going on. It was reported decisions were made with a view to saving huge that Mr Entwistle received about £25,000 for 20 days’ amounts of money and getting individual managers work, and you said, “He didn’t do it, because his out of the door. temporary replacement did the job.” When I asked if you had asked for the money back, you said very Q142 Guto Bebb: The key thing is that you do need simply, “No.” I suppose the question is: why didn’t to justify the figures in question, because this is public you ask for the money back? money. There is a great deal of concern that we have Lord Patten of Barnes: As part of the compromise two situations here: we have public money being agreement with George Entwistle, it was accepted that wasted without justification, but just as seriously, we if he broke the compromise agreement in any way, have a situation in which it appears that some people there was the possibility of us clawing back parts of who are able to talk to senior management in London the settlement. On two or three occasions, we get a far better deal than other members of BBC staff consulted Baker and McKenzie about whether we had in other parts of the country. That is a huge issue for an entitlement to make any clawback, and on each the morale of the organisation. occasion they said that we did not. Q143 Nick Smith: Mr Fry, earlier when you gave Q146 Nick Smith: That brings me to a wider point. evidence you used a phrase that I found deeply Colleagues around the table today have outlined the troubling. You said—I think you referred to the former eye-watering amounts of money that have been director general—that you were told to get back in overpaid in many cases. Are you going to ask for any your box. What was that about, did you resolve the matter and did you report it to Lord Patten? of that money back, or is it all just flowing down the river and gone? Anthony Fry: This predates Lord Patten. I think it was actually almost my first remuneration committee, Lord Patten of Barnes: What I am certainly not going where I think the former director general took the to do is to risk asking to get money back, losing in view that I had not read my royal charter quite closely court and fetching up paying more money from the enough and therefore realised that some of my prior licence fee payer than would have been the case experience of what I thought remuneration otherwise. committees were there to do was outwith my Chair: There is nothing wrong in asking. responsibilities as a member of the Trust. Nick Smith: Yes. Ask for your money back. If I think that I have been overcharged for something, I ask for Q144 Nick Smith: How was the matter that you were the money back, and all of my constituents would do disagreeing over resolved? too. Anthony Fry: If I am absolutely honest with you, I cannot even remember what the matter was. I suspect Q147 Chair: One thinks of Pat Loughrey, Roly that it was to do with aspects of executive Keating and John Smith, for starters, all of whom remuneration on a generic basis—the scale of pay and went into jobs. It is all public money, and I just think so forth. that there is nothing wrong in asking. In fact, Roly By the time I joined the Trust, which was 2008, the Keating has given it back. question of pay generally within the public sector was Lord Patten of Barnes: I am very pleased that Roly becoming a very live issue in the aftermath of the Keating has. The Roly Keating case happened since I financial crisis. I freely admit that I think the BBC have been chairman of the Trust. The other cases were Trust was way ahead of many other bodies in before my time. I think other people with an recognising that the question of pay in the public appropriate sense of seemliness would see whether sector was going to become a very big issue. I think they should make a similar gesture. at that time we were urging the director general that he should take immediate action in regard to the scale Q148 Nick Smith: When you go back to the office of salaries at the executive board level, because we tonight will you ask to get the money back? Ev 18 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Lord Patten of Barnes: I am not going to add to the Q155 Mr Bacon: As she was at a point where she answer I have just given which was not about George didn’t have a statutory right to redundancy pay Entwistle. I explained that the information was not in because she only had 17 months’ continuous service, relation to George Entwistle, but to other people. and your primary concern was to get people out of the door as quickly as possible, why was she then allowed Q149 Chair: Will you ask for the money, Lord Hall? to extend her stay at the BBC so that the proposed Lord Hall of Birkenhead: I think the onus of leaving date was eight months hence, taking her over responsibility for these decisions—these payments— the 24-month limit so that she became entitled to a lies with the BBC. I am pleased that Roly Keating significant sum of money to which she previously sent his money back. John Smith has sent some would not have been entitled at all? Why was that money back too. But we got this wrong. We were allowed if the primary concern had been to get her out overpaying. The fault lies with us, the executive of of the door? the BBC. Lucy Adams: Because she was pregnant.
Q150 Mr Bacon: I should like to ask Lucy Adams Q156 Mr Bacon: Right, so she then went on about case study 5. Could you turn to page 41? This maternity leave. is Sharon Baylay who was paid severance of Lucy Adams: That’s right. So we served notice at the £394,000. Do you think that this was value for point when her maternity leave finished. money? Lucy Adams: The saving of Sharon’s post very Q157 Mr Bacon: It says in the report that she went quickly meant that we recouped the money as part of on maternity leave just over a month later. the ongoing plan of annual savings. So I think it was Lucy Adams: But she was pregnant at that time so the right decision to remove that post. I also think she was about to go on maternity leave. As I say, it is that, given that Sharon was pregnant and about to go the BBC’s approach not to serve notice on pregnant on maternity leave, the fact that at the BBC, while it women. is not a legal necessity, it is custom and practice not to serve notice to pregnant women but to wait until Q158 Mr Bacon: You ended up paying her £400,000 the end of their maternity leave, and given that she when you needn’t have paid her anything. She had no was leaving at the same point as a male colleague entitlement to redundancy pay and you ended up who, as we have seen, was going to be receiving some paying her £400,000. fairly generous terms, it was the appropriate thing to Lucy Adams: We had to pay her her notice which was do. £310,000,which is the vast majority— Q151 Mr Bacon: What is the answer to my Q159 Mr Bacon: That is the whole point isn’t it. question? Until she had got past the 24 months—I am reading Lucy Adams: What I am saying is that it is a lot of money— from the report: “At this point, the individual involved has 17 months of continuous service and so is not Mr Bacon: What I am really asking is what is the answer to my question. entitled to redundancy pay”. Lucy Adams: I believe it was value for money rather Lucy Adams: That’s right, but the redundancy than face a discriminatory claim for unfair selection element was obviously 10% of the overall amount— of redundancy by a pregnant woman when a male colleague was in receipt of a significantly larger Q160 Mr Bacon: Are you saying that even at that payment. point she would still have been entitled to pay in lieu of notice? Q152 Mr Bacon: At the time it was decided that she Lucy Adams: She would have been entitled to her was to leave, she had only worked for 17 months. She notice period, whether it was paid in one lump sum had only 17 months of continuous service, as the or over the period. report says, “ and so is not entitled to redundancy pay”. That is correct, isn’t it? Q161 Mr Bacon: What does it say about HR policy Lucy Adams: That was correct. at the BBC when you hire this person, who was there for only 17 months on an annual salary of £310,000 Q153 Mr Bacon: Good. Okay, thank you. The next and less than a year and a half later you decide that the point is this: you have stated all along that the primary post is not required and make the person redundant? concern of all of this was to get people out of the door Lucy Adams: Ms Bayley joined before I joined the as quickly as possible. Correct? That was the primary BBC, so I was not involved in her appointment, nor concern: to get people out of the door as quickly as was I involved in the structure of— possible. I paraphrase, but that is what you said earlier, didn’t you? Q162 Mr Bacon: I was not asking who made the Lucy Adams: What I said earlier was that my primary decision. I was asking what it says about the BBC’s concern was to get people out as quickly as possible— HR policies if that is possible. Lucy Adams: It is clearly not desirable that people are Q154 Mr Bacon: Yes, thank you. I thought that is let go so soon after joining. You hope that they enjoy what you said. a fantastic career at the BBC. What we were trying to Lucy Adams: But with minimum disruption. do was to reduce the amount spent on executive board Committee of Public Accounts: Evidence Ev 19
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry members and senior managers. Ms Bayley was one of Lucy Adams: What they have got over the last four those casualties. years since I have been there is a reduction in senior managers, which has delivered £19 million of savings Q163 Mr Bacon: You were allowing people who every year, which is obviously significantly more than were below you to use delegated authority to get rid was spent. What they have also got is a reform of of people. One of the most surprising things you said pensions and a freeze on management pay. What they was that you did not even know about the example have also got is removal of management benefits more in paragraph 2.12—the case of someone being given in line with a public service. What they have also got £141,000 more than they were entitled to—until you is reform of additional pension supplements that were read this report. given to managers. What they have also got is Lucy Adams: No, that’s right. I wasn’t aware of it greater transparency— until the NAO came and talked to us about the study because, as I said, we have a level of divisional Q169 Mr Bacon: On benefits, such as private health, autonomy to make financial decisions and, with perhaps the BBC was going to remove it anyway, but hindsight, that lacked central oversight. it was a matter of astonishment that senior managers even got private health when everyone else didn’t, and Q164 Mr Bacon: And that was lack of central I think that reflects just how extraordinarily out of oversight by you. touch the culture had become. Lucy Adams: I think lack of central oversight based I have talked to BBC journalists. I was talking to one around the financial governance of the BBC in respect last night who said, “I would love to be one of those of these payments, yes. people who had to hang their head in shame because I had been paid so much money.” But most BBC Q165 Mr Bacon: It was a lack of central oversight employees are not like that. They work very hard and by you, wasn’t it? they don’t get paid big amounts of money. There is a Lucy Adams: We’re asking divisional directors—very sort of little superstratum at the top— senior executive board members—to make some of Ian Swales: Big superstratum. these calls, so in that sense I think it is shared responsibility. Q170 Mr Bacon: A big superstratum at the top. I Lord Hall of Birkenhead: Could I just make a point, don’t know whether it is the marzipan or the icing Mr Bacon? My point about the culture of the BBC is sugar, or the cherry on top, but a small number of that it is not just HR. What was going on here was a people have been gouging the licence fee bare for broad acceptance of things being devolved that in my quite a long time, and it is a very big problem. I am judgment should not have been devolved— delighted that Tony Hall in his answer a moment ago Mr Bacon: Indeed. said that he recognises that there is a big cultural Lord Hall of Birkenhead: And of responsibilities by problem, and I recognise that Lord Patten said earlier executive remcos with non-execs and so on, and that he is trying to do something about it. management boards and finance committees which I want to come on, Tony Hall, to ask you a question were not gripped or not tight enough. I have proposed about that, because you are dealing with an reforms to that, working closely with Lucy Adams. organisation that is widely loved. Many people in this country have a great deal of time for the BBC, but its Q166 Mr Bacon: There is a reason why you have actions over recent years are very hard to defend. said relatively little in this. Everyone knows that you There are those of us who want to see the BBC thrive have joined extremely recently and weren’t and do well and who want to protect the existing responsible for this culture. It seemed to be a culture licence fee structure against all comers, and goodness of mates, cronyism, slapping each other on the knows there are plenty of those who would like to see shoulder, arranging for huge pay-offs, snouts-in-the- it torn apart. I count myself among those people who trough r us. want to see it thrive, notwithstanding all we know Lucy Adams: I do not think it is a question of mates about convergence and all the rest of it. and cronyism, Mr Bacon. I think there was a My view is that, if it is not absolutely, completely, prevailing culture where generous redundancy terms totally and utterly broken, don’t fix it. Leave the and severance arrangements were made, which clearly licence fee system in place, because I think it delivers did not deliver value for money. tremendous value. For those of us who want to defend the BBC and everything it stands for, the actions of Q167 Mr Bacon: It is good that you said that, the people who have been running the organisation for because a minute ago you said case study 5 was value the past few years make it incredibly difficult for us for money. Now you are saying that generally they to defend the BBC. I would like to know what you were not value for money. That is interesting. What I have been doing as the new leader in the past few want to know is what is the licence fee payer getting months and what you will be doing in the time ahead for the £300,000 or so you are paid? How much is to restore the morale and confidence of the people your salary? who work for you. Lucy Adams: It is £320,000. Lord Hall of Birkenhead: First, may I thank you for what you said about the BBC? It is a wonderful Q168 Mr Bacon: What does the licence fee payer organisation that a lot of people, both inside and get for that if you are not doing oversight? outside the organisation, believe in. It produces great Ev 20 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry programmes, and it has been doing great programmes leave. In honesty, I have to say to the Committee that over the weekend, and before that, too. it is unlikely that we can redeploy those people, but On the specific issues that are before us now, I they are all people under prior conditions of service recognised that we had to move on this and move on and notice. it quickly, which is why I said on day two that we would tackle the issue of severance pay. A bit later Q175 Chair: Can I just ask some questions on that? that month, I said that we would cap severance pay. Were any of these people involved in the DMI fiasco? That was the first thing. Working very closely with Lord Hall of Birkenhead: No. Lucy on that, and looking into the culture of the BBC and the way that it is organised, I could also see that, Q176 Chair: Are any of them getting payment in lieu at the centre, the amount of control of what was going of notice? on was simply not good enough. There had been a Lord Hall of Birkenhead: No. different principle running through this, which was to devolve decisions. That was not good enough, which Q177 Chair: Are you proposing to pay any of them is why Lucy and I are working together. From now a payment outside of the BBC rules? on, we will have a senior management committee that Lord Hall of Birkenhead: No. There is one case looks at remuneration down to the level of £75,000. where there is a possibility of a fault in the way that That is not just to do with severance or redundancy, the case has been handled and we might have to make but—I think you made this point earlier, Mr Bacon— some recompense for that, but we are taking legal to look at the substance of pay and how much we are advice on that. paying people. On top of that, we will remove the use of payment in lieu of notice, because as the NAO Q178 Mr Bacon: I would like to ask two more Report makes absolutely clear, people should work questions of Lord Patten, because they are really about their notice and then leave. the Trust. The first is about the role of the National Audit Office. You cast some doubt on the existing Q171 Mr Jackson: In your letter, on page 2 you refer structure and, at the very least, suggested that perhaps to the 11 cases caught by the cap where redeployment the role of the Trust should be extended in some has simply not been possible. What specific legal respects, even if they were relatively minor. Another advice have you had, or are currently having, on your issue with which you will be familiar, which the responsibilities and obligations to those people? Committee has talked about for many years, is the Lord Hall of Birkenhead: Lucy and I began working relationship between the BBC and the National Audit on 26 people—work had been going on before I Office, which is unconventional to say the least, in arrived—who would be hit by a £150,000 cap because that it is the result of an agreement between the of the conditions of their contract before the cap. Secretary of State for Culture, Media and Sport and Those people had letters and all sorts of things saying the Trust, such that the auditor can go only where the that they would be paid redundancy and other things. auditee consents to it going. I understand that there is a negotiation and that six Q172 Mr Jackson: All of them? topics are suggested each year under the agreement, Lord Hall of Birkenhead: Yes. but it is not the kind of normal relationship that you might expect between the auditor and a publicly Q173 Mr Jackson: So it is not just custom and funded body. That has raised some questions, practice—they have had a letter indicating a particularly in the light of what has happened in recent contractual relationship in which they effectively have years. It is quite possible that, had the NAO had the to be paid above that cap? ability to go wherever it sought and therefore there Lord Hall of Birkenhead: Yes, Mr Jackson. There had been a greater degree of challenge earlier—one was no cap when these deals were done. These were might say the same about the Financial Services people to whom it was either said, “Will you stay on Authority, had it been the case there—some of these until a certain point?” or “We need you to stay on,” problems might have been uncovered earlier. Do you or whatever. These are people who either had letters see a case for examining and perhaps adjusting the or had had firm meetings saying, “This is the deal for relationship between the NAO and the Trust so that your exit.” the NAO as an auditor—a value-for-money auditor— With good work from the HR department, we have has the unfettered access that it would normally now got that 26 down to 11. Those are people who expect in relation to any other publicly funded body? either are going to stay on and accept the cap or are Lord Patten of Barnes: I cannot speak for the being redeployed. There are then 11. Six of those Comptroller and Auditor General, but at the moment people have gone with payments above the cap. I think we have a good and effective relationship with Above-the-cap payments by us to those six people the NAO. In practice, it is inconceivable that if the total £400,000. We are now working on the other NAO asked to look at this or that aspect of our five people. activities, we would be able to say no. We are coping with a situation that would have led Q174 Chair: £400,000 in total? some of my predecessors as Chairman of the Lord Hall of Birkenhead: In total for those six Governors to throw themselves on their spears in people. We have five people on whom we are now protest at what they would regard as an infringement working to see whether we can redeploy them before of the BBC’s independence. I do not take that view. 1 September, when the cap comes in, or they have to The BBC has been in front of parliamentary Select Committee of Public Accounts: Evidence Ev 21
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Committees nine times this year. That is the sort of court and council, dated 14 June, concerning the accountability that would have Lord Reith spinning in undercover filming in North Korea. In the conclusion, his grave. Nevertheless, I do think that there are he says that the limited concessions made by the certain points beyond which we should not go. If there executives—the BBC executives—to the case made is ever a case where the NAO wants to do something, by LSE constitute “a totally inadequate response to within the terms of our agreement, that we find serious and justified criticisms”. I understand from the difficult, clearly the issue would arise again. LSE that they are still awaiting a reply. Is it your plan However, at the moment, we welcome the reports that to issue a more fulsome apology to the LSE? the NAO has done. It has contributed to dealing with Lord Patten of Barnes: The issue is being looked at the issue that you raised earlier in remarks that I at the moment, under our complaints procedure. totally endorse. There is a disjuncture between the trust that people have overall in the BBC, and their Q182 Mr Bacon: I should point out that not only am views on its efficiency and the way that it uses their I twice a graduate of the LSE, but so is our Chair. money. That is a disjuncture that we have to change. Lord Patten of Barnes: I can assure you that that was why my answer was going to be even more grovelling Q179 Mr Bacon: While we are on the subject of than would otherwise have been the case. The LSE Lord Reith, in passing, may I just say how had a reply from the executive, or two replies, I think, disappointed some of us are that you are not wearing very promptly, which Peter Sutherland did not find a dinner jacket and that neither is Tony Hall? Tony acceptable, and which one other complainant did not had plenty of opportunities to wear a dinner jacket in find acceptable. Those complaints will be dealt with his previous job; he really should have made a bit under our normal procedure as rapidly as possible by more effort, frankly. the editorial standards committee. Lord Hall of Birkenhead: I didn’t, as it happened. I Can I just make a point that is analogous to what we wanted lots of people to feel that they could come to have been talking about? A lot of people would like a the Royal Opera House. Wearing a dinner jacket was situation in which the Chairman of the Trust not something that I enjoyed there. intervenes editorially on issues like that. That would be as bad as my intervening in the way that the BBC Q180 Chair: May I interject something before you is run day to day. We have to balance things, so that move off the point? We welcome the co-operation we can make oversight operate. That depends a huge with the NAO, but we must say that there is always amount on trust between the strategic body and the delay. Whenever I ask the NAO about how they are executive, and I totally trust what the director general getting on, for some reason there is always delay built is doing. in. That seems to show a reluctance on the part of the Chair: Very quick questions from Justin, Chris and executive—it is probably not an issue for the Trust— Ian, then I will come in, before Steve asks a final one. to co-operate fully and promptly with the NAO. We’ve got about 10 minutes, guys. Lord Hall of Birkenhead: I want to co-operate fully and promptly with the NAO, and as far as I am now responsible, I will make sure that that happens. Q183 Justin Tomlinson: Lucy, going forward, how Amyas Morse: May I say something? I hope that this important do you think human resources skills will be will be a moderate comment. I was very interested by in ensuring that licence fee payers get value to some of what both Lord Patten and Anthony Fry were money? saying about feeling that, sometimes, their own input Lucy Adams: In relation to severance arrangements? was held pretty strongly at arm’s length. That can be Justin Tomlinson: Yes. our experience as well. I therefore do not see a great Lucy Adams: What Tony and I have done in the last difference between our experience and yours, from few months is put in place a range of governance time to time. I think it is very important that we find arrangements, policy changes and communication to ways to make that a really open portal, rather than make sure that things are better understood. So in something where your approach is treated on a need- many ways, because room for exceptional payments to-know basis. I do not regard it as something where has been closed down, room for payment in lieu of we are really at odds with the Trust. It is something notice has been closed down, and room for anything where both the Trust and, when we are asked to work above the cap has been closed down, it will be an for you, the NAO need to have more free access to easier role for managers because there will be very information, so that we can actually give comments little room for manoeuvre. based on initiative rather than simply on getting in and mining for particular bits of information that we Q184 Justin Tomlinson: But you have had to use have had to agree to. I simply say that to you because your HR expertise and skills to ensure that those I think for both bodies to do a better job, that would systems are watertight. be very helpful. I am not trying to take it any further Lucy Adams: Yes. than that in this discussion. Anthony Fry: I do not think we disagree with that Q185 Justin Tomlinson: Do you remember your at all. interview with the CIPD—an organisation “leading HR into the future”—in 2010, when you were quoted Q181 Mr Bacon: One more for Lord Patten. I am as saying that you are not an HR person and you do looking at a letter to you from Sir Peter Sutherland, not have a traditional HR background? Do you have the chairman of the London School of Economics the skills to put those systems in place? Ev 22 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Lucy Adams: I have been a senior HR director for those confidentiality clauses could have been used to over 10 years now. What I was referring to in that hide some perhaps even worse cases. Do you feel that interview was that, first and foremost, I am not that might be the case, or have concerns that that somebody who is isolated from the business that I am might be the case? in. I believe the remainder of the quote was, “I’m first Lucy Adams: The Comptroller and Auditor General and foremost a business person”, and that was to point can comment on the methodology, but as I understand out that you can have people who understand policy it, the methodology employed was what is called a and best practice, but who do not get engaged in the purposive audit—we provided details of all 150 senior business. I am very keen to be involved in all aspects managers who had left with a severance arrangement, of the BBC. and the auditors chose which ones, not on a random basis, but on a purposive basis. They looked at the Q186 Justin Tomlinson: Have you ever run a largest payments and at exceptional payments, and at business? the cases involving the largest salaries and the largest Lucy Adams: I have not run my own business, no. pile-on. While a further 90 were not the basis of the study, our assumption is that there is no further Q187 Justin Tomlinson: You are not a business learning zone—the vast majority of the money is person. Secondly, the executive and senior covered. management pay strategy plan, back in 2011, was a Chair: Bring in Stephen on that point. document that I believe you pulled together. Did you not suggest that there should be a 10% uplift in pay Q191 Stephen Barclay: Thank you, Chair. My for senior managers? I believe it was then pulled. question is to Lord Hall, please, building on Justin’s Lucy Adams: I do not recall it—sorry, which paper? point. As we have just alluded to, 90 cases have not Justin Tomlinson: The executive and senior been looked at by the NAO—so the majority have not management pay strategy plan in 2011, which been—and it is unable, under its access rights, to proposed that senior managers should get a 10% publish the names. Given that the Committee has uplift, despite the need then to cut the numbers. agreed to call Mr Thompson back in the autumn, will Lucy Adams: I do not believe that to be the case, you now share with the Committee the names of all because at that stage we were looking to reduce 150 senior managers who received severance numbers, salaries— payments in the three years to December 2012, with the sign-off and relevant documentation regarding Q188 Justin Tomlinson: It was released under their pay-offs? freedom of information to The Daily Telegraph at Lord Hall of Birkenhead: We have to have care about the time. protecting—under data protection—those who have Lucy Adams: But that would be very strange—I will benefited from the BBC’s decision. Our presumption, have to check—because we were looking to reduce and we have taken advice from the Information numbers and salaries at that time. Commissioner on this, is that we should not do that, unless those people come out themselves and say, “We Q189 Justin Tomlinson: Okay. Mr Bebb pointed out, are prepared to have our names in the public domain.” very reasonably, that all members of staff had What we are very prepared to do, Mr Barclay—on the contracts, but that decisions were taken—often by top 10 names that are now out there from this you—to deviate from the standard terms of the Report—is to tell you the groupings of people who contract for what you believed to be in the best made those decisions. interests of the BBC, although often costing us a lot more money. Under the new NAO proposals, you will Q192 Stephen Barclay: So the legal advice you get sight of things at a much lower level, so you will have—given you publically say that you have a very have even more involvement. Will that mean that we open culture—is that data protection prevents you will have even more contracts ignored and more from sharing that with the Committee. money simply given to people to leave? Lord Hall of Birkenhead: There is a balance here, Lord Hall of Birkenhead: May I answer that? Lucy which you probably know better than I do, between is reporting to me, and we are doing a lot of work on openness on the one hand, which is what we want, making sure that the organisation is simpler. I will not and protecting the personal data of those people go into that now, because it is not the point you made, whose data should be protected on the other hand. It but when you talked about value for money for is a very hard balance. licence-fee payers, that is really important. The answer is that I am going to be working with Lucy Q193 Stephen Barclay: Indeed it is. In reaching that very closely on all those contracts, to make sure that balance, would paragraph 5 of Schedule 2 to the Act they are proper and that the policies we have told you not apply? It imposes a public interest test. Indeed, that we will deliver, will be delivered on. the High Court ruling that applied to MPs’ expenses had two limbs to the test: whether it was taxpayers’ Q190 Justin Tomlinson: Turning to page 8, No. 13 money; and whether there were allegations of is on confidentiality clauses. The case studies that we impropriety. Both those tests would be met here. have looked at today have all raised concerns, but we Further, the ninth article of the Bill of Rights means have only skimmed the very top of this. There are that no proceedings can be sustained against a witness huge numbers of others that we do not have the to a Select Committee, so Speaker’s counsel has information for. I am just speculating that some of advised me that there is no impediment to you sharing Committee of Public Accounts: Evidence Ev 23
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry that information with this Committee on the basis of total faith that Lucy Adams has the skills to deliver data protection. Will you now, therefore, share that value for money for licence fee payers? information? Lord Hall of Birkenhead: Yes I can. We have been Lord Hall of Birkenhead: We need to take away what working together very hard over the past three you have just said and examine it. I will always look months, not just on these issues but on other issues to at that. We need to come back with a considered do with the design of the organisation. As I said in judgment on the things you have referred to, rather my letter to you, I think that the BBC is over-complex than just coming out with one here now. and over-layered. We need to have a simpler structure, On impropriety, one thing I took very strongly from in which people take responsibility for decisions that the Report was that the NAO are not saying that there are made and there is real authority, and people know is any impropriety in any of these payments. the authority levels within the organisation. Stephen Barclay: To avoid potential doubt from BBC In this case, I feel that the authority levels were lawyers, I would also draw your attention to the devolved far too low. Lucy Adams has been working Information Commissioner’s guidance about seniority. with me on that and doing some first-rate work, which To put seniority in context, the average severance I hope will really give better value for the licence fee payment is £164,200. Paragraph 50 on page 16 of the payers in the medium term. Information Commissioner’s guidance on requests for personal data about employees says that “it should be Q195 Chair: Lord Hall, has anybody who was recognised that there is an increasing public responsible been disciplined? expectation of transparency regarding the expenditure Lord Hall of Birkenhead: Why I wrote to you saying of public money and the performance of public that I felt that this was an institutional matter and a authorities. This is especially the case if there is any cultural matter is because people were working within evidence of mismanagement by senior staff”. So, guidelines and within a framework, which in my again, there is an element of debate there. The figures judgment, looking back at this—I could be wrong— cited in that guidance relate to staff at the level of was accepted but we all know was wrong. £58,200 and above. We are talking here about a group Stephen Barclay: Sorry, could you explain— of people some of whom were paid sums that are Lord Hall of Birkenhead: Some—not all—of the sixfold above that. people who have been responsible for that are no As I have set out, I don’t think that there is any longer at the BBC. I have concentrated my work on impediment to your sharing with the Committee the going forward and saying, “This is wrong. It is details regarding all 150 cases from a data protection unacceptable,” and looking at how I make sure that I can stand before you all and say that we have a grip on perspective. Just in case there is any doubt on that, this and are giving good value to licence fee payers. under Standing Order 148(1), Parliament has “the power to send for persons, papers and records”, and “Erskine May” is very clear—this is on page 839: Q196 Stephen Barclay: Could I clarify? Lord Hall, you said that people were working within guidelines. “Disobedience to the order of a committee made Where was it set out in the guidelines that people within its authority is a contempt of the House”. I could ignore contractual terms? would therefore like to ask the Chair for the Lord Hall of Birkenhead: I will correct myself there, agreement of the Committee that we apply Standing because I think that you have made an important Order 148(1) in the event that data protection is seen point. Culturally—as I think Lucy Adams and others as an impediment, and request the names of all the have said, and you have all commented—we had lost 150 people, and the relevant papers regarding their the plot. We had lost the way. We had got bedevilled severance. by zeros on various salaries. Chair: The Committee is agreed that that is what we should do. Q197 Stephen Barclay: People were not acting Justin Tomlinson: I think you know that there are far within guidelines? more issues and that gagging orders were used to hide Lord Hall of Birkenhead: I think one of the issues some even worse cases. I believe that you was that there was not enough grip at the very centre commissioned an Ernst and Young report that of the organisation by the non-execs with the highlighted that, and it would be rather helpful to see executive remuneration committee. There was not a that report. I presume it will not be forthcoming, but senior management remuneration committee. Things Steve’s legal knowledge may very well help us on were devolved far, far too low down. What I am that. attempting to do, and will do and am doing, is bring Stephen Barclay: The Committee can agree, within that back to a proper level at the heart of the the same part of the Standing Orders, to request that organisation, with me chairing— report for Mr Tomlinson as part of our evidence. Q198 Stephen Barclay: And we do appreciate that, Q194 Justin Tomlinson: Crucially, throughout the and we appreciate your getting a grip, and we evidence given today, people keep referring back to appreciate that there was a loss of grip. But just to be the fact that there was a culture of this happening. It very clear, people were not acting within guidelines, was nobody’s fault—it was always somebody else, but were they? nobody is prepared to say who that is. Lord Hall of Birkenhead: I take the point that there One final question for Lord Hall from me: after were things that were outside the policies of the BBC. everything that we have heard today, can you have That is completely right, yes. I accept that. Ev 24 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Q199 Chris Heaton-Harris: I am sorry I was late in. organisation feel, and holding the executive to I was actually at a Statutory Instrument Committee account. I also think that it is up to us, the executives, which, as Lord Patten will remember, is one of the to make sure that we are listening to what our viewers Committees in this place where you have no choice and our listeners, our audiences, are saying to us. And but to turn up. It was about the minimum wage, and I think that we are, now. sticking three pence on a band of one particular part Amyas Morse: Very quickly, I wanted to ask Lucy of the minimum wage. You do expect these people to Adams a question. There have been a lot of pay the licence fee too. The contrast between the suggestions about things you might have challenged figures I was listening to in Committee Room 11 and under the previous director generalship. Would you the figures we have been talking about since I walked feel that you actually had permission, or a culture that in here has been rather stark. was encouraging of challenge at that time? I want to ask Lord Hall a question. You have been in Lucy Adams: That is a very interesting question. this role since November last year. I wanted to follow Coming into the BBC, which had a director general up on the points being made, because what I have who had been in position for a long time, there was a heard since I walked in referred to a “lack of central certain way of doing things and, as is evidenced by oversight”, which I think was a direct quote from Ms my failed attempt to get a redundancy level cap in Adams, and that it felt way too cosy. I do not want to 2011 and to reduce the amount that people were call for Ms Adams’s head at all. I do not like doing getting at that time, I think that there was only so far that sort of thing, and I do not think that it is clever that we would go. politics. But I do think that when she starts talking Amyas Morse: So that would be no, really. Would that about people’s roles, it proves to me that there is such be a fair summary? a culture of cosiness and cliqueyness, where there is Lucy Adams: I don’t think it is fair. I think there not enough regard for taxpayers’ money and licence was absolute— fee payers’ money. I wonder how you are going to Amyas Morse: Pretty tough? tackle that. Lucy Adams: “Tough” is fair. Lord Hall of Birkenhead: To correct you on one point, I have actually been in the job—and it is a Q202 Chair: I am going to come in on this. We hear wonderful job in many respects—for three months, it all too often when we have witnesses here. It is one not since November. I was announced then, but it is disaster after another, and it is always “Not my fault, three months. guv, it was the person before.” Public money is at stake. I have to say to you, Ms Adams, that you were Q200 Chris Heaton-Harris: Are you enjoying in that job for four years. You were head of HR. You Public Accounts so far? are probably a tough cookie. You should have exerted Lord Hall of Birkenhead: I am enjoying a lot of the a bit of toughness. It is a big enough organisation that responsibilities that go with the job, but I also want to you could have done so. It is all too easy to blame make sure that I can stand before you and also the people who are not in the room. We have people in people who pay for us, the license fee payers, and say front of us, and they no doubt have some explanation, that they are getting brilliant value for money. I think but it is always blaming the person before. I would Mr Bacon made the point earlier that there is a lot of love it if we had an organisation in front of us that good will for the BBC, for the programmes that we accepted responsibility for what had happened. You do and the services we provide. I want to build on were there for four years. You were there for the three that. I think the challenge role which you are hinting years that are the subject of today’s deliberations. at is a really important one for our non-executive Lucy Adams: Madam Chairman, I would hope that directors. the Committee has heard from me throughout this The conversation earlier on with the Trust was about session that I have accepted responsibility for being ignored. I want our non-executive directors to decisions that I believe with hindsight were made in provide absolute proper challenge to the executive, error, and that were not good use of licence fee and I know that they will do. That is what they are payers’ money. I am trying to set a context of an there to do, in terms of what we do. Not just in terms ambition and an overwhelming regard for trying to of pay, but across the range of services that we move money out of the organisation and save £20 provide. I intend to make sure that they provide that million a year. I hope I have made it clear today that proper challenge. That challenge, in my judgment, alongside my colleagues, I take my share of looking back, has not been there in anything like the responsibility. degree— Q203 Ian Swales: I have one quick question. The Q201 Chair: Directors should also do the job BBC is almost a byword for complexity—it is still properly. lampooned in publications like Private Eye for it—so Lord Hall of Birkenhead: I completely agree, Madam I am not surprised to see a comment in your letter, Chairman. It is down to me and the executive team, Lord Hall, saying that there are some 55 separate which I have spent the last little while building. But boards and committees looking at operations and regarding the non-executive, I think that the point back-office functions. You still have 445 senior being made was about culture. I think the cultures of managers. You made a very welcome comment about organisations, which non-executive directors need to looking for simplification. How many senior build into an organisation, is that sense of representing managers do you think the BBC actually needs, the outside view and what people outside the approximately? Committee of Public Accounts: Evidence Ev 25
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Lord Hall of Birkenhead: I cannot give you an arguments. It would be in both our interests to avoid answer to that, because it would be off the cuff, and I that if it is humanly possible. do not like giving that sort of answer. What I can tell you is that I take the agenda of simplifying the Q206 Chair: I do not think we would in any way organisation really seriously. I think that will be wish to undermine individual rights. I was going to welcome, and not just to people outside the BBC who ask three quick questions of Tony Hall, just for clarity. are pitching for programmes or have an interest in the Does your £150,000 cap include the lot? Does it spending of their money as licence fee payers. As I include any pension top-ups, and all that sort of stuff? go around the country meeting people in the BBC—I Lord Hall of Birkenhead: The lot, but we do not plan am doing that one day a week—I think it will also pension top-ups. That is the lot. liberate people within the organisation to have some clarity. It also brings us back to—I think simplification Q207 Chair: That is the lot. Now, for clarity, the also means this—people taking responsibility. If they issue of health care and car allowances, because it is are running a project or whatever, they are taking unclear from the Report—are you stopping that for all responsibility for that. current staff, even though they may have had it in their original contract entitlement? Q204 Ian Swales: I totally accept that. One final Lord Hall of Birkenhead: Not at the moment. All comment: Mr Bacon talked about how the BBC is new staff do not have either of those two benefits, as loved, but equally, if you are in any doubt about how you know, Madam Chairman. Over the autumn and important it is to the public how the money is spent, winter, Lucy Adams and I will be looking at the you only need to go back and look at the debate on remuneration packages that we are offering. We will local radio, whenever it was. I have never heard try to achieve the very difficult balance between what anything like it in Parliament. That is a part of the the public expects of us in terms of pay, but also some BBC that needs protecting. It is a very small amount areas where the market for talent is pretty hot and we of your spending, and yet there were plans to axe a do not want to lose people who are good. lot of it. That is exactly what the public do not want to see. They want to see this agenda that you are Q208 Chair: I hear that, but those two are currently talking about. costing you £3 million a year. Lord Hall of Birkenhead: Mr Swales, I have been to Lord Hall of Birkenhead: The NAO Report suggests a number of local radio stations. The work being done that we do a cost-benefit analysis on that, and we will in local radio, with small resources but huge ambition, do so. is absolutely first-rate. We are providing a service to communities, for example in Radio Orkney, which no Q209 Stephen Barclay: To address Lord Patten’s one else is doing. We have got to make sure we can point, the legal advice I have received—obviously, it justify every pound we spend, as if it were our own will be subject to discussion with BBC lawyers—is money, to the people who are paying for us. That is a that, first, the royal charter does not fetter standing really important point for the BBC of the future. order 148(1). Secondly, as I set out, I do not think Lord Patten of Barnes: I think we may be coming to that data protection is a constraint, although that is a close. I do not want to cut short this Socratic something on which Lord Hall will want to take dialogue, but there is just one point that I want to be advice. I have cited the 2008 case and the public clear about. On the point that the Committee is interest element. Thirdly, the fact that the Committee making, if the legal advice that the executive has is obtains information does not equate to its being that those who received severance payments are published. I cite the precedent from the National entitled to the protection of legislation on data—I am Policing Improvement Agency, where we investigated not talking about the people who made the decisions, a payment of over £500,000 to a member of staff, but but the people who received the payments—is it the then accepted representations from Mr Gargan of the Committee’s position that it will seek to use NPIA, who gave us good grounds for why the data parliamentary privilege in order to overturn those could not be shared, which satisfied the Committee. rights? I do not know if I am interpreting that Obviously, it is an issue for further discussion, but the correctly, but I think there would be a hell of an point is that ahead of our hearing with Mr Thompson, argument about what it would do to the BBC’s it strikes me as appropriate that the Committee has independence, which I am statutorily obliged to access to the details regarding those 150 people. They defend. are senior members of staff, and we would not know whether any of them was currently being employed as Q205 Chair: All I can say to you is that we get a consultant for the BBC, for example. It is relevant information about individuals on a number of cases, that that information is available for the Committee, most recently around the Serious Fraud Office. We and then the Committee can decide what it does with of course have regard to the rights of the individuals it. concerned in the way we use that information. Lord Patten of Barnes: Behind that argument is your Lord Patten of Barnes: Is the Serious Fraud Office four-square defence of the integrity and the guaranteed by charter its independence? independence of the BBC. Chair: Probably not. Stephen Barclay: These are value for money issues. Lord Patten of Barnes: I do not want to find us They are not editorial questions. getting into unnecessary constitutional or legal Ev 26 Committee of Public Accounts: Evidence
10 July 2013 Lucy Adams, Lord Patten of Barnes, Lord Hall of Birkenhead and Anthony Fry
Chair: On that note, thank you very much indeed for being at this session. Committee of Public Accounts: Evidence Ev 27
Monday 9 September 2013
Members present: Margaret Hodge (Chair)
Mr Richard Bacon Mr Stewart Jackson Stephen Barclay Fiona Mactaggart Guto Bebb Austin Mitchell Jackie Doyle-Price Nick Smith Chris Heaton-Harris Ian Swales Meg Hillier Justin Tomlinson ______
Amyas Morse, Comptroller and Auditor General, National Audit Office, Gabrielle Cohen, Assistant Auditor General, NAO, Peter Gray, Director, NAO and Marius Gallaher, Alternate Treasury Officer of Accounts, were in attendance.
Examination of Witnesses
Witnesses: Mark Thompson, former Director-General, Marcus Agius, former Chairman of the BBC Executive Board Remuneration Committee, Lord Patten, Chairman, BBC Trust, Anthony Fry, BBC Trustee, Sir Michael Lyons, former Trust Chairman, Lucy Adams, Director, Human Resources, BBC, and Nicholas Kroll, Director, BBC Trust, gave evidence.
Q210 Chair: May I start by declaring an interest? I payer understand who they can hold to account. We have a daughter who is employed by the BBC. I do are trying, this afternoon, to shine a little more light not think there is anybody else who has an interest on those arrangements. to declare. I am going to start with you, Mr Thompson, and I am I thank you all for coming this afternoon. We have going to try to focus mostly on the Mark Byford pay- seven witnesses and probably about a dozen members off, but that is simply because it is an example of all of the Committee—I have not totted it up—so if we the others that we considered in the original Report are going to make this a positive occasion that works, from the NAO, the subsequent Report from the NAO that will demand some self-discipline on all our and the report that the BBC itself commissioned behalves, including answering questions succinctly from KPMG. and trying to keep to the question that is asked. I will I accept, Mr Thompson, that this is your first try to keep an order and to keep it going. appearance before the Committee on this, so this is I want to make just a few remarks at the beginning. your first opportunity to have your say. You will have We are not a court of law, but we are trying this read and heard how other people have expressed their afternoon to get at the truth, and only you, as disbelief and disgust at the size of the pay-offs. Would witnesses, can help us to do that. It is extraordinary you have come to the same decision today on Mark that the Committee has felt the need to ask seven key, Byford in the same circumstances? top players in the world’s leading public service Mark Thompson: I think the circumstances in 2010 broadcaster to come together to attempt to establish were very different from today. In 2010 I believed—I on behalf of the public and the licence fee payer who believed I had the full support of the non-executive knew what at what time and who is responsible, and directors of the BBC, and I also believed I had the therefore answerable, for decisions taken by the BBC. full support of the BBC Trust—that we had to do You are all people of assumed integrity, and you have something very significant very rapidly to reduce the been busy accusing each other of somewhat numbers and the aggregate pay of senior managers in misleading this Committee—that is probably the best the BBC. Indeed, we launched the programme which way of putting it—and of saying you are not ultimately saw, I think, 24%—one in four—of the responsible for certain decisions that have been taken, senior managers of the BBC leaving. The programme which I think everybody now believes led to grossly was originally expected to last three years; we excessive severance payments, which most right- accelerated it to about 18 months. The act of thinking people consider unacceptable. accelerating, itself, yielded an extra £9.5 million of What we are not here to do is to bash the BBC; we savings. The programme as a whole has saved about are not here to undermine the BBC. I think all of us— £35 million so far and has led to £19 million of certainly, I hope, round the table and in this room— savings for every year into the future. So the ultimate admire, value and cherish the creative talent and first- value-for-money argument for this reduction was class output of the many thousands of people who very strong. work for the BBC. Those employees, like us, must, I We felt it was important, and I felt it was important, am afraid, be looking at the management of the BBC that this programme should not just be, as it were, in dismay, particularly when they look at these pay- about the middle-ranking senior managers, but also offs. Probably even to the most seasoned viewer of should be seen to be about the BBC reducing its most the BBC’s affairs, the current arrangements under senior ranks and losing some of the highest-paying which the BBC operates are bewildering, complex and posts in the organisation. In the summer of 2010, we confusing, and they do little to help the licence fee identified the possibility—there were arguments Ev 28 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll against it, by the way; one of the arguments against joiners, the amount of money people would get for it was the likely severance payment—that we could past service to a year, and we had progressively potentially make a very big saving and also send out reduced and then abolished pension augmentation, a powerful signal by abolishing the post of Deputy which, as the NAO Report states, was once a big and Director-General. That is why, in 2010, we began to expensive part of severance. But it is true that I think about whether there was a way of doing that. I believe that we—I—achieved a lot in terms of began to talk to everyone about the best way of doing reducing senior manager numbers and the total senior that and what kind of severance payment it would manager pay bill. I would be the first person to say entail. that I did not do as much in terms of controlling and reducing severance payments. The time to reduce Q211 Chair: Can I take you back to my question? severance payments is after you have done your big With the benefit of hindsight, would you take the same reduction. If you launch a renegotiation of every decision today? If you think about Mark Byford’s £1 single senior manager’s contract at a time when you million, an ordinary worker on average earnings have told them that between one in five and one in would have to work for 40 years to earn the £1 million four is about to lose their job, the danger is that that that Mr Byford got in redundancy pay. In those process will hold you up for months or even years. circumstances, you can understand the disgust that ordinary licence fee payers feel about their Q215 Chair: You could have offered Mark Byford contribution being used in that way. With the benefit one year’s salary—in fact, he worked eight months of of hindsight, would you have given those very a period that would have been part of his notice— generous pay-offs if you had to take the same rather than giving him a further one year’s salary, decision today? which you classified as a year’s notice in lieu of Mark Thompson: You will have seen that at the time, salary. I completely fail to understand why you did in the so-called Project Silver note, which I wrote for not think that £500,000 in redundancy was enough. Sir Michael Lyons, I contemplated not going ahead Mark Thompson: I think that what is at debate here with this because of the size of the severance, but, had is the eight months, not 12 months. In other words, it we not made Mark Byford redundant, by now the is about £300,000. BBC would have spent at least another £1.3 million Chair: Focus on the question. Don’t go off it. I have on salary for him. Although I absolutely recognise that been very generous to you in not interrupting you, as it is a very large amount of money—I recognise the is my usual wont. impact it has had—it made better value-for-money Mark Thompson: If I may say so, Chair, it is not sense for the BBC to make the redundancy and save £500,000; it is £300,000, represented by the eight the money than to leave him in post. months between the announcement and the—
Q212 Chair: So would you take the same decision Q216 Chair: Under the terms of the contract, he today? could have been given one year’s salary, which, give Mark Thompson: I think we are now at a point where or take a bit, is £500,000. He walked away with, give we have reduced the overall population of the BBC or take a bit, £1 million. Why was £500,000, which is senior management by a quarter. Colossal savings megabucks for most people, not enough to get rid of have been released by that. In a sense, the wider somebody whom you decided you no longer needed value-for-money case is not as strong now as it was in your organisation? then, so the answer is that it probably would not have Mark Thompson: We were, at this point, in the made sense today. middle of a massive restructuring of the BBC, which involved losing a quarter of the senior management, Q213 Chair: One is tempted to say that there was and also a massive reorganisation. We were, as you colossal waste if you managed the organisation know from other hearings, in the middle of a series perfectly well with fewer top staff. Do you therefore of gigantic projects to include Salford and the new not agree with Tony Hall, who said the BBC had lost Broadcasting House, and also the preparation of the the plot on severance? He said, “We had lost the plot. broadcasting of the royal wedding and the Olympic We had lost the way. We had got bedevilled by zeros”. games. We took the decision—it was my judgment, Do you agree with him? which I put to the executive board and discussed with Mark Thompson: I want to say that we were focused the BBC Trust—that we wanted Mark Byford, above all—I do not think it was just me; it was the through this difficult transition, fully focused on the BBC Trust as well—first and foremost on whether we enormous task that we had. We did not want him could get the complete pay bill down, and real worrying about his future or taking calls from progress was made on that: £19 million. With the headhunters; we wanted him fully focused. That is earlier savings, we had made much more than that per why we decided not to ask him to work through his year of ongoing savings. notice. If I may say—
Q214 Chair: You do not think you had lost the plot? Q217 Chair: Hang on a minute. I am sure others will Mark Thompson: I do not think we had lost the plot. want to come in on the notice period. You still have I think we had done several important things to begin not answered the question. Had he left without this to control severance payments. We had capped, for discretionary element in his contract to give him the executive directors and then for new senior manager extra year of payment in lieu of notice, though he Committee of Public Accounts: Evidence Ev 29
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll worked for eight months of it, he would have got of its difficulty, I kept the option, and I shared this £500,000. What I do not understand is that for most with the Trust, of not proceeding with it because of ordinary people, £500,000 is a lot of money. Why, in the size and the difficulty of the potential settlement. your view, was that not enough? Mark Thompson: If I may say so, this entire exercise Q226 Chair: How typical is it for the average BBC was about reducing the numbers of high-paying jobs employee who is being made redundant to be given in the BBC. not just their statutory redundancy pay—I am talking about someone who is on a 10th or a 20th of Mark Q218 Chair: We understand that. That is not the Byford’s salary—but a year’s additional pay in lieu of answer to the question. Why did you consider half notice? How typical is that? a million too little as a fair redundancy payment to Mark Thompson: Mark Byford’s contract— Mark Byford? Mark Thompson: I want to be clear. I have said this Q227 Chair: How typical is that for others? Go right was not because I thought it was in the interests of down. I happened to be escorted through Millbank the Mark Byford that he should carry on working and day after we had our previous hearing in July by a receive formal notice later on; I believed that it was receptionist who had worked at the BBC for more in the BBC’s interest because of the immense than 20 years—I think it was 23 years—and who had operational challenges that we were facing at the time, just been made redundant, and all she got was the and it made sense for the BBC to have a Deputy statutory basic. She did not get a year in lieu. Director-General who, by the way, we were not ready Mark Thompson: Mark Byford’s contract, as I to make redundant yet— understand it—
Q219 Chair: You still have not answered the Q228 Chair: I know about Mark Byford’s contract. question, Mr Thompson. What I am trying to get at is that it feels to this Mark Thompson: In my calculation— Committee—it felt this in our previous hearing—that this small elite of senior managers, all of whom had Q220 Chair: Why did you feel that you had to go to worked together and probably known each other from the maximum payment allowable under the contract when they were trainee recruits into the BBC, were rather than a perfectly generous—massively getting the most generous end of redundancy generous—half a million? Why? settlements, while ordinary BBC people were not. Mark Thompson: Because I wanted Mark Byford to Mark Thompson: A BBC employee who had worked be fully focused. for 31 years—in most cases, or in many cases—in the rank and file would be eligible for a year of pay for Q221 Chair: He could have worked his notice and each year of service up to a cap of 24. In other words, done that. they would be eligible for two years. Mark Thompson: I have explained that what I wanted him to do was to be focused 100% on the task, and not Q229 Chair: They would not have got a year in at a point where he was worrying about headhunters. lieu— Mark Thompson: No, but they would have got two Q222 Chair: Just a few more questions, and then years in respect of past service. That had been capped others are longing to come in. How long have you in the case of Mark Byford at 12, so the idea of known Mark Byford? someone of 31 years getting the equivalent of two Mark Thompson: Many years. years’ pay would be widespread across the organisation. Q223 Chair: You came in together at about the same time, did you? Q230 Guto Bebb: On the specific issue of people Mark Thompson: Roughly the same time, so over who know each other at the top of the organisation, three decades. I went away to Channel 4, but I have the statistics show very clearly that the higher you known Mark Byford for three decades, yes. were within the organisation, the more likely you were to get a payment which was over and above your Q224 Chair: And you socialised with him? contractual entitlement, and even at the managerial Mark Thompson: Sometimes, yes. level: executive directors—50% over and above their contractual entitlement; senior managers level 1— Q225 Chair: Did that influence your decision 21% over and above; senior managers level 2—12%. making? It does give a picture of an organisation looking after Mark Thompson: No, it did not. One of the things I people at the top. want to say is that if you look at some of the Mark Thompson: Do you mean contractual documents that I submitted to you, I think you can see entitlement or contractual minima, as it were? that I was trying to involve as many other people in Guto Bebb: Contractual minimum entitlements the decision-making part of the organisation—non- according to the NAO Report. executive directors and the BBC Trust. The actual Mark Thompson: Well, there is a difference between negotiations with Mark Byford were led by Lucy those two things. The BBC can decide, for operational Adams, the director of the HR division of the BBC, reasons, to pay someone and make a payment in lieu and not by me. Throughout the entire process, because of notice. The BBC can do that. In the case of George Ev 30 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
Entwistle, for example, quite understandably, it was for new senior management joiners under my director- felt he should leave quickly and he was given it. I was generalship in 2008. One of the things we did was to involved in some cases where, because of a difficulty introduce such a cap. with an individual, a senior person left the BBC, and Much of what we are talking about here is something you make a payment in lieu of notice. Making a that was true of the BBC for many years. The reason payment in lieu of notice is not above the contract. why there were a lot of cases in this period was The contract is explicit that you can have a year of because it was a period when we decided, and I notice or the BBC may choose to pay you a year’s decided, to do a great deal to reduce the numbers of money in lieu of notice. That is an option under the senior managers and to reduce senior management contract. pay, so there were a lot of cases going through the system. It is not that there was an earlier period in Q231 Guto Bebb: It is interesting that the higher you the BBC when there were tighter controls and fewer are within the organisation, the more likely it is that benefits. Actually, the story is that we were reducing that option is exercised. Does that in any way make the number of benefits available in severance you concerned about the way in which the BBC packages. operated towards its staff across the country? Mark Thompson: I do not believe it is favouritism. Q234 Chair: Can we go to Ms Adams to get What may have happened though, and I was not aware confirmation of the evidence she gave us in July? of this until I read the NAO Report, was that in Lucy Adams: Yes, please, because I think that you are particular the cap that began to be placed on how misinterpreting what I said the last time I was before many months would be paid in lieu of past notice, the Committee. What I said was that there was a and the reduction and then the elimination of pension culture and practice in an organisation that had been augmentation may—that is may—have put more led by an individual for some time. Absolutely; one pressure, as it were, in those discussions on HR people would accept that. It certainly was not to imply that it to consider more readily for senior people particularly was “my way or the highway”. Mark was very open affected by this the possibility of payment in lieu of to discussion and challenge on a number of occasions. notice. We talked about a whole raft of things. In terms of the paper to which you referred, this was Q232 Mr Jackson: Mr Thompson, I think there is a a decision taken by the management board at the time danger of us going down a cul-de-sac where we just in 2011, when I proposed bringing in a cap, but as go round the Mark Byford situation ad infinitum. The Mark said earlier, there was reluctance to introduce a key point seems to me that you pray in aid a public cap at the very moment that we had announced sector ethos of public service, but you wanted private significant redundancies among senior managers. On sector pay, terms and conditions in the time that you the one hand, we are saying that there was a plan to were Director-General. Let us not forget—and I would reduce the management population by 20% and the like you to respond—that the KPMG report, the NAO pay bill by 25%, but the view of the management Report and our findings essentially say that, under board at the time—not just Mark, but a number of your leadership, there was weak governance on this colleagues—was that it would be inappropriate to issue and poor process management, and that in this introduce a cap at that time. narrow respect you were leading a dysfunctional organisation. Q235 Chair: Hang on a minute; you are completely You will no doubt respond to that, but may I ask you contradicting the evidence—you can’t do that. something specifically? You talk about value for Looking back at the evidence, you said: “I would also money, but in her evidence on 10 July, Lucy Adams say, going back to the level of challenge that I specifically made reference to the redundancy provided”—because we challenged you on your level payment cap that she sought to bring in as a policy, of challenge—“to the prevailing culture, that I which she identified you as blocking? If you were proposed to the management board in 2011 that a interested in value for money, as you said, why did redundancy cap be put in place. I was well aware that you take that action? this was unsustainable.” Mark Thompson: I didn’t. I don’t know what you are Lucy Adams: That is exactly what I said. I proposed referring to. it to the management board, and the management board took the view at the time that that wasn’t a cap Q233 Mr Jackson: “Coming into the BBC, which that it wanted to introduce. had a director general who had been in position for a long time”—you, from 2004 to 2012—“there was a Q236 Q236 Ian Swales: Mr Thompson just said that certain way of doing things and, as is evidenced by he didn’t have a cap proposed to him. my failed attempt to get a redundancy level cap in Mark Thompson: We introduced a cap in 2008 for 2011 and to reduce the amount that people were new senior management joiners, as I recall. getting at that time, I think that there was only so Lucy Adams: What we did was we put in place a cap far that we would go.” There was an inference in her on the amount of redundancy they could get in terms evidence that there was a culture of “my way or the of months. In September 2011, at what was then the highway” when you were Director-General. BDG—the management board—we proposed a Mark Thompson: I simply do not recall ever rejecting number of options. You may not remember it, but the idea of a cap. Indeed, such a cap was introduced there was a paper that looked at a number of options, Committee of Public Accounts: Evidence Ev 31
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll one of which was to put in place a cap of £100,000, Mark Thompson: Custom and practice is not a legal which was what I proposed at the time. requirement, did you say? Stephen Barclay: There is no legal requirement for Q237 Mr Jackson: The Committee will note that you to make payments in line with custom and you have had to apologise to us since the last meeting, practice. given that you claimed not to have seen a document Mark Thompson: That is perfectly true, but the that you substantially authored. I think that we need decision you make when you are a manager in any to take your evidence with a pinch of salt. organisation, whether private or public, is based on Lucy Adams: To draw an inference with that not just legal requirements, but what is to the best clarification is grossly unfair. You were referring to a advantage in terms of value for money, operational document, but I did not understand which document success and so forth. There are many issues involved you were talking about at the time. I was shown the in reaching a settlement with an individual, whether document after that meeting, and of course I that is one to hire them or to fire them. recognised it as a document with which I had been involved, so I immediately clarified the situation. Q242 Stephen Barclay: Sure, but the company policy was that you could not go beyond payment in Q238 Chair: Just to be clear on that, because I am lieu of notice. not having any more lies this afternoon, may I ask the Mark Thompson: It is really important to say that the NAO whether that document—the 7 October BBC has a number of policy documents in this area document, of which we were all given a copy—was in which the emphasis is that they are guidelines. also passed to the witnesses? Did they know what we Specifically in redundancy cases, managers are were talking about? explicitly asked to look at wider value-for-money Peter Gray: I believe it was made available to the considerations, and operational and non-financial Committee on that day, or just before, by the Trust. considerations. In my view, it is an error that the NAO Lucy Adams: Yes, it was submitted by the Trust; it Report talks about a breach of policy. Managers, wasn’t a document that I had seen. I apologise to the advised by HR professionals and employment Committee that I wasn’t able to identify that document lawyers, are expected to use their best judgment about at the time. There was no attempt deliberately to what is in the overall best interests of the mislead the Committee. I immediately clarified upon organisation—not the individual, but the organisation. Parliament’s return that I recognised the document as one to which I had contributed. In the Committee Q243 Stephen Barclay: So it is your evidence that meeting, I was clear that I couldn’t with absolute company policy at the BBC allowed individuals to go certainty recall that document, but I was also clear beyond payment in lieu of notice. that I was involved in advising Mark on the terms Mark Thompson: In some cases, yes. for Mark Byford. I have never sought to deny my involvement in that. Q244 Stephen Barclay: And you delegated that authority down to a very large number of people. Q239 Chair: Let me just say that your immediacy Mark Thompson: Yes. By the way, I should be clear: was a letter to Mr Jenner on 2 September. I did not loosen the financial controls in this area. Lucy Adams: On Parliament’s return. Those financial controls are ones I inherited when I Chair: It was on 2 September, after we had met on became Director-General. 15 July. Lucy Adams: On 10 July. Q245 Stephen Barclay: That speaks to the governance, but what it does not speak to is the legal Q240 Chair: That is a very funny interpretation of entitlement of the member of staff. A member of staff “immediate”. had no legal entitlement to a payment beyond Lucy Adams: When I read the transcript, because I payment in lieu of notice, did they? They could not had said that I could not say with absolute certainty force you to pay more than payment in lieu of notice; and because I had not sought to deny any involvement they had no contractual entitlement to work their in the discussions around Mark Byford, I did not notice and be paid a payment in lieu of notice. believe it needed clarifying. Subsequently, over the Mark Thompson: That is correct. They have a ensuing weeks, there has clearly been a lot of contractual entitlement to be given either a year’s discrepancy between one side and the other. At that notice or a payment in lieu of notice, or some point, on Parliament’s return, I sought to clarify it. combination of the two. Chair: Before we move on to who said what to whom, I want to establish the culture. Stephen, can Q246 Stephen Barclay: Sure, but they do not have a you come in on that question about the nature of the legal entitlement to both. policy, before we try to move on to who actually said Mark Thompson: No, but that is a matter of when anything to anybody, or nothing to anybody? you give them formal notice, which is not itself set out in the contract. Q241 Stephen Barclay: Just to clarify something, Mr Thompson, custom and practice is not a legal Q247 Stephen Barclay: What is set out in the requirement, is it? contract is that they do not have a right both to work Ev 32 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll their notice and to be paid in lieu of notice. That is meant a renegotiation, which the BBC has currently the position. been involved in, of everyone’s contract. I was saying Mark Thompson: That is correct. that trying to renegotiate everyone’s contract at a time when you are telling one in five or one in four that Q248 Stephen Barclay: So, in making such a they are going to be leaving is a very difficult task. payment, you were going beyond what the member of Once you have made a big reduction, it becomes staff was legally entitled to. much more achievable, and I think the BBC is making Mark Thompson: We took a decision, for the reasons real progress on this point. I was never suggesting I have already said to the Chair— that there was any question, or any need, to attempt a renegotiation on Mark Byford’s contract. Q249 Stephen Barclay: It is a yes or no, surely. Mark Thompson: We had taken a decision not to Q255 Stephen Barclay: It is not just this restructure, issue formal notice—and we made this clear to because the three-year sample of the NAO shows everyone involved—until June 2011. From that these big payments, but the previous three-year moment, we absolutely followed the contract strictly. sample also shows those. So it is over a six-year period, it is not just a recent thing. What I cannot Q250 Stephen Barclay: I understand the reason you understand is, if you are very lax in delegating are giving. Mr Agius speaks to it in his submission: authority and you allow people to go beyond what he thinks that £500,000 would have left Mr Byford legally they have to pay, would it not be reasonable so dissatisfied that he could not be relied on to work to expect those decisions then to go to Mr Agius’s professionally. What I am saying is that legally he did committee as exceptions, for that committee—if that not have an entitlement to that payment. It was your committee means anything—to look at them and discretion that led to him being made that payment. approve them? Mark Thompson: It is an operational management Mark Thompson: Firstly, I think that the word “lax” decision, in the end, submitted as a proposal to the is too strong. There was a control system in place. executive board remuneration committee. Stephen Barclay: That is the NAO finding. Mark Thompson: I am here as a witness; let me tell Q251 Stephen Barclay: So to come back to the you what I think. Over the time I was Director- original question, it is not a legal entitlement of the General, we tightened the controls so, for example, member of staff, is it? compromise agreements over a certain point had to Mark Thompson: It has never come up, so no, it isn’t, be referred up. The largest potential settlements were, and no one has ever suggested it was. throughout the entire period, referred up anyway to the finance committee, and the overall group finance Q252 Stephen Barclay: They couldn’t take you to director was involved as well as the group HR tribunal and say, “I should have had this payment.” director. Mark Thompson: No. The risk—I say in my Having said that, I absolutely accept that one of the submission that I do not believe that it was a large recommendations in the NAO Report, which I believe risk, but I was advised about it—was, rather, one of the BBC is now adopting, of tighter controls further constructive dismissal. down the system so that there is more oversight and a system of reporting back. There is a role now for the Q253 Stephen Barclay: Sure. So in your opening chair of the executive board remuneration committee remarks a few moments ago, if I heard correctly, you to report exceptions in the annual report and to have said it wasn’t a time for a renegotiation with Mr more explicit oversight. All of those recommendations Byford. strike me as being very sensible. Mark Thompson: This was not a time, in my view, for a complete restructuring of the BBC’s approach to severance across the entire population, because we Q256 Stephen Barclay: So just to be clear, it is your were in the middle of a very rapid reduction of evidence that it was not lax to have payments beyond senior managers. what was legally required, with no paper trail when Stephen Barclay: Indeed. I am just trying to the National Audit Office went in, with multiple understand— people signing them off, with the head of HR not Mark Thompson: I was not referring to Mark having a clue about a significant number of them until Byford’s case at all. they appeared in the NAO Report, and without them appearing before Mr Agius’s committee as exceptions Q254 Stephen Barclay: I am just trying to to the agreed policy for sign-off. None of that was lax; understand why legally enforcing a contract is a that was all professional in your view. renegotiation. Mark Thompson: I will work backwards through Mark Thompson: Those are two quite different those points, if I may. The executive board points. remuneration committee was set up with the specific Stephen Barclay: No, they are not. task of dealing with the remuneration of members of Mark Thompson: Yes they are, if I may say so. What the executive board; it is that kind of remuneration I was saying was: the suggestion that Lucy mentioned, committee. There were, as you know, other the proposal in September 2011 of, for example, committees looking at, and approving, many other introducing a lower cap on payments, would have severance payments across the organisation. Committee of Public Accounts: Evidence Ev 33
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
I have said to you that I think “lax” is too strong. I organisation. My role is absolutely central. I am a certainly accept that losing a quarter of your senior witness who is coming before you not to say “I was management population in 15 months is a very rapid, somewhere else”; I was absolutely there, and I was aggressive change. I thought it was justified; I thought making decisions in the real world, with a very big it was possible. Lucy Adams had advised me that it and complex organisation. I was in the middle of it. was going to be very difficult and, to be honest, we But I look—of course—to advice. I looked to advice do not have a standing army of employment lawyers from colleagues and specialist colleagues in HR and and HR specialists which is ready the whole time for elsewhere; I looked to the line management of big this scale of task. And if you say to me—through the divisions of the organisation and the senior managers period, but particularly in these three years—that not there; I looked to the executive board, in particular the all the paperwork was done perfectly, and there were non-executive directors on the executive board; and I examples of laxness, I accept that. But all I would say looked to the BBC Trust ,absolutely, to help them with is: the acceleration of the programme itself yielded an their role of oversight. It was also because, in my additional £9.5 million of value-for-money savings, experience, chairs of the BBC—I absolutely include and there was a prize of real money that we could Sir Michael Lyons and Lord Patten in this—are great take and put on our programmes and services as a sources of advice and counsel. result of moving so quickly. All the way through this process, I am trying to seek advice, support and challenge, because sometimes, the Q257 Ian Swales: You talked about it not being the best thing that people can say to you is, “You’re crazy. time to renegotiate contracts, but here we are mainly Don’t do it.” That is sometimes good advice too. talking about payments outside contracts. So are you suggesting to the Committee that what you would Q261 Chris Heaton-Harris: Did you get good have liked to do was negotiate more generous challenge on these decisions? contracts so that these payments were inside Mark Thompson: I believe that the broad topic of contracts? That is the only logic from what you say. senior management pay and numbers was talked about Mark Thompson: No. The issue is whether or not it extensively. I was under ferocious pressure from the would have been desirable to do what the BBC has BBC Trust and from non-executive colleagues on the done now, which is to introduce into all contracts executive board to do something big and quick, and I blanket caps so that under all circumstances, no matter thought they were right. When I say that it was how much service, there would be an absolute limit. I challenging, I did not disagree with them, but there believe that that is the right thing for the BBC to have was ferocious pressure continuously from Sir Michael, done now. until he left and Lord Patten arrived, and he put me under ferocious pressure as well. This was a period Q258 Chair: And you could, at the time, Mr when the Trust was very clear—whatever one may Thompson, have done it all for less. I think that that think about the past—about the then-current public is the contention of this Committee, working on behalf mood on this topic, and they wanted action. So on that of licence fee payers. You could have done it for less. topic, there was immense challenge. Mark Thompson: My honest view of that, Madam On the specifics of, for example, “Should we abolish Chairman, is that the price you would have paid in the role of Deputy Director-General?”, again, there 2009 or 2010 to try to do it would have been a delay was immense discussion and challenge, and often that would have ended up costing more. The savings challenge both ways—“You say you think you can do from advancing the programme were much greater without a Deputy Director-General, but look at all the than the amount of money at issue in the NAO Report. things he does and at all his responsibilities. Who is going to do them now? Quite apart from the issue of Q259 Chair: I think we have to agree to disagree the severance, is it the right thing to do?” Other on that. Effective management could have saved the people, of course, argue the other way and say, “I’m licence fee payer money. surprised that you didn’t do that six months ago.” Mark Thompson: This is simple mathematics. The savings were so large, a single month’s delay Q262 Nick Smith: Mr Thompson, you say that you potentially cost well over £1 million. welcome challenge, particularly from the Trust. Chair: I am going to call Chris and Nick, and then I Indeed, Ms Adams said that you weren’t the sort of am going to move to who said what to whom. guy who said, “It’s my way or the highway.” But there seems to be a contradiction. The last time Mr Fry was Q260 Chris Heaton-Harris: This is on a point of in front of us, in July, he said—this was about clarification, if possible, Mr Thompson. You say that redundancy caps—“I would be delighted if you had “we” did this and “we” did that. At one point you the former Director-General in here…to talk about were talking about the executive board remuneration this issue”, because you talked it through on a number committee, and at another point you were talking of occasions, when, “not to put too fine a point on it, about something else. I wonder if you could clarify people like me were asked in not particularly pleasant who the “we” was when you were talking about terms to get back into our box.” Mark Byford. There seems to be a contradiction about the culture of Mark Thompson: I am not trying to duck the most challenge around pay and conditions at the BBC central and obvious point, which is that I was the between what you say—Ms Adams just said how you Director-General and chief executive of the handled these things—and what Mr Fry told us in Ev 34 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
July. Who is right? Ms Adams? Or were you putting threaten to take legal action on the size of their pay- the BBC trustees back in their box? off? Mark Thompson: I just want to say that I cannot Lucy Adams: Certainly, no executive directors did. recall ever using the words “back in box” or anything There is in a number of cases the possibility of threats like that, or ever speaking angrily, disrespectfully or of legal action. arrogantly to Anthony or any other trustee. All I would say is, look at what we did. We reduced the size Q265 Chair: We are talking about the top of the executive board substantially. We made colossal management pay-offs. Did anybody threaten to take reductions to senior management. We froze pay, legal action? abolished bonuses and special pension supplements, Mark Thompson: There certainly was a threat of legal and dropped car and health allowances. There was an action on the removal of the pension supplements. enormous agenda of reform that was driven by the Trust. The Trust was very clear that it wanted to see Q266 Chair: From whom? action and we complied with that. The idea that there Mark Thompson: From senior managers. There were was some resistance to that is not borne out by the certainly threats of legal action over that, because simple facts. those were written into contracts.
Q263 Nick Smith: Can we hear what Mr Fry says Q267 Chair: But none of the people you made about Mr Thompson’s remarks? When I looked at Mr redundant threatened to take legal action against the Fry as Mr Thompson had his say, he looked a little BBC. pained, at the very least. Mr Fry, do you accept what Lucy Adams: When you are in discussions with Mr Thompson said, that he was not telling you to get somebody about taking their job away, you are back in your box? weighing up a number of factors, one of which is the Anthony Fry: I don’t accept that. I am certainly not possibility of legal action. They do not necessarily going to say the actual words that I used, which I said, have to threaten it for the risk to be there, because we to put a finer point on it, were to make sure it did not know that it may be a choice between one person and take too much time. I very much regret that the area another, there may be issues of discrimination— that we are discussing today, on severance, was not Chair: There is always risk. Those of us who have one of the ones that I among others had focused on. I been in the public sector long enough know that you will say that quite openly; I wish that we had done. are always given the risk. However, from the time that I joined the Trust and the Lucy Adams: As a result you are weighing up that remuneration committee, I felt that on a whole lot of balance, so there does not have to be— areas such as perks, the level of pay and the level and Mark Thompson: I can think of at least one example appropriateness of bonuses we did not just have one that ended up with a compromise agreement—a conversation at which we expressed a view. The slightly different circumstance—where there was record, if someone cares to go back through it, will definitely the threat of legal action. show that there were months and months of arguments between the Trust and the executive, which I as an Q268 Chair: From a senior manager? incoming trustee certainly found in many cases Mark Thompson: Yes. extremely challenging, not least because the very fine Chair: Who got a year in lieu of notice. line that existed under the way that this was set up Mark Thompson: It is a different example, but that between what is policy, where the Trust has a was a compromise rather than a redundancy. perfectly legitimate area to get involved, and what is the detail of individual remuneration became a Q269 Chair: Let us move on to who said what and battleground. who knew what. Again, the first question is to you, Mr Thompson. Do you stand by your assertion that Yes, I will stand by what I said. Many of those we were misled by other witnesses when they meetings were not easy—I don’t expect meetings to appeared before us in July? be easy—but I got the distinct view and felt very Mark Thompson: I do. I have to say, my intention uncomfortable, as did other colleagues, that basically here is to set the record straight. I believe that the our views were not being taken with what I believe to suggestion that I, perhaps with my colleagues, had be the seriousness that they deserved, at a time when withheld important information about the Mark there was a lot of public anxiety about the question of Byford and Sharon Bayley settlements from the BBC pay in general in the aftermath of the banking crisis. Trust—that it was kept in the dark and that it would So yes, I will stick by what I said to you earlier. be “just as interested as you”, the PAC, “in why we The fact that the BBC eventually took action in these didn’t know”—is untrue and unfair. areas, which I welcome—and I think the progress has I want to say, though, that I do not understand why been fantastic—does not mean that the process of those misleading statements were made. I do not want getting there was not extremely difficult. Yes, I think to impute intention to it, but I believe that damaging we got pushed back time and time again on a lot of and unfair misleading statements were made issues including, for example, bonuses. specifically on this point of how much information had been shared with the chairman at the time, Sir Q264 Chair: I want to move us on, but can I finally Michael Lyons, with the Trust unit led by Nicholas have a yes or no to this, please? Did anyone ever Kroll, with other trustees and subsequently with the Committee of Public Accounts: Evidence Ev 35
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
BBC Trust. I wanted to set that right. I am not 59, by Paul Farrelly, who is very concerned, and has criticising the individuals; I simply do not think it is been for some time, about BBC pay: Paul Farrelly fair, because I believe that I made sure that the BBC asks me specifically about the Byford payments. I Trust was fully informed in advance about these reply with some well-meaning stuff, I hope, about settlements. Much of this was oral and face to face trying to get the pay of the BBC down, and the rather than in documents, and one or two more importance of the Hutton principles, which we had documents have come to light since I sent you my pressed the BBC to introduce that year. Mark then submission, but I think that the documents I have sent comes in and says, “I agree with all of that. The only you substantiate that point. thing I would add is that Mark Byford’s terms on departure from the BBC are absolutely standard, as Q270 Chair: I think I have to give the others a regards notice and months of redundancy in terms of chance to respond to that. I think I will start with Lord service”. Patten. Do you want to respond? So am I supposed to get from that that there is a Lord Patten: I am in a slightly different position, different view of what a contractual entitlement is, because I became Chairman of the Trust six months taken by some in the executive, from the one which after the Byford and Bayley settlements— you have been enunciating here? All I said to this Committee—and I am in some difficulty about this, Q271 Chair: But you did make these statements because, I repeat, I was not party to any agreements last time. made about Mark Byford; I am in the position in Lord Patten: Yes. Let me be clear. You said, “So you which I am accused of having misled the Committee think that you should have known. I completely on something that I never knew and could not have understand that those within contractual obligations been expected to know. are an executive decision but, where they exceed contractual obligations, should the Trust have Q272 Chair: Why, Mr Kroll, wasn’t it in the known?” I responded, “Yes, and if you call a previous induction pack? Director-General of the BBC in due course, I will be Nicholas Kroll: Because severance issues were not in as interested as you in why we didn’t know.” It is said the knowledge of the Trust being operated in the way that that is misleading the Committee, which I take we subsequently discovered, so there wasn’t an issue very strongly. about severance, as there now is, which we are I just want to make three or four very obvious points. considering today. First, since the previous Trust did not know that payments had been made outside contract, why should Q273 Chair: Hang on a minute—we will come to Sir I, as a new Trust Chairman, have known? Is it really Michael, and I am sure he is desperate to come in— likely that the Director-General would say to me, the paper trail, particularly from the NAO recently, “Look, the previous Trust did not know that these demonstrates that there were lots of e-mails floating were paid outside contract or paid in what I define as around between the Trust and the executive, around in contract,” although that is not the same as the the issue of the severance payment of Mark Byford NAO’s view on what a contract is? Is it likely that I and Baylay. would have a briefing that told me that? We have Nicholas Kroll: Yes, I would be happy to go through looked through my induction briefing and there is no why, I am afraid— reference at all to severance payments. I had discussions with Michael Lyons, whose work in Q274 Chair: It is obviously such a contentious—a pressing for a reduction in pay and in dealing with million quid. I have to say to you, Lord Patten, I think such matters I very much admire, and he did not I would have questioned a million quid, and that is mention severance payments or the Bayley and having been a non-executive member on a heck of a Byford payments. Mark’s point therefore depends on lot of public bodies; but I take it you did not. I think it the separate briefings that we both had for the press should have been in your welcome pack, and I cannot conference for the annual report of 2010–11. We understand, Mr Kroll, why you did not put it in there. received different briefings as we would get different Nicholas Kroll: Let me say, the reason for that, questions. My briefing drew on his and actually Chairman, is that my interpretation and my staff’s quoted almost directly from it. His says, “How can we interpretation of what Mr Thompson has included in justify paying Sharon and Mark these sums of money his brief is different; so we were not aware of the for loss of office?” The briefing that both of us had details of Mark Byford’s arrangement—neither in goes on: “These were contractual payments which writing nor from any oral contact; and that is the fact were essential in order to slim down the executive of the matter. board.” These were contractual payments. Now, Mark’s contention is I should have been able, Q275 Chair: We can’t believe that. through some forensic work of my own, to discover Nicholas Kroll: If you want me to explain, I would that his view of what a contract was was different be very happy to do so. The first thing I think I ought from what, today, we know the NAO’s to be; and I to say, in response to the point in Mark’s submission, just cannot accept that. It is actually much easier than is that I personally—as he suggests—was not closely looking at what we were told to say to the press engaged in the preparation of the note of 7 October. conference. We both appeared in December in front of the Culture, Media and Sport Committee. Question Q276 Chair: Were you engaged at all? Ev 36 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
Nicholas Kroll: If I could tell you what I did— Nicholas Kroll: I have worked for the BBC for nine years. Q277 Stephen Barclay: In e-mails it says that the Trust have asked for amendments to that document. It Q282 Chair: When you see a figure of more than £1 is difficult to ask for amendments to a document that million, do you think that that is the minimum you can neither find nor know anything about. contractual basis for a redundancy payment? You are Nicholas Kroll: We might come back to that issue, if the conduit between the Trust and the executive, and you want to, in a moment; but if I could explain what you get this figure. What do you think? that process of commenting involved, it is regular and Nicholas Kroll: I think that it is a large figure. standard practice for the Trust and the Trust unit, as Unquestionably it is a large figure. the secretariat of the Trust, to see papers from the executive before they go final. We do that not Q283 Chair: Do you not think, on behalf of the somehow to take over the responsibility for drafting Trust, which is responsible to the licence fee payers, the paper but to make sure that papers that are that you should have some understanding of the provided for trustees deal with any questions that we figure? Did you not know from your knowledge of know trustees have had, but also are clearly presented. being an employee of the BBC that that meant it was In the case that we are talking about today, of the not one year’s salary, but a heck of a lot more than paper of 7 October, that was sent to me at 5 o’clock that? in the afternoon on 6 October—my first sight of it. I Nicholas Kroll: I would like to be clear on two points. offered some comments within three hours of that. My First, absolutely it is a large figure, but the comments were precisely to the sort of issues that our determination of the figure, the scrutiny of the figure job is to represent, on behalf of trustees, to the and the decision on whether it is the right figure in executive; so I queried the lack of any reference to the line with the contract are not matters for the Trust new, stretched responsibilities of the chief operating under the charter. They are matters for the executive officer, which flowed from this arrangement, and I board remuneration committee, chaired by Marcus queried the presentation of the figures for Mark and Agius. That is the first point. The second point— Sharon, which were produced originally in aggregate form. That was the limit of our engagement in the Q284 Chair: Why was the paper with you at all? composition of the paper. Nicholas Kroll: Michael wants to explain, but I will have a go. Q278 Chair: Hang on. What was the content? Just tell the Committee again, what did that 7 October Q285 Chair: The paper was with you because the memo say? What did it actually say? Go on. Trust had some interest in the quantum of these Nicholas Kroll: The document of 7 October, which figures. was produced by the executive— Nicholas Kroll: The paper was with us. If you relook at the paper, you will see that the sums paid to Mark Byford and Sharon Baylay were one of a number of Q279 Chair: Yes. What did it set out? issues that went to the responsibilities that the BBC Nicholas Kroll: It set out, in relation to the two Trust has for the structure of the executive board. The individuals, a high-level cost for each. issue for which we are responsible is changes to the structure and numbers of the executive board, and that Q280 Chair: What do you mean by “high-level”? connects absolutely with the paper. I think the DG Nicholas Kroll: A single figure for Mark Byford of was telling us about the cases of Mark Byford and £1.022 million and for Sharon Baylay of £387,500, Sharon Baylay because those are high-profile names. with an assurance from the Director-General that The Trust would expect to be aware of the those redundancies would take place on the basis of announcements of the sums paid to them, and that is the terms set out in their contracts. That was what the the reason for it. paper said. I want to be clear that it was the Director- May I add one point? I am ready to go into detail on General’s assurance, and not some assurance that I this, if you would like. It is wrong to assert that the was party to. papers available to the BBC Trust would have made If I can continue, we read those words in the way that it perfectly clear that the figure was not the sum total they are most naturally read, which is that we had of what Mark Byford was going to receive. The only some payments that were in line with the contract. paper that was with us in advance of 7 October was Mark is suggesting that other documents that were the Project Silver note, which I do not think clearly available to the Trust—to me and Sir Michael— points to that at all, and the two papers subsequently conveyed a clear story that those words meant do not do so either. something different and were a clear signal of the arrangement that the National Audit Office Q286 Stephen Barclay: Does the 8 October e-mail discovered, which allowed for an additional eight not signal to the Trust that serving of notice would months of work without being netted off for 12 be delayed? months’ pay in lieu of notice. Nicholas Kroll: It absolutely does that. It announces that serving of notice will be delayed to calendar year Q281 Chair: How long have you worked for the 2011. It does not, by the way, indicate that the date in BBC? question will be 30 June 2011, even though that date Committee of Public Accounts: Evidence Ev 37
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll was known within the executive. What it crucially You said it didn’t exist, and you had to recant and say does not do is indicate that Mark’s service—up to in an e-mail to Mr Thompson and the NAO that those whenever in 2011 is indicated by the note—would not documents did actually exist. be netted off against his 12 months’ pay in lieu of Nicholas Kroll: That, if I may say so, is a rather notice. That is the crucial point. different issue, which I am happy to deal with now if you would like me to. Q287 Jackie Doyle-Price: May I just say, Mr Kroll, that if I were a trustee, I would be relying on you and Q292 Mr Jackson: Please elucidate why that was your staff to highlight some of these issues to me? the case. You have hidden behind the suggestion that Mr Nicholas Kroll: I will. The original focus of the Thompson is the executive responsible for negotiating NAO’s study was into the level and approval these deals and the issue of severance is not a matter mechanisms for severance. Not unnaturally, given for the Trust. But the issue of protecting the interests what I have said, the contact that the NAO had with of licence fee payers very much is. Having seen the the BBC was with the executive side of the BBC, who Project Silver note and then received a note that set are responsible for these matters. out the exact total of the settlement to Mr Byford, did After Mark Thompson was consulted about the draft you not even think of asking a question as to why that NAO Report, he asked a question why the issue of the figure had been arrived at? If I were a trustee, that is Trust’s knowledge of these payments and involvement exactly what I would be expecting you to do. I would in them was not being covered in the draft Report. He not expect to have to do that myself. asked the NAO to explore whether there were Nicholas Kroll: No. This is very much what Sir documents that indicated that that was the case. We Michael was—Sir Michael was very keen to do two and the executive side of the BBC proceeded to do things. He was very keen to draw the attention of the that. In the Trust’s case, we had, in fact, already done full Trust to these figures, hence the note. the exercise in February, because Sir Michael had asked us as the work was beginning whether there Q288 Chair: I think he can tell us what he was keen were any issues on Trust files that were related to to do. We are asking what you should do. Mark Byford’s pay-off. The answer is that there were Nicholas Kroll: My job is to advise the trustees, and not, and the reason that there were not is that our Sir Michael among them. files and processes are connected to and geared around Trust approvals and Trust formal business rather than Q289 Jackie Doyle-Price: And that includes other issues, and this is not a matter of Trust formal establishing the veracity of the information you are business. given. I absolutely concede that, as it turned out, even though Nicholas Kroll: Of course. If this was a figure for they were not on our files, we did have some papers which the Trust’s approval was required, we would on this subject. In fact, it was the Director-General’s have gone into an enormous amount of detail before office that did a trawl not by reference to files, but by agreeing it; there is no question about that. But the reference to e-mails, which discovered the documents fact of the matter is, as I have said, that the of 7 October and the associated e-mail chain around responsibility for getting underneath this headline the time of early June, at which point we passed them figure and establishing whether it is in line with the directly to the NAO. Both documents were reflected, contract, or whether there are other and better ways I think, in the NAO’s study. of doing it, rests with the executive board of the remuneration committee, hence Sir Michael’s Q293 Chair: Can I ask, Mr Kroll, how much do you insistence at all stages through this process on being get paid? sure that they were content. Nicholas Kroll: I get paid £238,000 a year.
Q290 Jackie Doyle-Price: But your role is to help Q294 Chair: You seem to have a very short memory. the Trust hold the executive board accountable. Of Mr Agius in his evidence said that he had one-to-one course they are responsible for their decisions, and meetings with Sir Michael Lyons. I will come to you, ultimately the buck does stop with Mr Thompson for Sir Michael, I promise, it is just that we have slightly this deal; I completely agree with that. But you are dug into this. You had one-to-one meetings in which not helping the trustees hold the board to account if issues such as this were discussed; is that true, Mr you do not ask those questions. Agius? Nicholas Kroll: I think I am responsible for asking Marcus Agius: Yes. questions in those aspects of the BBC’s responsibilities that fall to the Trust. I am trying to Q295 Chair: You don’t remember that, Mr Kroll? explain that the issue of specific executive Nicholas Kroll: I did not sit in on meetings that Sir remuneration packages or severance packages is not a Michael had with Marcus, and I do not know whether responsibility of the Trust. the issue of Mark Byford’s severance package came Jackie Doyle-Price: That is not the point. up in that meeting.
Q291 Mr Jackson: Mr Kroll, as recently as February Q296 Chair: Okay, so you did not sit on those. We this year you denied the existence of substantive will come to that in a minute. The money that you documentary evidence that gave rise to this decision. get—the job of the Trust is to protect the licence fee Ev 38 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll payer’s interest. The reason you are getting performance of the executive board would have given astonishment from round this table is that there is not you the opportunity to ask questions like this? one person round the table who can understand that Nicholas Kroll: The charter is very clear on the there was no challenge from you at your level to the subject of executive board remuneration. The charter pay-offs that were agreed with Mark Byford to see says on that subject: “The Remuneration whether they were excessive or appropriate. We Committee… shall determine the remuneration of cannot understand why you did not challenge them. executive members in accordance with a strategy Nicholas Kroll: The answer is the answer I have approved by the Trust. The terms on which such given. I am responsible for advising trustees on members are appointed must be compatible with this matters that fall within their responsibilities and the requirement.” So there is a specific provision in the issue of Mark Byford’s severance package does not charter which makes it clear that such matters are the fall within the Trust’s responsibilities. responsibility of the executive board. Stephen Barclay: No one disputes that. Q297 Fiona Mactaggart: But the Trust made it absolutely clear that it wished to be informed, Q299 Fiona Mactaggart: It isn’t the straightforward consulted and briefed about it. Even if you have remuneration, it is the cost of making someone forgotten those e-mail exchanges and the reports that redundant and the cost of abolishing not some minor were given to the Trust, which everybody in this room job but that of the Deputy Director-General. To admits were given to them, when asked about this you suggest that the abolition of the post of Deputy can’t say, “It wasn’t in our job description so we Director-General is not the business of the Trust is didn’t do it.” Guess what? All the people round this extraordinary. I don’t believe you think that. table do things that are not in their job description and Nicholas Kroll: I don’t think I have anything much to do not choose to ignore the fact that they have as you add about this. seem to do. Nicholas Kroll: I don’t accept that. One of the reasons Q300 Nick Smith: Mr Kroll, a simple question to that the Trust was set up was to establish a mechanism follow on from that. This was an eye-watering amount within the BBC for governing the BBC which made of money. Didn’t you think to ask your Trust expert clear a distinction between strategic oversight and on PR and pay, Mr Fry, whether this was the right operational management. thing to do and whether further questions should be Chair: It isn’t clear. There is a blurred line. It is asked. absurd to think that. Nicholas Kroll: I did not need to ask him that question because he had a paper which included the Q298 Stephen Barclay: We’ve heard that a lot from figure and he could make that comment himself. the Trust. You are right: 24(1)(a) of the royal charter says that the Trust has a general function of setting Q301 Chair: Did he have the 7 October memo? the overall strategy. No one disputes that, which is Nicholas Kroll: Yes, of course he did. why it will be interesting to hear Mr Agius’s comments on this in due course. Of course, the Q302 Ian Swales: I think this is a very important executive board remuneration committee was point. You are saying that the pay is the responsibility responsible for signing these payments off and for not of the Trust but of the executive board. But what delegating the authority. No one disputes that, albeit about the executive board themselves? Do they decide Mr Agius said he had extensive consultation and their own pay, redundancy and so on with no interaction with the Trust. He had one-to-one meetings involvement from the Trust? with the chairs and he attended trustee meetings. Nicholas Kroll: The Trust is responsible for the But going back to the royal charter, Mr Kroll, remuneration and the terms. Severance packages form paragraph 24(1)(c) says that part of your functions are part of what is broadly described as remuneration for “assessing the performance of the Executive Board in the Director-General. That is its specific delivering the BBC’s services and activities and responsibility. holding the Executive Board to account for its performance.” Paragraph 23 states: “In exercising all Q303 Ian Swales: Only the Director-General? its functions, the Trust must act in the public interest Nicholas Kroll: Only the Director-General. and, in particular, it must—(a) represent the interests Remuneration of the other members of the executive of licence fee payers”, which was Ms Doyle-Price’s board is the responsibility of the executive board point. remuneration committee, which is comprised of non- In other words, yes, the formal decision was taken by executive directors, and of which Marcus, at the time, Mr Agius’s committee but quite often, according to was chairman. the evidence from Mr Thompson, there was implied approval from the Trust. There was a sense that the Q304 Chair: Okay. We are getting to the heart of Trust was being asked to give its view and to record who knew what about this, and therefore who has any objections. You seem to be taking a remarkably some responsibility. I know Mark Thompson wants to limited interpretation of the royal charter if you say say something, but I want to ask people who have not that it was not part of your general duties or functions spoken yet. I will go to Marcus Agius first, and then to have a view. Surely part of assessing the to you, Sir Michael. Committee of Public Accounts: Evidence Ev 39
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
Marcus Agius, you took the decision in your Q305 Mr Jackson: On that point, the evidence that committee. How much discussion was there with Sir Mr Fry gave to us on 10 July is at variance with your Michael Lyons around the quantum, the justification recollection. He said of the non-executive directors of for the quantum, and the whole issue of severance the executive remuneration committee: “Frankly, not payments? How much discussion, if any, was there to put too fine a point on it, I thought they were with other members of the board, and how much completely out to lunch in regards to what they discussion have you had with Lord Patten about thought was acceptable pay in a public body. I make these issues? no bones about that. I was extremely vociferous.” Marcus Agius: I had no direct discussions—nor did Marcus Agius: With respect, that is a different any of the other committee members, as far as I am question. If you are asking me whether I thought it aware—with the Trust on this subject. I was aware, as was a large amount of money, of course I did. Did I is set out in Mark Thompson’s evidence, that there think that, when the figure was made public, it would was a great deal of what he calls “shuttle diplomacy”, cause a great deal of comment and controversy? Of which you might call triangulation. I was certainly course I did; and it did. My judgment in that respect aware that the subject of the redundancies and the was right. I had to look at two things. First, the amount of money that was involved was a matter of contractual entitlements of the gentleman concerned. interest to the Trust. There was also, as evidenced by If we had paid him his severance payment and he had various e-mails, a great deal of concern about whether worked his full term, he would have ended up with we were going to approve—not whether we had the same number. approved—the payments. I got to the point—this message was passed through Q306 Chair: No, he would not, because he worked to the Trust—where I let it be known that I was happy for eight months when, for some inexplicable reason, for the proposal to go before my committee. Any he was not served his redundancy when the decision chairman would do that. If a chairman knew that a was taken. proposal was not going to fly, he or she would never Marcus Agius: I understand. That was the second part have it put before their committee. So I knew that I was coming to, which is that, when all is said and what was coming was something that we could talk done, of course the executive board remuneration about and discuss, but I also knew that it was not committee is there specifically to look at certain that the approval would be forthcoming. I remuneration, but we were directors of that board. As knew, because we had talked about it generally on directors of that board we were responsible for the the executive board and among the members of the management of the BBC, delivering the BBC’s executive board remuneration committee, that there objectives and all the other things that we know and was a great deal of concern about the redundancies. love about the BBC. We had to listen to and were With Mark Byford, for the obvious reasons that persuaded by Mark Thompson that his formulation several Committee members have talked about this was the right formulation in the circumstances to afternoon—the seniority of his post and the sum of manage two different things. One was the desire to money involved—we were concerned that the make an early announcement on the total programme settlement that was being proposed had to be right, for the cost saving reasons he mentioned. Second was appropriate and would represent, in the round, good not wishing to get rid of Mark Byford at that point value for money for the BBC. because he still had a job of work to do. The I can tell you that the discussion we had at that reconciliation of those two led us to where we were, committee meeting was intense. The other two non- which involved—there is no dispute between us—a executive members of the committee, Rob Webb and lot of money. Val Gooding, are both very experienced, very Chair: He could have done the job of work during independent-minded people with wide business his period of notice. experience. Collectively, the three of us challenged and tested Mark Thompson, who was proposing this Q307 Mr Jackson: Where is the licence fee payer’s settlement, for all the obvious reasons: to make sure interest represented here? Where in the papers is there it was the right thing for us to be doing in the any documentary evidence that you or your fellow circumstances. After sustained challenge and debate non-executive directors said, “Hold on, this doesn’t we were finally persuaded that, in the circumstances, smell right. This must be looked at properly”? Given it was the right decision on value-for-money grounds. that the culture was that business cases were Chair: I think we are astounded that you took that incomplete, from the NAO and KPMG. view. I don’t know how you would explain to a Marcus Agius: I admit that the minutes of that constituent of mine in Dagenham—or to people in committee meeting were a model of brevity and not Grimsby, Hackney or any of the constituencies particularly illuminating, but I can tell you from being represented here—that it was justified. The in that room that we were absolutely conscious of the shareholders of the BBC are the licence fee payers, need to manage the BBC during a period of and I cannot for the life of me understand how you considerable upheaval and turmoil, as Mark has said, can justify levels of redundancy payment that were in order to keep Mark Byford doing the job that we way beyond what the contracts set out was necessary needed him to do for a bit longer before we served to achieve the redundancies. formal notice on him a number of months later. Ev 40 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
Q308 Mr Jackson: You didn’t think it appropriate to attempts to set out the case that there was proper minute properly and record a debate and discussion debate, discussion and consultation. I assume you about giving £1.4 million of taxpayers’ money to accepted that—I do not see any refutation of his case. two individuals? The day afterwards, you came and gave evidence as Marcus Agius: With the benefit of hindsight, I wish if you had never received this e-mail that sets out his we had written 15 pages on the subject, but the fact position. It looks to me that there was an element of of the matter is that I know what was there. I have disingenuous or even misleading evidence given by made and sent to you, Madam Chairman, a written you, because he attempted to set the record straight submission that was endorsed or blessed—whatever before your evidence at the hearing. the word is—by my other trustees who were on that Anthony Fry: I was very straightforward about this. I committee with me. We were all in the same room did receive that e-mail, and you know I received the together. e-mail because I responded to it in the way that I responded. I was working on the assumption that the Q309 Chair: I am going to move on. Mr Fry, Mr documentation that had been provided to the National Thompson and then I am coming to Sir Michael. Audit Office on the basis of the National Audit Anthony Fry: May I make a very brief point, Madam Office’s Report and the information with which I had Chairman? The timing of all this is made quite been provided as part of preparing to appear in front difficult from my viewpoint, and indeed from Mr of you was the information. If I received an e-mail Agius’s viewpoint, by the following. On 6 October, from somebody providing information, I never said Mark Byford received from Lucy Adams a formal that in front of you. In fact, the Chairman challenged letter that reads: “I promise to get you a letter which me hard on my position on what Mr Thompson would sets out formally the amounts you would receive at say and on whether I was suggesting that he was the point of redundancy and the time frames of your lying. I did not say that; what I said was that there departure from the BBC.” That is dated 6 October and was a disconnect. That disconnect still exists, and I is sent before the Trust gets the document it got dated would stand by everything I said. 7 October, and by definition before Mr Agius’s If you are asking me a different question, which is committee met on 11 October. This is not a letter that whether I might have taken a different view with the says, “In various circumstances.” It does not say, knowledge that the Trust had, as opposed to individual “Without prejudice.” It actually lists to what he is trustees, had I been aware of the existence of the entitled and says that he to be was made redundant on Project Silver document, I might well have done. But 30 June. I cannot tell you today how I would have responded to At the very same time, there is an e-mail that is in Mr various questions in the absence of the documentation. Thompson’s pack, again from Lucy, to Jessica Cecil Frankly, an e-mail from somebody on the day before in Mr Thompson’s office, which says: “I am not sure I am due to appear before you did not carry with it— about this needing to go to the executive remuneration perhaps it is my fault that it did not—the same committee as they are being made redundant and not standing as the information that I had received as a receiving anything other than their contractual result of an independent Report from the National entitlement.” My point is that if you read this, you Audit Office. come to the conclusion that every bit of consultation that was supposed to be going on—arguably, Q312 Meg Hillier: We have a copy of the Project according to Mr Thompson—with the Trust in this Silver options document, which was sent by the note of 7 October and, according to this, with EBRC Director-General’s private office to the Trust Unit on on 11 October, was frankly spurious, because on the 17 September. Mr Fry, are you saying that you did not basis of this letter, I would argue that Mr Byford know anything? The document lays out very clearly, would have had a very good case to go to an for example: “So the dilemma we are wrestling with employment tribunal and say, “I have already had my is between trying to deal fairly with someone who has offer from the BBC.” devoted many years of service to the BBC…as against numbers which—even at the contractual minimum— Q310 Mr Jackson: Why didn’t you say that in your might cause us serious difficulty when they become previous evidence on 10 July? public.” Well, that was certainly prescient. My Anthony Fry: Because, with respect, sir, I was not question is to Mr Kroll: if that came to the Trust Unit aware, first, of the existence of the stuff in Project on 17 September 2010, why didn’t the trustees see Silver. I was not aware of that. The first I knew about the document? any of this was 7 October, and by definition I was not Nicholas Kroll: I passed the document to the aware that the letter had already been sent to Mr chairman. It was for a discussion with Mark Byford and I certainly did not have access to the e- Thompson. It is an options note, and no doubt Michael mails from Lucy Adams to Jessica Cecil. I didn’t have will speak about that issue himself. any of that. Q313 Chair: Okay, we will come to Sir Michael. Q311 Mr Jackson: The reason I ask, Mr Fry, is Very quickly on this one if you can, Mark Thompson. because if we look at document No. 6 in the pack, Mark Thompson: We told the chairman of the Trust which is your exchange of e-mails with Mr Thompson Unit about the details of the settlement, which from New York, he sent you an e-mail at 4.39 pm on included the decision—or the proposal, as it was 9 July, the day before the hearing, in which he then—to delay the setting of formal notice to the Committee of Public Accounts: Evidence Ev 41
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll following year and to make a payment in lieu of notice Q318 Chair: Stick to this letter. That is the then. Once it went through, we told the press. It is not allegation. true to say that you need the National Audit Office Lucy Adams: I am trying to answer your question, Report of 2012 to know what this deal was; all you Madam Chairman. That was the subject of the had to do was to read the Daily Mail on 12 October. remuneration committee. We were pushing to make That is the day after the EBRC and the Tuesday after an announcement shortly after that. In order to get to the weekend when the Trust saw the 7 October that committee meeting and to get a resolution for all document. The ultimate authority here: “In a shock concerned, Mark Byford was very keen to understand announcement director general Mark Thompson will what his contractual position was: 12 months’ notice tomorrow tell staff that the long-serving BBC boss”— and 12 months’ redundancy was the very minimum Mark Byford—“who has been at the corporation for that we could pay. more than 30 years, will leave the broadcaster in early…2011… But the £475,000 a year executive will Q319 Chair: I do not understand how that answers not be leaving empty handed, as well as getting a the question. I am happy to let you carry on, but the year’s salary in redundancy pay he will get up to 12 question was: is there a letter dated 6 October with an months worth of money for his notice period, meaning offer to— his exit deal is worth as much as £950,000… Mr Lucy Adams: It states his contractual position in the Byford…will leave the executive board in March after event of a redundancy. 32 years before stepping down fully in…summer.” The Daily Telegraph reported on roughly the same Q320 Chair: And that letter was sent out before day, “As well as being paid his salary of £435,000 a either the Trust was given a view on 7 October— year until he leaves in 2011, Mr Byford is expected to Mark Thompson: I believe the HR department accepts that it was not sent until after the EBRC met. receive redundancy of between £800,000 and £900,000.” Q321 Chair: Dated 6 October. Because we thought we should be transparent about Mark Thompson: Apparently, the date is wrong. what we were doing, we briefed about the entire thing. The delay in formal notice and the decision to make a Q322 Stephen Barclay: payment in lieu of notice—it was all out in the public Just to be clear about the extent of his contractual position, I assume it stated domain on the Tuesday. that he would be paid for part of his notice and also work part of his notice? Q314 Chair: A really serious allegation that we have Lucy Adams: It states that he is entitled to 12 months’ heard this afternoon is that you took the decision on notice and 12 months’ redundancy. 6 October, before the Trust had seen any of the issues and before it had been in front of Mr Agius’s Q323 Chair: When did you write this? This is from committee. Is that true? you, Lucy Adams. When did you write it? Mark Thompson: I am told by the BBC HR Lucy Adams: The date is the 6th, so, although my department that they accept that that letter was colleagues are telling me that Mark did not receive it incorrectly dated. It was actually sent probably on 12 until later, I have to accept that it was on the 6th. It October or 13 October and received on 14 October. I sets out what Mark would receive in the event that he am afraid that it is a bit of HR bureaucracy. They was made redundant. The discussion then happened at obviously had some sort of draft. the remuneration committee and we then followed up with him to say that the decision had been taken to Q315 Chair: Is that right, Ms Adams? Just say yes press ahead with this. or no, because I want to get on to other stuff. Lucy Adams: I am sure you do want me to say just Q324 Stephen Barclay: To be clear, that letter did yes or no. not say that he would be asked to work part of that notice period? Q316 Chair: It is a legal document with a date. Lucy Adams: I do not believe it goes into the details of what he would be expected to work and not work. Mark Thompson: That is Rachel Currie’s view, It sets out that, if we were to make him redundant, he presumably. was entitled to 12 and 12. Lucy Adams: Yes. One of my team spoke to Mark Byford, and he believes that he got it later. But if you Q325 Stephen Barclay: It is just very odd that you look at the letter that was sent— would give him a letter that was different from what you were proposing to him. Q317 Q317 Chair: No, no, no. Is it right? What is Lucy Adams: Ultimately, we had a discussion at the the date? Did it go on 6 October before the Trust— remuneration committee. The remuneration Sir Michael and Anthony Fry—had seen it and before committee believed that the best way to approach this Marcus Agius’s committee had seen it? Is that right? was for him to work until June and at that point make For goodness’ sake! him redundant. Lucy Adams: In terms of the remuneration committee making a decision about whether to press ahead with Q326 Chair: Okay, let us go to Sir Michael, who has Mark Byford’s redundancy— been sitting there patiently. You will want to reply to Ev 42 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll a lot of these issues, but may I start off with this be developed that would enable us to make fast and question? If big pay-offs were seen as the best way of substantial savings and a reduction in the number of getting people to go, is that not a strategy that should senior managers, believing that that was not only in have been considered by the BBC Trust, rather than the interests of licence fee payers, but in the interests simply be a matter for the executive? If that was the of a healthy BBC. policy, it then, in my book, becomes a strategy that should have been endorsed by the BBC Trust. Q329 Chair: You could have done it for less. The Sir Michael Lyons: It is a fair question about whether whole premise from us is that you could have done it we should have spent more time exploring the process for less. of implementation of the cuts. But let me draw on Sir Michael Lyons: I have heard your message. I am some of the evidence that you have already been— not personally convinced that that is the case. My judgment tends towards that of the Director-General Q327 Chair: So you would agree? here, because this was not just, “Let’s make these cuts Sir Michael Lyons: I think, with hindsight, maybe we come whatever”; it was, “We want to make these cuts, should have, although let me be very clear. You have and we want to do them quickly”—in fact, we then heard many times—I am afraid I am going to bore accelerated the process—“but we do not want any you by going over it again—that the charter defines a disruption of BBC services or of the series of very sharp separation in terms of the duties of the charter. substantial projects in the pipeline.” Some of you, I know—either as Ministers or in your Q328 Chair: We all understand that, but when it professional lives—will have been involved in the becomes a policy—all senior management got big process of rapid reductions in senior management. Let pay-offs. In all the studies we have had—not all, but me tell you, it is not easy; it is very difficult. I have most: the two studies from the NAO and the KPMG had to do that in my professional life; it is not easy. study—all the evidence demonstrates that that became So I am not going to sit here and pretend that, a policy. In my book, that is part of strategy, which somehow, this was a walk in the park for the Director- ought to have been a focus of debate and endorsement General or, indeed, for his executive board; it was not. by the BBC Trust. The sums for the ordinary person in the street—Chair, Sir Michael Lyons: Chairman, these things do look I absolutely agree with you about how they would be different at different points in time. Let me just go seen in Stechford and in Barking and Dagenham— back to where we were. I absolutely accept the look eye-watering, of course they do. But that goes validity of your point made now. Anthony Fry has for many other posts, whether in the civil service or said, and I would agree, that perhaps we should have in private industry. spent more time looking at severance payments, but let me just go back. I arrived on the scene in 2007— Q330 Q330 Chair: We are talking not about the Trust newly set up—and from the very beginning recruiting and retaining people, but about making we were clear that we had inherited very generous them redundant, and these payments look to be more terms of payment for the most senior managers and generous than most private sector redundancy leaders of the BBC, including very substantial pension payments I have ever seen. supplements, expectations of up to 30% bonuses and Sir Michael Lyons: Then we might differ in our salaries which had been quite generously linked to the experience of that. [Interruption.] Well, let’s not get private sector, rather than to public sector into that point. Frankly, I hear what you say: you think comparators. Pretty much from the beginning, we we should have done it for less. With the benefit of regarded that as something that had to be tackled. hindsight, maybe we should have spent more time I have to say, if there is a weakness here, and I might being clear. I think the price of that would have been accept that I had this, it is that this proved quite that it would have taken longer and the savings would difficult to negotiate—I will come back to that in a have been smaller. moment—and I might have been a bit blinkered. For me, and for my colleagues on the Trust, the issue was Q331 Stephen Barclay: It is not just our view; it is to get down the amount of money we were paying to the National Audit Office view. Do you accept the senior managers, both individually and collectively; evidence you have just given is at odds with the that was the ambition. We started a series of NAO’s finding that this was poor value for money and discussions with the Director-General—Tony Fry, of put public trust at risk? course, joined slightly later. My memory of those is Sir Michael Lyons: The Comptroller and Auditor that, actually, they were not always straightforward, General has his responsibilities and his views; I had but let me concede that when the Director-General, at my responsibilities, and I have my views. You have each and every step in this process, was convinced of asked me to come along and share my views, not to the need for action, he was diligent in carrying it enter into a debate about whether my views or his through. should prevail. You are guided by his advice—I These were difficult times. A lot of energy was used, understand that. and I think Anthony’s comments about exchanges relate to the period between my writing to the Q332 Stephen Barclay: Indeed. I am just clarifying Director-General and Mr Agius at the beginning of that you are saying, “We couldn’t have done it quicker 2009—February 2009, if I recollect correctly—laying without risks attached.” The NAO has obviously down the Trust’s expectation that a new policy would looked at that. Committee of Public Accounts: Evidence Ev 43
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
Could I take you to your e-mail of 30 May? Via the Q336 Stephen Barclay: It was Mr Agius’s decision. BBC, you told the National Audit Office and, So the note was not sent to you for formal approval, therefore, this Committee that you had “no memory” was it? The Project Silver note? of a detailed written submission of proposed terms for Sir Michael Lyons: The Silver document? No, not at Mr Byford and Ms Baylay. Is that still your evidence? all. That wasn’t sent. Sir Michael Lyons: Could I just check? I became aware from a journalist today that there is a summary Q337 Stephen Barclay: Was it a detailed written of my e-mail circulating that came from the NAO. I summary of proposed terms? don’t know the background to that; I haven’t had time Sir Michael Lyons: No, it isn’t it. Can we turn to the nor perhaps would I have had access. I had agreed Silver document? It is very important. It is not, these with the Trust yesterday that people should see things are the terms we are offering Mark Byford. This is the in my own words. It is quite important that you do so. Director-General coming to me right at the beginning of the discussion. As he says, he first informs me in Q333 Stephen Barclay: I am quoting your own September, that as part of the reductions he is going to words. make he is thinking about deleting the post of Deputy Sir Michael Lyons: That is fine. I just want to be clear Director-General. There is a reference also at that about that, because there is some nuance and colour point to Sharon Baylay. there that is quite important. He then sends me this document, which essentially lays out three options. I think we can disregard the Q334 Stephen Barclay: Indeed. Perhaps I could first one. The second one is what I think is referred to repeat the question, please, Sir Michael. I am quoting as contractual obligations. The purpose of the note, as from your e-mail, your own words, of 30 May sent at I read it and remember it now, is to focus on the third 14.45. You were in Italy at the time. It says, “I have option, which is that, by introducing some flexibility, no memory of detailed discussions which might have it might be possible to get the headline cost of Mark justified the claim that the package as approved by the Byford’s severance down from the £1 million figure executive board remuneration committee was done so to a figure close to £700,000. There can be no doubt with the knowledge and approval of the Trust about the appeal of that. Broadly, I think Mark and I chairman. This would most certainly have required a) have exactly the same memory of those discussions. I a detailed written summary of proposed terms.” say I don’t think there is any difference between us Sir Michael Lyons: You have missed out a couple of on this document, inasmuch as I think we discussed it words, I think, that are quite important. I am sorry to in a phone call on 21st of the ninth and again probably be pedantic but can I just go back? “I am in Italy at at a routine meeting on 22nd of the ninth. present. I am sure that Mark made me aware of the The issues that I was focused on at that point were, fact that he was drawing up exit plans for both the first, whether it was right to delete this post, which named individuals.” So, I am absolutely clear at that was a concern I continued to have all the way through, stage that there have been discussions. I am very clear because of the history of problems around deputising about that. I then go on to say, “I have no memory for Mr Thompson. I am not going into chapter and of detailed discussions which might have justified the verse here, but if you need it I can give it to you. claim that the package that was approved by the Secondly, I took the opportunity to underline that executive board remuneration committee was done so whatever we did here, the executive board with the knowledge and approval of the Trust remuneration committee really must scrutinise the chairman.” package very carefully to make sure that we could be I make the point that the approval of the Trust assured of value for money, and that they were fully chairman, which is frankly no power with me, the satisfied that this was the right solution. approval of the Trust is not given lightly and would Also at that time, I said that I wanted to ensure that, only be on the basis of a document actually there for given any predictable controversy that there would be approval. Not discussions, not briefings. If I was being about big sums, trustees were sighted on the eventual asked whether I had approved this, categorically I am deal. It was very clear that that was not the deal. not aware of any document that would suggest that I had approved it.1 Q338 Stephen Barclay: For someone who had no memory, you have given us a very long answer of Q335 Stephen Barclay: Could we just unpick that, your memory of discussions. When we had our last because it is a very carefully constructed and legal hearing, we were told that there was no such answer? There was no requirement on the Trust to document and that the Trust could not provide it. approve, was there? Given that you can now recollect it with such clarity, Sir Michael Lyons: No. why did we not have this document at the time? Sir Michael Lyons: I must take you back to the memo 1 Note by witness: the point I was seeking to make might have been clearer if I had said “I seek to make the point that I that I sent and which you have in front of you. I am don’t believe the Chairman of the Trust has personal power not aware of any document which could be regarded to approve any matter and approval by the Trust itself would as constituting the basis for approval— not be given lightly and only on the basis of a document specifically seeking such approval, even where it has the necessary authority. Informal discussions and briefings do Q339 Stephen Barclay: No one is saying approval, not constitute approval.” Sir Michael, but it is simply not credible. Ev 44 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
With great respect—you are a very senior figure in the Silver document is because, after the challenge our public life—I struggle to understand how someone and hearing from Mark Thompson, Lord Patten, quite can read Project Silver setting out three detailed properly, said, “Let’s go back and check to make sure options, and then have a host of discussions on it. that there really isn’t any documentary evidence”? Of course you were not being asked for your formal approval—that was not the governance process—but Q341 Stephen Barclay: So the first hearing wasn’t when we had our last Committee hearing, we were important enough to do it properly? told that the Trust was not involved. Sir Michael Lyons: Please do not keep asking me In fact, so concerned was I personally about this that questions that should be related to the Trust. I wrote to the National Audit Office ahead of our Stephen Barclay: Mr Kroll? hearing, because I found it incredible. I thought, “How Sir Michael Lyons: Let me just finish— could Mr Thompson be senior enough to run an Mark Thompson: I have something to add which I organisation like the BBC and not discuss his No. 2 think is relevant. Somebody—a whistleblower, I going?” I actually wrote to the NAO ahead of our guess—from inside the BBC sent me this document, hearing, and I raised it with Mr Fry at the hearing, which is a letter from the NAO to Nicholas Kroll on where I said that the implication, if he hadn’t 19 July. This is immediately after, I think, the Project discussed it with the Trust, was that he was being Silver document had been discovered: “I must say we incompetent. At no point at our last hearing, or with are concerned with this development. As you will be your discussions with the NAO, did this document aware, during clearance of our report we made a come to light. It only came to light when Mr specific request to see copies of any communication Thompson then requested this. Yet today, you are between Mark Thompson and the BBC Trust relating giving us a very detailed recollection of your to the severance awarded to Mark Byford and Sharon discussions. Baylay. We made a parallel request to the BBC. We Sir Michael Lyons: Let me try to be helpful on this. were initially informed the Trust did not have any I understand the point that you are making. First— documents on file and that it did not have any you heard Mr Kroll underline this earlier on—before recollection of being privy to the details of Mark the NAO had even started its work, I wrote to the Byford’s severance package and had not received a Trust unit and asked for all documents relating to this detailed summary.” So that is 19 July. The sense, even period. I was told that there were no documents; I will at that stage in the game, is that the NAO has not been come back to that in a moment. given a complete picture, either in terms of document There is no doubt that, as you look at my response, or recollection. while I was on holiday, as I remember it, I responded immediately when I got the message, so it was rather Q342 Stephen Barclay: Mr Kroll, would you like quickly put together. The one thing I am absolutely to comment? clear about is that there have been discussions. I say Nicholas Kroll: It is true—and I really regret—that that in the note. The other thing that I am absolutely the Project Silver document did not emerge earlier on. clear about is that there is nothing at all that could The documents which we have been talking about constitute approval by me. previously— Looking back on it, although I had been told that there were no documents, perhaps I should have been a bit Q343 Chair: Why did you not remember it? That is more cautious— what we are all astounded by. This is a major thing— why did you not remember it? Q340 Stephen Barclay: But if the Chairman of the Nicholas Kroll: I am sorry, Chairman. I do not think Trust has said that he had objections, of course it was that I am the only person who failed to remember it. not an approval by you. With respect, I just don’t find We asked both our executive colleagues and— it credible for the BBC to make a payment of £250,000 a year to Mr Kroll to say that he cannot Q344 Chair: You amended these documents, but you search for a document because it had a codename. It do not remember them? is standard business practice dealing, whether it is a Mark Thompson: It is incomprehensible. merger and acquisition or something else. We are Chair: You have got to understand that, at your level, talking about the second most senior executive. one would expect something more. [Interruption.] I know that Mr Thompson wants to Nicholas Kroll: I am sorry that you feel that, and Mr come in. Thompson’s comments from the side, but the fact of It just doesn’t strike me as credible for the Trust to be the matter is that this document had been prepared saying what it did for this, most material of close on three years previously. I regret that I did not documents, which the NAO itself says is an important remember it, but I did not remember it. document that would have influenced its Report. It is The fact, Mr Barclay, that there was a problem was not credible for you to say, when dealing with the absolutely and explicitly related to the codeword. We second most senior executive of the BBC, “We can’t did our best at a full electronic search of our e-mails, find the most important document because it had a using the obvious search terms linked to Mark Byford, codename.” but we did not— Sir Michael Lyons: I can’t really account for that, can Amyas Morse: Mr Kroll, you wrote to us, very kindly, I? I wasn’t with the Trust at the time. How do you on 16 July and you said to us, “However, with Lord think I felt when subsequently, the reason you have Pattern’s agreement, I was yesterday in touch with Sir Committee of Public Accounts: Evidence Ev 45
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
Michael Lyons to seek an agreement to trawl his process. The Director-General sent me this paper for archived e-mails. We have now done this and, in him and me to discuss. It was marked “private and parallel, Sir Michael has checked his own private e- confidential”. Throughout my life as chairman, not mail account.” And in that process a document had only in this organisation but elsewhere, when the chief come to light. May I know where that document was, executive comes to the chair for a discussion, you do please? In which particular e-mail account was it? not immediately send the documentation to the other Nicholas Kroll: Sir Michael found it— members of the board. Amyas Morse: You personally found it in your own e-mail? Q348 Guto Bebb: You mentioned in your evidence Sir Michael Lyons: Yes. that the first option could be discarded, because it was Nicholas Kroll: In parallel, Sir Michael’s office—now not important, as it was not likely to be delivered, Lord Pattern’s office—found it at roughly the same but I find the first option the most disturbing one; the time. The difficulty is a straightforward one and I customs and practice of the BBC would have led to a regret it, but the fact was that the codename had pay-off, in this case, of £2.5 million, yet you do not precluded it emerging from the electronic search. feel it is necessary to share these types of examples Amyas Morse: Just to make sure I have got this with the Trust members. straight. Sir Michael, this was in your personal e- Sir Michael Lyons: What I was clear about in mail account. discussions with the Director-General was that this Nicholas Kroll: Can I just add, because I think I was an issue that the Trust would be interested in, and should, that although Sir Michael found it, it had been that trustees would need to be involved. I was very sent through the normal channels, even though the clear about that at that stage. search had not revealed it because of the codename. This search we conducted on— Q349 Guto Bebb: So when were you planning to Chair: Chris has been waiting patiently. I will go to inform them? Guto quickly and then to Chris. Sir Michael Lyons: At that stage, of course, the Sir Michael Lyons: Could I just pick up one point? I Director-General had not determined that he was am a little uneasy about what Amyas is trying to point going to press ahead with the redundancy. The paper to here. that is in front of you makes that very clear. He was Amyas Morse: I am not trying to point to anything. weighing the pros and cons, the costs involved and Sir Michael Lyons: Let me just make sure you are the public response to the salary, and that is what the not, Amyas. This document came into the Trust; it consultation was about. There are a range of possible was then conveyed to me by Nicholas Kroll. Let me terms that might be involved. I made it clear that if be clear: I did not recollect this document. All I knew he decided to go ahead with redundancy, the point at when I was contacted while I was in Sicily was that which a package is shaped up and finalised is when it there was nothing that I had approved; of that I was should be shared with the other trustees. sure. And, of course, this document is not one seeking approval; it is a document about the basis of Q350 Chair: Do you accept Mark Thompson’s discussions. evidence that you had a say in whether there would Mr Jackson: You have already said that. be extra money put into the pension pot? Sir Michael Lyons: Fine. Thank you. Sir Michael Lyons: I absolutely raised that question. I was concerned about making sure of that. Q345 Guto Bebb: Mr Kroll, you mentioned in passing that you are not the only one who failed to Q351 Chair: But you did not think to ask about recall this document, so who had sight of it apart from having in effect two years’ redundancy, rather than the you, Sir Michael and Mark Thompson? one to which he was contractually committed? Nicholas Kroll: I think there was a colleague in the Mark Thompson: That is incorrect. For the reasons Trust unit, but obviously I do not know, on the we said earlier, he was entitled both to a year in executive side, who had sight of this document— respect of past service and a year’s notice. I want to be clear about this. You may disagree, but I was formally Q346 Chair: On the Trust side? advised that at the time. The only reason the phrase Nicholas Kroll: No; I am saying that on the Trust side “on the basis of the contract”, or whatever it is, is in it was myself, Sir Michael and, I think, a Trust unit there is because I was advised that it was contractual. colleague. I am trying to make the point that the The NAO Report does not in fact say that it was not failure to recall it was also on the executive side, but contractual. It uses a phrase about the “maximum I do not know who on the executive side would have possible payment”, which must mean the maximum seen it. possible payment under the contract. There is a big canard here about whether it was contractual or not. Q347 Guto Bebb: Can you explain why you did not Lord Patten is incorrect to say that the NAO found feel it necessary to share that with the other Trust that this deal was above the contract. There are some members? deals that are. The George Entwistle settlement was Nicholas Kroll: With the other Trust members? That above the contract. I have a lot of sympathy for why was an issue for Sir Michael. it was done in that way, but that is an example of a Sir Michael Lyons: That is for me to answer. Let me settlement that was above the contract. I was advised be very clear about this. This was the beginning of the that this one was contractual. Ev 46 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
Amyas Morse: I just point out that the reason that a number of occasions, and my experience just it is contractual was because serving the notice was reinforced that for me. deliberately delayed until well after it was known that Let me come back to the Chairman’s challenge about the person was going to go, so I do not really find that what this must feel like to staff in the BBC. I am convincing at all. absolutely clear that, in the actions that I took in Chair: Quite. I think we understand that. seeking to make big reductions in the cost of senior management, I was focused not only on licence fee Q352 Chris Heaton-Harris: Earlier today, Tony payers but also on folks within the BBC, where there Hall, the current Director-General, sent an e-mail to was very considerable controversy. That was—I admit all BBC staff, saying that this was a very difficult day it—what I was after, in a rather blinkered way. Could for the BBC. I do not know whether any of the seven that have been done more cleverly? I would concede of you actually feel that this has been a particularly that it could, but this is not a group of people who edifying episode for the corporation so far. It is the failed to work together effectively on most things. most bizarre game of “Whac-A-Mole” I have ever Take Mark Thompson’s submission to you: I read it seen in my life. You hit one fact down and out pops yesterday and I think I would agree with about 85% another bunch of questions. I feel sorry for some of of it, word for word. There are some very significant the staff at the BBC who are watching this at the points on which I disagree with it. We have not yet current time. I just wonder whether one of you might come on to one of those, which is whether I was ever like to take some responsibility for some of this. told that, in the negotiations, we were now going to Mark Thompson: If I may say so, I think I have right take the issue of payment in lieu of notice while from the start said that I was the Director-General at working without netting off, which had been in the the time and that I ultimately made these proposals. I option that would have given us a £700,000 cost, and think I have taken responsibility. What is so that we had now got the negotiations to a point where frustrating about this debate—I will not deny that it is that was part of the package that was costing us over a real debate and a real disagreement—is that I think £1 million. I am absolutely sure that, whatever was every single person on this side of this meeting, all of intended to be understood, I never understood that whom I have worked with, is united in believing in point, because if I had, it would have been clear to me the BBC and what it stands for, wanting it to succeed in the context of the options paper that we were making concessions from the one that was supposed and not damaging it. What has happened as part of to cost us less money and going into option two. this process is that a significant disagreement about Mark Thompson: How do you think we got to how fully the Trust was briefed on these redundancies £950,000, then? has emerged, but I don’t think you should draw from Sir Michael Lyons: Well, Mark, all I can say is that, that the conclusion that we disagree about the value looking back over these documents, the document that of the BBC, or that we wish to damage it. was prepared for trustees—and frankly, I should say to your colleagues, Chair, that it is not the job of the Q353 Chris Heaton-Harris: What we see on this Trust to scrutinise separately matters coming from Committee is that it has been only for a few years that the executive— the National Audit Office has had any access to what goes on within the BBC, and pretty much every time Q354 Mr Jackson: I am sorry, Sir Michael, but I’m we scratch the surface, something pretty horrible afraid you are misleading the Committee. appears. It is a huge shame. Those of us who went to Sir Michael Lyons: I certainly do not want to do that. Salford enjoyed Salford, and there is the DMI; we can Mr Jackson: Well, I think you are, because you were go through a list of these things. I was wondering intimately involved in the debate and discussion about whether the governance of the Trust is broken in this the error made by BBC people and by Lucy Adams’s particular regard. staff in respect of the Deputy Director-General’s Sir Michael Lyons: Clearly the Trust is damaged by severance payments, in terms of the evidence she has these sets of discussions; I have no doubt about that given. There were detailed phone calls between Mark at all. The debate about whether the Trust was the Thompson and the chairman on Mark Byford’s right model has continued from the day that it was set potential exit package. The e-mail was produced that up, really, and there are some peculiarities. I myself gave rise to that discussion three days before Project wrote on 8 July 2010 to the then new Secretary of Silver was made available to the Trust, so I would State, Jeremy Hunt, to say that I really thought that contend that you were aware of that. The context also the separation around remuneration of senior is that you had the conference, you had dinner and managers was dysfunctional, and that it should be you had briefings, so it just seems to beggar belief sorted. Similarly, there was the decision to put the that you were not in a position to make a value audit function on the executive board. Both of those, judgment on whether it was prudent to pay nearly £1 in my view, should have been part of the Trust and million to one individual in your role. the Trust’s responsibilities. Sir Michael Lyons: Let me help you on that point. I, The problem is that at the time when the charter was too, saw that quote from Lucy Adams, and the only agreed, everybody was preoccupied with the issue of way that I can understand it is that the way in which regulation, rather than the issue of how you made sure the Director-General raised that issue with me is in the that the BBC had the strongest possible governance. briefing note—the so-called Silver note—that came to That has been a point that I have made in speeches on me a couple of days later. I do not believe that there Committee of Public Accounts: Evidence Ev 47
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll was any previous discussion of contracts. Indeed, if all have to put on a hair shirt? While most of this you look at the way that note is constructed, it very discussion, understandably, has been about what the clearly says, “These are the things that I am thinking Committee thinks is the most egregious example of about. These are the possible options. Can we have a excessive payment—and I agree with them—I think discussion about that?” there are one or two others that are a problem. Jana Bennett I think is a problem. I think Roly Keating is Q355 Mr Jackson: Did you discuss the error— a problem, although he has very decently responded answer the question with a yes or a no, please—in to that. Lucy Adams’s department that was made in respect of the severance payment being doubled? Q359 Chair: Caroline Thomson. Sir Michael Lyons: The one and two years? Lord Patten: While all that is true, and while of Mr Jackson: Yes. With Mark Thompson. course it was true that it was difficult to implement Sir Michael Lyons: You can see for yourself in the this policy of rapid reductions without some cost, and Silver note from Mark Thompson—he actually mistakes were made, and occasionally people were explains that there is only one year’s entitlement. paid more, maybe for good reason—while that stands up to some extent, what, for me, is really important is Q356 Mr Jackson: No, I did not ask that question; I to compare the KPMG report with the subsequent asked whether you discussed it with him as one of the NAO Report. That shows that there was exactly the parties to the e-mail that had been received that gave same problem from 2006 to 2010 as existed after that. rise to— The figures are uncannily similar. For the KPMG Sir Michael Lyons: No, I never received that e-mail. period, there was £1.9 million spent over contractual obligation. In the second period, in the NAO’s Q357 Mr Jackson: But he will have discussed it excellent Report, there was £1.9 million paid over the with you, won’t he? top. That is a reflection not just of having to manage Sir Michael Lyons: No. Basically, the Silver note is things occasionally by spraying money over people; I post that discussion and at the point where it has been think there is a cultural issue there that we really have established that the entitlement is one year. to recognise, apologise for, and deal with very Mark Thompson: I think the point here is that we had robustly. a phone call—according to Lucy’s e-mail, I had to Michael is entirely correct when he says that trying to make a phone call to tell you that our earlier get people to face up to lowering salaries and to discussions had been based on the wrong contract. reducing the number of managers was an uphill That happened before the Silver note. That is my struggle. I remember, when I first became chairman recollection, for what it is worth. It is not a of the Trust, going to a lunch at the top of a Barclays contentious point, in itself. tower to talk about executive pay and making a very simple point: the best cultural director in the world, Q358 Chair: I am going to Lord Patten, because the Neil MacGregor, got £180,000 a year for running the question Chris really asked was about governance, British Museum. I said, “How many people at the and seeing you all squabbling on the head of a pin BBC get paid more than that, and how can we justify suggests to me that the governance is broke. that?” Working for the BBC is a fantastic privilege, Lord Patten: May I respond to that? I very much take and the way we have been running this system has your point; I think a lot of people listening to this been unfair to the other people in the BBC, and very discussion will have started to lose the will to live. unfair to the licence fee payer. There are an awful lot of pinheads. I think that it is Unless we can demonstrate that having responsibility perfectly possible to have a system of governance in without having executive power can be made to work which there is a separation between responsibility and in the next couple of years, of course people are going power—power to implement. I have to say, on the to say that we need a completely different system of basis of this experience, that I do not hugely governance. I think it is possible to prove that the recommend it, but I think it can work, and I hope we system can work, but it sure as hell has not worked can demonstrate in the next couple of years that we very well in relation to this, not just since 2010 but can make it work; otherwise, all of you will be tied since 2006, before the Trust was created. Who knows, up again in another attempt to provide the perfect if we were doing a survey for the three previous years governance for the BBC, which always ends up with under a board of governors, what we would see out of having to devise another system of governance for the that. It is a cultural issue, and we have to grip it. BBC, and it is rather tiresome. I think one example of the difficulty of making this Q360 Mr Bacon: Lord Patten, do you remember work is reflected in the very important letter that what Stanley Baldwin said in the 1931 by-election in Michael Lyons wrote to Jeremy Hunt in the summer St George’s ward about Rothermere and of 2010, in which he said that we needed to have a Beaverbrook? I think it was that they had “power bit more clarity on the relationship between strategy without responsibility—the prerogative of the harlot on pay, and so on, and on who does what. He referred throughout the ages.” I hear in what you say that you in particular—not being unpleasant about this—to the would like to give it another go, but I think many of role of the non-executive directors in relation to the us around this table listening to Mr Kroll—I came into Trust. However, can I say that I think there is a much this meeting quite agnostic about whether the structure bigger and more difficult issue, and one on which we needed tinkering with. You are right; it is very Ev 48 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll tiresome. But surely the case has been overwhelming to Jeremy Hunt, you may well have to look at the proven, hasn’t it, against having this form of divided extent to which a supervisory body is more involved responsibility and accountability? It made me hanker in the audit function, and whether it should be more after the old days of the BBC governors, to be honest, involved in remuneration; but I can’t imagine, for listening to Mr Kroll. He did not sound, frankly, like example, handing the regulatory power to Ofcom and he was running an organisation in the Trust unit that Ofcom wanting to be involved in determining had a full grip. It sounds like it is broken. It is broken. remuneration. There are all sorts of models which are The bicycle is not working properly and it needs suggested out there, but none of them seem to me fixing now. necessarily to be huge improvements, and the last Lord Patten: I know it is not fashionable for people one—the single board and governance—was scrapped to do it these days, but I would defend Mr Kroll to because of the imbroglio surrounding broadcasting on the limit. If executives get things wrong, and if they the Iraq war. are thought to get things wrong, then the people Mr Bacon: On which you got it largely right, by the ultimately who have to take responsibility are those way. who are in a ministerial or quasi-ministerial role. I Lord Patten: Well, I agree with that. absolutely take your point: we do have to demonstrate that we can make this work. I think we can. Q364 Jackie Doyle-Price: Just to follow up on the Mr Bacon: That was not meant to be a personal attack points you have just made: you are quite right to come on Mr Kroll. It was really a questioning of the to the defence of Mr Kroll, because actually I wasn’t architecture. If Mr Kroll is operating in an attacking him personally. What I was trying to environment where it is not clear who is responsible highlight was that there is a systemic failure here, and for what, or who needs to know what when, then it is I think this systemic failure probably could be hardly surprising that you end up in a mess. witnessed in a lot of organisations. That is because of the increasing reliance on e-mail. If we are going to Q361 Chair: What are you going to change? What is have real confidence in our governance procedures, going to happen? We round the table all feel that it is there has got to be a way of capturing papers that broke; that is what you come out of this whole episode come in by e-mail, so that when, Lord Patten, you ask feeling. What are you going to change that would give to be briefed, you can be confident that the full suite of us the confidence that there is proper accountability, papers that should be considered are being considered. and that these decisions are taken properly? What we have heard today—things being done by Lord Patten: I said in my evidence last time that I was document search, and then coming out in Sir Michael inherently sceptical about the argument that whenever Lyons’s e-mails—shows a structure that just is not anything went wrong you had to change the working. When you get an incident like this, it all falls institutions. Sometimes things go wrong because of down. I would also say there are issues here as well individuals. I think that the Trust and the executive, for you, Mr Thompson, because I kind of get the today, partly because of the experience of the last few impression—and by all means challenge me if I am years, will have a different and good relationship; and being unfair—that quite a lot of the time e-mails are if that doesn’t happen I dare say you will have to sent to the Trust as a back-covering exercise, rather spend a certain amount of your time in the run-up to than as a method of governance. Taken together, those 2017 slaving away over what sort of governance two issues are really ones we need to tackle. It is not system could work. necessarily about throwing the baby out with the bathwater, but let’s actually get the system working. Q362 Chair: I am genuinely sceptical of that answer, Mark Thompson: If I may say so, you only see part because if any structure depends on the relationship of the story, because so much of this kind of sequence between individuals it is not sustainable over the of events is done in oral discussions—phone calls and longer term, and what has happened in this particular face-to-face meetings. instance is you have had an executive taking one set of decisions; you have had non-executive directors on Q365 Jackie Doyle-Price: You need minutes. the executive board taking decisions; you have had Mark Thompson: Well, there are points—the 7 the Trust involved—everybody, I am afraid, running October note, for example, is clearly a more formal away a little bit from responsibility. Perhaps—okay— moment in the process; but what the Committee people are shaking their heads. That’s the feel. cannot hear any more are the conversations. I believe Mark Thompson: I honestly don’t think I am running that both Lucy Adams and I disclosed completely the away from it, actually. terms that we were proposing should be made to these two individuals. Q363 Chair: No, okay; I accept you haven’t run away. That’s the thing—you are all now, suddenly, Q366 Jackie Doyle-Price: I can see that you are all going to be responsible; but you cannot build telling me the truth as far as you see it; but to the sustainable structures on the personal relationships public it looks like somebody is lying, because we between two individuals who happen to hold posts at haven’t got these clear audit trails. That is what is a particular point in time. You can’t do it. missing in this governance. Lord Patten: What this—not just the NAO report— Sir Michael Lyons: This is important, as you draw a what the NAO report and the KPMG report together conclusion. Mark Thompson clearly does believe that indicate is that, as Sir Michael Lyons said in his letter he conveyed to me, at least to me, that the severance Committee of Public Accounts: Evidence Ev 49
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll terms that were being negotiated for Mark Byford Nicholas Kroll: That is exactly the question. would basically double-dip in that he would work Mark Thompson: If I may say so, every trustee could some time, but he would be paid in lieu of notice. It have read the whole thing not just in the Daily Mail is an important point. I do not think that I was given but across the media on the Tuesday. We should be that information. I will, quite separately, respond to clear that there is not any communication back from that part of his document to you showing why I do the Trust on this. We go and announce that we have not think that that is possible, just in terms of the dates made the payment, which you have talked about at on which we met, but the critical thing that I would length, to Mark Byford of getting on for £1 million. focus you on is the document that was prepared for The topic of senior management’s severance is never Mark Thompson that came to the Trust on 7 October mentioned by the Trust that I can find in its and that was seen by the trustees. That document is committees or to me. Sir Michael Lyons steps back silent on this issue despite the fact that the similar and Lord Patten arrives, but it is just never mentioned. report prepared for Marcus Agius’s committee only a I think it is Claude Rains in “Casablanca” who says, few days later actually covers the point explicitly. “I’m shocked, shocked to find that gambling is going Now there has been some criticism here about how on in here!” The truth is that these very large come the secretariat did not scrutinise this or deal with payments were extensively in the press. The details this. Indeed Mark Thompson himself alleges that this were in the press. It was a topic of very lively is a jointly prepared document. Nothing could be conversation. There were briefings in front of the further from the truth. It is a document that has come annual report 2011. There were briefings in front of from the executive. The Trust unit has asked some the annual report 2012. Parliamentary colleagues in questions to try to improve the quality of that Committees were asking questions about it, and the document to help trustees. I have just focused you on Trust did not raise it at all until the George Entwistle that moment. I do not want to say any more. settlement and the NAO Report. Mark Thompson: I have an e-mail here, which was Chair: I want to bring this quite quickly to an end. handed to me just today, from Nicholas Kroll to Sir Michael Lyons on 8 October—this is the day after the Q367 Stephen Barclay: I will be quick. Can I bring 7 October note arrived. Here Nicholas Kroll says to up two cases that have not been discussed so far: Peter Sir Michael Lyons, “Jessica tells me it is not yet clear Fincham and Roly Keating? Mr Thompson, did you when the individuals will get their formal and final take legal advice about whether disciplinary action letters confirming their redundancy arrangement, but could be taken against Peter Fincham? in both cases it is likely to be in calendar 2011. It is Mark Thompson: I have to say—this is based on my not yet possible to say which financial year this will recollection, rather than after having checked the fall into and so when disclosure will arrive.” In other records—I believe we were advised that we did not words, the final letters and formal notice will not be have grounds for dismissal. given to them into calendar 2011 and potentially in the next financial year. In my clear recollection, that Q368 Stephen Barclay: backs up verbal conversations had by me and indeed Right. Because he got paid by Lucy with Trust unit officials as well as with the £500,000, even though he was implicated in— Chairman. I absolutely appreciate that recollections Mark Thompson: Again, it is quite like the situation can differ, but it is not just the memories, it is the e- with George Entwistle. This is a situation where you mail trail. This e-mail, which as I say was sent on the have a really prominent leader, a great controller of Friday, backing up further evidence and further factual BBC 1, and there has been an editorial disaster. Many material about the severance payments after the 7 people inside, and indeed outside, the BBC—because October note, supports the case. many of the core problems happened at the Nicholas Kroll: Chairman, may I respond to that? independent producer that made the programme in Mark is producing various bits of paper like question—were responsible, but Peter, unfortunately, firecrackers. Happily, by strange chance I have this who was controller of BBC 1, was the person who one in my pack as well. I did of course report to Sir stood up and said it. Having looked at the report, Michael Lyons what Jessica Cecil said in her e-mail which was compiled into this saga by Will Wyatt, I to me, but that e-mail was silent on the key issue that felt that it would be appropriate for Peter to go. The Michael has raised that Mark Byford received not just clear advice, however, was that we did not have a single payment of a year’s pay in lieu of notice and grounds for dismissal. We decided that we would go the redundancy payment as well, but that in addition for a consensual termination, where he would depart. there would be eight months’ pay which would not be It was a compromise agreement. netted off against the pay in lieu of notice. Mark’s proposition is that within the Trust unit we should do Q369 Stephen Barclay: Was that communicated to some sort of jigsaw puzzle analysis of various pieces the Trust at any point? of paper in order to work out what he means, but I Mark Thompson: I remember briefing the think the Trust can have a reasonable expectation that Chairman—not on every detail, but explaining that we when it gets a note from the Director-General setting were going through a difficult lawyer-to-lawyer out what appears to be a clear statement of a sum of negotiation. It was different from a redundancy money within contractual entitlement, that’s it. situation, where you have a contract that you can read Mark Thompson: But why would we brief the Daily out; it was a negotiation. I have to say that Peter Mail correctly and not brief the Trust? behaved, from first to last, very honourably. There Ev 50 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll was, without question, a risk of legal action Lucy Adams: Mr Keating was entitled to six months’ afterwards. notice and two years’ redundancy.
Q370 Stephen Barclay: But, to be clear, you did Q376 Stephen Barclay: You said in your evidence, discuss the case of Peter Fincham with the Trust? “I consulted with my line manager at the time, Mark Thompson: I did not discuss the whole— Caroline Thomson”. Sir Michael Lyons: Can we be clear about what was Lucy Adams: Yes. discussed? We are as one on the fact that there were discussions. Indeed, on behalf of the Trust, I was Q377 Stephen Barclay: I have an e-mail from Ms adamant that there had to be consequences from the Thomson saying explicitly the opposite. mistakes, and the Director-General acted diligently on Lucy Adams: We may have different recollections on that basis. He then briefed me on what his intension that. I remember consulting her. I was very clear that was. However, the package was never discussed with I took the decision. the Trust. Q378 Stephen Barclay: So clearly there are two Q371 Stephen Barclay: But that is not what I was versions. Someone cannot be correct. told by the BBC Trust. I wrote about that specific Lucy Adams: As I said, people recollect different point on 9 July to the Clerk of the Committee: “Can things. I recollect it differently, but I said that I took I please check the BBC are saying that no papers exist the decision. regarding discussions, e-mails, meetings, between the executive and the Trust, regarding the other cases Q379 Stephen Barclay: May I just ask you about a reported in the media, other than the Byford/Baylay cultural point? Was it your sense—we have discussed case?” What you are saying is that there were culture—that these payments beyond contractual discussions of other cases. terms were, in essence, sweeteners to BBC staff? Was Sir Michael Lyons: Absolutely, there were that how you saw it? discussions. I would have briefed colleagues on that Lucy Adams: We were trying to—in the event, we basis. There may be no documents—I would be did—take out 195 senior people in a three-year period. willing to concede that, but it is a different point. Each one of those conversations was difficult and with Chair: Okay, can I— people who had been with the BBC for a long, long Stephen Barclay: Can I ask one more? time. Very often, they did not want to leave their jobs. Chair: Fine. Q380 Chair: Was it difficult for the receptionist? Q372 Stephen Barclay: Ms Adams, you told us last Lucy Adams: Let me finish my answer. We were time you were here that you consulted your line weighing up against the risk of litigation— manager, Caroline Thomson, about the Roly Keating pay-off, and that Mark Thompson was also involved. Q381 Chair: I have to say that this attitude that the Lucy Adams: No, I didn’t say that Mark was top cadre of people at the BBC face greater difficulty involved. You asked me, Mr Barclay, “Did you when they get redundancy, as opposed to a approve the Roly Keating payment?” And I said, receptionist or someone working lower down, is “Yes, I did.” offensive. Lucy Adams: I am not suggesting that. I am Q373 Stephen Barclay: You said it was “after a suggesting that you are weighing up the issues of the conversation he had had with Mark”, and then you risk of litigation, duty of care to the individual and the went on to say— disruption to the business if the individual leaves in Lucy Adams: Yes, after he had spoken to Mark about an unamicable way. If you look at the total amount the British Library role. Mark had never been spent on severance, 8% of that was spent above the involved in the discussions with Roly Keating about contractual entitlement. I don’t see those as a severance arrangement. That was my discussion sweeteners; I see those as sensible business decisions. with him. Q382 Stephen Barclay: Indeed. We have been Q374 Chair: So you decided that although he had through those arguments. My question was very got another job, he should still get severance, did you? specific: did you suggest to HR colleagues—this is a Lucy Adams: I went through this last time, Madam cultural point—that these sorts of payments should be Chairman, if you remember. I took the decision viewed by them as sweeteners? because Mr Keating explained to me that he would be Lucy Adams: As sweeteners? I think that that is a unlikely to take the British Library role unless there strange term. What we are talking about is enabling was a severance offer. It is an important point, because people to leave the business in a way that minimises it is an issue about the money and the decision that I disruption and avoids legal risk. It was a shorthand took. We were going to be making the role redundant, term, possibly, but I do not recollect it. but probably not for at least 18 months. In my view, that would have meant a two-year payment for Q383 Stephen Barclay: Sorry, but is it your evidence redundancy, plus his notice, plus his salary. that you would not have viewed the payments as sweeteners? I am talking about the culture and the Q375 Chair: No—a year. lead. You were head of HR. We have talked about the Committee of Public Accounts: Evidence Ev 51
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll fact that authority was delegated, and we have talked out of the door to minimise disruption, avoid legal about the fact that payments were made beyond what risk and address duty of care issues with the was legally required. I find it very odd that HR individual, and, occasionally—for 8% of the costs— professionals were not intervening and saying, “We we did that. A sum of £1.9 million was spent moving should not be paying beyond what we have to.” You these people out of contractual entitlement, against a say it is a strange term, but were you giving an saving of £20 million a year. instruction to your HR staff that they should be lax Chair: We are hearing the same thing, time and time about this, because they should view the payments again. Meg, can you quickly raise another issue? as sweeteners? Lucy Adams: Certainly not lax. We were trying to get Q390 Meg Hillier: I wanted to raise the issue about people out of the door, to minimise disruption and to Jana Bennett, who left, of course, in October 2012. reduce the risk of litigation. In some instances, in 8% She had moved previously to BBC Worldwide and her of the cost—£1.9 million against a £20 million redundancy package was originally paid by the saving—it was the case that we went above BBC—so I suppose I am looking at Lucy Adams and contractual entitlement to enable that to happen. probably Mark Thompson on this one—but later the BBC acknowledged that it should have been paid by Q384 Stephen Barclay: So you deny giving that sort BBC Worldwide. That was a pretty big error. Why did of steer to HR staff. it happen? Lucy Adams: What I would be saying to my staff is Lucy Adams: When Jana moved to Worldwide, we that we need to be moving the senior management agreed that she would have a two-year period where population down. she would be protected. She would get a year’s salary against her previous entitlement, as a sort of carry- Q385 Chair: Did you use the word “sweetener”? over agreement— Lucy Adams: I cannot honestly recall using that word. HR professionals all over the world recognise that Q391 Meg Hillier: Protected salary? occasionally you have to pay above the contractual Lucy Adams: She was moving to a lower salary. So, entitlement. in order to encourage her to take the Worldwide job, which initially she didn’t want to do because she Q386 Stephen Barclay: But in an e-mail you did didn’t want to leave her role as director of television, exactly that. You said, “Can I get a sense of the scale that seemed like the best solution for everybody all of the sweetener?” It seems that that is another round. It was nil cost; it was good for Worldwide, document that you are forgetful of writing. You could because she had a level of expertise that they could not remember the 7 October e-mail. benefit from; and it was good for the BBC public Lucy Adams: Can you show me this document please, service, because we were able to refresh— Mr Barclay? Q392 Meg Hillier: I am not so much talking about Q387 Stephen Barclay: I am very happy to share it why she moved; it is about the payment. with the Comptroller and Auditor General so that he can verify the document. I would have thought that Lucy Adams: There was a mistake and an error was that would be satisfactory. It is a leaked document, so made—a misjudged view that, in the event of a I cannot share it with you, but I am happy to share it restructuring of Worldwide, the BBC public service with the Comptroller and Auditor General. should pick up this liability. That should never have Lucy Adams: I am more than happy to comment on happened. It has been recharged. As I say, it should the document if you show it to me. I may have used never have happened in the first place. the term by means of an incentive to get to a swift resolution. Q393 Meg Hillier: But it was not really reflected in the accounts. It did not come out readily—even expert Q388 Stephen Barclay: So you might have used the auditors from the National Audit Office did not find it. term, even though you regard it as strange. Lucy Adams: Because the data that we provided to Lucy Adams: I find it strange because, as I said, we the NAO was all based on HR data—so, payments were trying to reduce the number of senior managers. that were made to individuals. This was an inter- Occasionally, you have to find a way of making it company recharge from Worldwide to the BBC. As happen more quickly while minimising disruption, or soon as it became known to us that this had happened, you have to find a way of avoiding legal risk. we took it to the NAO and asked them to consider whether they should include it in the second Report. Q389 Stephen Barclay: It says something about the culture that public money is bandied around, Q394 Meg Hillier: I just want to touch on the wider particularly at the more senior level, as Mr Bebb has relationship between the BBC and Worldwide. Mr highlighted, and the head of HR is saying, “Use the Thompson, I think I am right in saying that as licence fee money for sweeteners.” Director-General—when you were the Director- Lucy Adams: As I say, please do share the document General—you were responsible, although it is a that you are referring to with me and I can comment slightly independent body, for signing off the pay and on it. On occasion, we would always advise people remuneration of the chief executive of Worldwide. Is who were trying to manage and arrange to get people that right? Ev 52 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
Mark Thompson: Worldwide has its own an understanding that he wanted to make a change at remuneration board, with non-executive directors, and Worldwide; and although I heard those conversations had the primary responsibility for setting the chief were going on, I was not a party to them, because that executive’s remuneration, but I think there was a was going to be the next chapter in the BBC. report to the executive board remuneration committee just to keep an extra level of oversight over it. Q401 Meg Hillier: Ms Adams, were you having Lucy Adams: That is correct. In fact, one of the things discussions five weeks before he announced he was that has come about since the NAO Report is that leaving? we have abolished having two sets of remuneration Lucy Adams: Yes, I was involved in discussions with committees, for Worldwide and for the executive, so John Smith. As Mark says, it was very much George’s there is only one remuneration committee now, and view to refresh that team. that is for the executive board remuneration committee that would deal with the chief executive of Q402 Meg Hillier: I referred to BBC Worldwide Worldwide and also the executive directors of the Ltd’s annual report and financial statements for the BBC board. Then there is the senior management year ending 31 March 2013. John Smith’s total remuneration committee, which approves severance package for that year was £1.6 million. Is that right? and remuneration over £75,000 for public service, and Lucy Adams: That was his salary and the severance £75,000 and £125,000 in terms of severance and arrangement that we reached with him. remuneration for Worldwide. Meg Hillier: Hopefully quick questions and quick Q403 Meg Hillier: He already had a job to go to, answers. didn’t he? Chair: Last one. Lucy Adams: He subsequently returned six months of his notice period. Q395 Meg Hillier: Chair, I need to pursue this; we Meg Hillier: Okay. That’s very helpful to know. discussed that beforehand. Were there any other Amyas Morse: On a point of order. I have just been executives transferred to BBC Worldwide Ltd who shown an e-mail forwarded to Mr Barclay by a received severance payments that were recharged to whistleblower that appears to have arisen from your the BBC, or was it just Jana Bennett and never any using the word “sweetener.” I want to let you go away others in the history of Worldwide BBC? Just yes or from here. I appreciate that you want to see it, and no? you do need to see it, but may I just ask you to reserve Lucy Adams: I don’t know about the history of your position and we will look into it later on? Worldwide BBC, but certainly in the sample period that we looked at—but as I say, that money has now Lucy Adams: Absolutely. I am more than happy to been recharged back to the commercial— have a look at that document. As I say, what we were trying to do was to find a way of moving people out of the organisation. Very occasionally, legal Q396 Meg Hillier: Mr Thompson, what discussions did you have about John Smith’s departure before you entitlements in the contract of employment— left the BBC in September 2012? Mark Thompson: None. Q404 Chair: You’re developing a habit, Ms Adams, of changing your evidence after the hearing. Q397 Meg Hillier: Nothing at all? He left about five Lucy Adams: No, that’s unfair. That is really unfair, weeks later. Madam Chairman. Mark Thompson: The decision for him to depart was taken by my successor, George Entwistle. Q405 Chair: I don’t think it is. Lucy Adams: No, that’s very unfair. All I asked is to Q398 Meg Hillier: So, five weeks before you left—? see the document. Mark Thompson: I had heard it was likely that John Smith was going to go, but the decision for John to Q406 Meg Hillier: I want to ask Lord Patten, as depart from BBC Worldwide was not mine—it was chairman of trustees, about BBC Worldwide. I do not really made by my successor. have time to go into it, but there is certainly evidence that there were big, generous payoffs over a decade Q399 Meg Hillier: So really, five weeks before he ago at Worldwide. In your remit to try to clean up this went, you had no idea? Because it was quite well mess, will you be looking at BBC Worldwide as well? trailed— Lord Patten: The new chief executive of Worldwide Mark Thompson: No, I’m saying that I had heard that is, I think, paid less than half—I cannot give you the he was likely to go. exact figure, but it is considerably less—and he is well aware of some of those issues. He is already getting a Q400 Meg Hillier: You had not discussed any terms grip. I think he is outstanding, and I think he will give with him? great leadership to Worldwide. Mark Thompson: I had heard he was likely to go, but the decision—it is possible that George Entwistle Q407 Meg Hillier: Does the current Director- would have talked to John before he formally took up General’s cap, which I presume you back, apply to office. But George in the late summer of 2012 was BBC Worldwide? beginning to think about his top team; part of that was Lord Patten: Sorry? Committee of Public Accounts: Evidence Ev 53
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll
Meg Hillier: Does the cap of £150,000, which Tony from working for the BBC. But if you have a work Hall set, apply to Worldwide as well? force who could notionally walk out of the door and Lord Patten: Absolutely. Tim Davie is applying that get twice as much or more the next day that does put to Worldwide. Any payment of £75,000 or above is extra pressures on managing the staff that don’t exist going to be referred to the remuneration committee of in other commercial organisations. the main BBC. Q409 Ian Swales: I did not expect to get quite that Q408 Ian Swales: I would like to come back to Lord answer, because when we spoke about Ms Adams’ Patten on the question of culture. It seems that the pay at the last hearing we heard that it was roughly in summary of a lot of what we have been hearing is that line with a FTSE 100 HR director. That was part of a lot of senior managers in the BBC have effectively what we discussed. That is my point. I think it needs had a one-way bet. In other words, they have had testing by the trustees. I won’t go as far as calling it private sector style salaries while enjoying a lot of mythology, but clearly it is felt in the BBC that most public sector style benefits in terms of contracts, of the people could go out and double their salary. management structures and so on. I just think that needs testing against all the various Ms Adams’s evidence to the Committee last time, for contracts. That is the conclusion that I would get, example, said that the benchmarking for severance particularly when we don’t get the evidence that payments—the ones that were going on—was people get fired in the way that they would in the typically more favourable than in the private sector private sector. So, with the DMI fiasco or the Lonely but about in line with the public sector. Add to that Planet fiasco, I don’t know how many people got fired the number of managers and the types of structures. for those things, but certainly in the private sector a Lord Hall’s evidence last time was that there are 55 lot of— boards looking at various aspects of operations and Mark Thompson: You need to be a little bit careful back office functions, I am quite sure Sky TV, for about that. DMI was one of seven— example, does not have 55 boards looking at back office functions. Going back to your point about a top Q410 Chair: We are going to come back to DMI. culture leader being paid £180,000 a year, what do Mark Thompson: Seven or eight projects. you think needs to happen? Does the BBC need to have high salaries and become more private sector in Q411 Chair: We are going to come back to DMI. We the way it operates, or should it start operating like are going to have the pleasure probably of most of the public service broadcast organisation that we think your company when we return to DMI. it is? Mark Thompson: Don’t forget the projects that went Lord Patten: I have two opening comments and then well. Lonely Planet was a failure, but in the context a serious reply. First, Tony Hall is trying to strip out of Worldwide doubling its turnover and quadrupling some of the boards at the moment. Although I do not its profits, despite Lonely Planet. There is a slight imagine that Sky has the same number, people who danger of focusing only on the ones that go wrong work for Sky are paid a lot more than people who and, in this case, focusing only on the payments that work for the BBC. Sky is in the private sector, and enabled the bigger savings, forgetting the fact that there is a discount in BBC pay against the private gigantic savings were made. sector. The main point I want to make is that that is something that we have to recognise, because in my Q412 Chair: I am going to draw it to a close. We are view the BBC is the greatest broadcaster in the world looking forward, Lord Patten, to receiving the details and people get considerable pleasure from working and names of the 150 that you are in the process, I for it. If they do their job well, it doesn’t make it more understand, of writing to. We hope that that will difficult for them to get other jobs afterwards. While happen. Those are data that this Committee has said it there is a point beyond which you can’t discount wants and will treat in confidence. So we are looking without losing some very good people—and there will forward to that. All of us round the table, and I am be a danger of that in the next few years— sure you do down that end as well, really believe and nevertheless, we should take account of the fact that value and recognise the absolute central importance the BBC is a great organisation. As a public service of the BBC as an institution. It is one that we want to broadcaster it can’t behave, as I have said in the past, protect and promote. like a bank. That is why in my view this has been a grossly Marcus Agius: May I just reinforce what Lord Patten unedifying occasion, which can only damage the has said and add to it, when he refers to this discount? standing and reputation of the BBC. We regret that You said that the people at the BBC enjoy private and we hope that you regret that. Have we got any sector salaries. They don’t. The remuneration policy wiser? I don’t know. We will have to see when we of the BBC is not to pay any senior staff more than look at the details of the transcript when it is brought half of what they can get in the commercial world, to us. At best, I think what we have seen is ideally less. incompetence, a lack of central control, and a failure The benchmarking that has been done over a long to communicate for an organisation whose business is period of time indicates that the average discount that communication. At worst, we may have seen people is suffered or enjoyed, depending on your point of covering their backs by being less than open. That is view, is north of 60%. That is exactly as it should be not good for the thousands of people who work for because there are, as Lord Patten said, many benefits the BBC and who produce the fantastic content that Ev 54 Committee of Public Accounts: Evidence
9 September 2013 Mark Thompson, Marcus Agius, Lord Patten, Anthony Fry, Sir Michael Lyons, Lucy Adams and Nicholas Kroll enriches all of our lives. Thank you for your presence knowing the names. We, as an employer with our today. Let us hope that people learn the lessons of responsibilities under the Data Protection Act, this experience. recognising parliamentary privilege, wrote to the 150 Lord Patten: May I add one point, Chair? I would or, rather, the 146—four of the names are already in like to thank the NAO and KPMG for Reports that I the public arena—on 5 September, and we have given think will help to transform the BBC and make it a people until 19 September to respond. We will more trusted national institution—more trusted than it continue to talk to the Clerk of the Committee on is today, which is reasonably high but not as high as these matters. I think we have had a good relationship it should be. in trying to deal with this issue with the parliamentary On the names, we received, I think on 3 September, authorities and the Clerk. your argument about the public interest case for Chair: Okay. Thanks very much indeed.
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