BBC’S Severance Pay Does It No Favours In Eyes Of Britain

This week, we celebrate the Declaration of Independence – the document that set out the principles on which the United States claimed its independence from Great Britain.  Since then, while we’ve crafted a “special relationship” with our former colonial master, we’ve gone our own way in some particulars – such as getting rid of extra vowels in some of our words and changing some spellings, and driving on the right.  

One way in which our two nations are similar, however, is that severance pay that is perceived as excessive can stir public controversy. 

Today, Britons are outraged by reports that the BBC – a “semi-autonomous public service broadcaster” funded in part by an annual license fee on televisions – paid £369 million ($563 million) in severance payments to executives over the past eight years.  An angry headline in the Daily Mail opens a story on an audit by the UK’s National Audit Office, which found that the payments broke the BBC’s own rules and “put the public trust at risk.” 

The payments came as the BBC began to implement a 20% cut in its budget, in part due to a freeze on the license fees that provide much of its revenue, along with challenges from other media.  It is, one could say, not unlike the financial challenges the fictional Robert Crawley, Fifth Earl of Grantham faced in the popular Downton Abbey drama – which, ironically enough, was produced by ITV, a private-sector competitor of the BBC.  . 

Ten top former BBC executives received £4.9 million ($7.49 million) in severance, and the Audit Office found that somehow two executives were paid their severance twice.  We don’t know enough about patterns of severance pay for semi-public companies in Britain to judge for ourselves whether this is outrageous “behaviour,” but there’s evidence these payments were excessive to even one of the recipients: Roly Keating, the BBC’s former comptroller, returned his £376,000 ($574,100) severance, calling it inappropriate.  His action earned him a headline in The Telegraph newspaper hailing him as “a role model for our age.” Additionally, the UK’s Culture Secretary called the payments “a culture of pay-offs that simply cannot be justified.”

Surely this is publicity the BBC doesn’t want and doesn’t need.  What might its experience teach US entities – whether private sector companies or public agencies – about severance pay or golden parachutes?  It reinforces something that seems to be a common theme in several of our stories, which is this: consider the reaction of key stakeholders – whether they are shareholders, bankruptcy trustees, the public, or whoever else is relevant – when you make decisions about severance.  Sometimes, the negative effects of departure payments that are viewed as excessive may not be worth making the payments themselves. 

• Bankruptcy
• Executive Compensation
• Severance Agreements