BBC Governance The Governors The Board of Governors was responsible for the strategic oversight of the BBC until its replacement by the Trust at the start of 2007. Governors’ committees Board; reviewed progress of major projects The Board of Governors routinely referred some and strategies, including property; scrutinised matters to sub-committees which reported back management proposals to assist deliberations to the full Board.These were: of the full Board. Fair Trading Compliance Committee – Remuneration Committee – considered the reviewed the BBC’s compliance with its Fair performance of individual members of the Trading Commitment, the World Service Trading Executive Board and recommended their Protocols, and the BBC News/BBC World base pay and annual bonus awards to the trading relationship; considered significant Board of Governors. external challenges to the BBC’s compliance Programme Complaints Committee – ensured with its Fair Trading Commitment; tested the that complaints were properly handled by the fair trading processes and controls through the BBC, including hearing certain appeals. work of the fair trading independent auditor. The structure of these sub-committees reflected Audit Committee – reviewed the BBC’s the governance system in place under the systems of internal controls; the compliance Charter and Agreement that expired at the end of the BBC’s financial statements with legal and of 2006. Under the new Charter and Agreement regulatory requirements; the BBC’s relationship some of the responsibilities of the former Board with its external auditors; the work and of Governors have passed to the Executive. effectiveness of the BBC’s internal auditors; This is why, for example, the Board of Governors the value-for-money reviews commissioned had an audit committee while the Trust does not, by the Audit Committee. the audit responsibilities having passed to the Finance and General Purposes Committee – Executive under the new Charter. scrutinised and made recommendations to the Board on the annual budget; reviewed The attendance record of Governors at Board investment cases before consideration by the and Committee meetings is set out below. Board and Committee attendance, 1 April 2006 to 31 December 2006 Finance and Fair Trading General Programme Board of Compliance Audit Purposes Remuneration Complaints Governors Committee Committee Committee Committee Committee Number of meetings in the year 8 3 5 10 4 7 Michael Grade (to 27 November 2006) 7/7 9/9 4/4 Anthony Salz 7/8 3/3 6/10 4/4 Deborah Bull 7/8 3/4 6/7 Sir Andrew Burns 8/8 5/5 Baroness Deech (to 22 October 2006) 5/6 1/2 4/4 Dermot Gleeson 7/8 4/5 10/10 Professor Merfyn Jones 6/8 3/3 6/7 Professor Fabian Monds 8/8 3/3 7/7 Jeremy Peat 7/8 5/5 10/10 Angela Sarkis (to 22 October 2006) 5/6 5/5 Ranjit Sondhi (to 22 October 2006) 6/6 Richard Tait1 6/8 3/7 1Agreed leave of absence owing to illness 46 | Part One:BBCAnnual Report and Accounts 2006/2007 Governance Unit The Governors were supported in their work by the Governance Unit, which provided independent and objective advice as well as administrative backup. It was reconfigured as the Trust Unit at the end of 2006 as part of the transition to the governance arrangements established by the new Charter and Agreement. Details of the Trust Unit are on page 37. At the end of 2006, the Governance Unit had a staff of 33.The total cost of the Unit for the first nine months of 2006/2007 was £7.9million (£8.3million 2005/2006 – full year cost). Members of the Board of Governors in office from April 2006 until 31 December 2006 Michael Grade CBE, Chairman BBC Chairman until his resignation in November 2006. Chairman of Pinewood Shepperton and of Hemscott Group and, from September 2006, of Ocado. Former journalist and theatrical agent. Held many senior positions in broadcasting including Director of Programmes, LWT; Managing Director designate, BBC Television; and Chief Executive, Channel 4. Anthony Salz,Vice-Chairman Acting Chairman of the BBC from November 2006 to December 2006 following Michael Grade’s resignation.Vice-Chairman from August 2004. Chairman of the Fair Trading Compliance Committee; Chairman of the Remuneration Committee and member of the Finance and General Purposes Committee. Former joint senior partner of the law firm Freshfields Bruckhaus Deringer. Deborah Bull CBE Member of the Governors’ Programme Complaints Committee and the Remuneration Committee. Creative Director, ROH2. Former Principal Dancer, Royal Ballet. Sir Andrew Burns KCMG The BBC’s International Governor. Member of the Audit Committee. Non-Executive Director of J P Morgan Chinese Investment Trust and Chairman of the Council of Royal Holloway, University of London. Former diplomat. Baroness Deech DBE (Ruth) Member of the Audit Committee and the Fair Trading Compliance Committee. Independent Adjudicator for Higher Education. Former Principal of St Anne’s College, Oxford, and former Chairman of the Human Fertilisation and Embryology Authority. Professor Merfyn Jones The BBC’s National Governor for Wales. Member of the Fair Trading Compliance Committee, the Governors’ Programme Complaints Committee, and the Councils and Advisory Bodies Committee. Historian and broadcaster. Former Vice-Chancellor of the University of Wales, Bangor. Professor Fabian Monds CBE The BBC’s National Governor for Northern Ireland. Member of the Governors’ Programme Complaints Committee, the Fair Trading Compliance Committee, and the Councils and Advisory Bodies Committee. Chairman of the trustees of BBC Children in Need. Specialist in communications, information systems and entrepreneurial studies. Angela Sarkis CBE Member of the Governors’ Programme Complaints Committee. National Secretary YMCA from July 2006. Former Chief Executive, Church Urban Fund and former Vice-President of the African Caribbean Evangelical Alliance. Ranjit Sondhi CBE BBC Governor with special responsibility for the English Regions. Chairman of the English National Forum and of the Councils and Advisory Bodies Committee. Senior Lecturer at the University of Birmingham’s Westhill College. Former Deputy Chairman of the Commission for Racial Equality. Three other BBC Governors – Dermot Gleeson, Jeremy Peat and Richard Tait – transferred to the BBC Trust.Their biographical details are on page13. Part One:BBCAnnual Report and Accounts 2006/2007 | 47 BBC Governance The Governors Board of Governors remuneration Governors: remuneration policy This section of our report sets out the The members of the Board of Governors remuneration policy and remuneration received received a fee determined by the Secretary by the Board of Governors. of State for Culture, Media and Sport.They were additionally reimbursed for expenses incurred The BBC is exempt from the requirements of on BBC business, and any tax arising on those the Directors’ Remuneration Report Regulations expenses was settled directly by the BBC.The 2002 and those of the Financial Services fees and taxable benefits are reported in the Authority, but this report has been prepared table on page 49. as if those requirements apply wherever the disclosure provisions are relevant and applicable. Pensions The sections on pensions and remuneration The Chairman was eligible to participate in received by the Governors are audited. a pension scheme, which provides for pension benefits on a defined benefit basis with an accrual Until 31 December 2006, the Governors’ rate of 1/60th of the final pensionable salary Remuneration Committee, a sub-committee per year of service. Earnings are subject to a of the Board of Governors, advised the Board maximum annual limit (£108,600 per annum of Governors on the remuneration policy for for 2006/2007) for those who joined the Pension the BBC’s Executive Board and the determination Scheme after 31 May 1989.The Pension Scheme of their base pay and any bonus awards.The provides for early retirement on medical grounds Governors’ Remuneration Committee was and life assurance of four times base pay up to chaired by Anthony Salz and the other members a prescribed limit. No other Governors were were Deborah Bull and Michael Grade. eligible to participate in a BBC pension scheme. The meetings of the Governors’ Remuneration Details of defined benefit entitlements compared Committee were also attended by the with 2005/2006 are shown on page 49. Director-General (Mark Thompson) and the Director, BBC People, to advise on matters relating to other members of the Executive Board and the overall performance of the BBC. Neither was present when matters concerning their own remuneration were considered.The Committee also had access to internal expertise through the BBC’s Head of Reward, who attended the meetings. Complying with the 2003 FRC Combined Code on Corporate Governance, the Governors’ Remuneration Committee took specialist advice from external professional advisers on remuneration matters, particularly market practice. During the year, the Governors’ Remuneration Committee received advice from the Hay Group on comparative market data in the determination of pay and benefits for the Executive Board. 48 | Part One:BBCAnnual Report and Accounts 2006/2007 Pension entitlement Defined benefit schemes Annual values Transfer values1 Increase in Increase Transfer value Transfer value transfer value Accrued in accrued of accrued of accrued less members’ pension at pension over pension at pension at contributions Name 31 March 20072 the year 31 March 20072 31 March 2006 over the year (age at 31 March 2007) £000 pa £000 pa £000 £000 £000 Chairman Michael Grade (64)2 4 1 59 50 6 1The transfer value of accrued pension benefits represents the estimated cost to the Pension Scheme of providing the pension benefits accrued to date.The value is affected by many factors, including age, pensionable salary, pensionable service and investment market conditions at the date of calculation (in accordance with Actuarial Guidance Note GN11). It is not a sum paid or due to the individual and therefore cannot be meaningfully added to remuneration. The effect of the investment market conditions on the transfer value varies according to the member’s age – for older members the calculation reflects the yields on index-linked gilts, while for younger members the dividend yield on the FTSE All-Share Index is the more significant determinant 2Michael Grade resigned on 27 November 2006.The figures at the end of the year are the total pension (before any pension was commuted for cash) and contributions at the date of retirement. His total benefits have then been valued as at 31 March 2007, including the value of the benefits received between 27 November 2006 and 31 March 2007 Remuneration received The remuneration of the Governors during the year is shown below. 1 April 2006 – Fee/base Expenses/ 31 December Total pay benefits 2006 2006 £000 £000 £000 £000 Governors (retired 31 December 2006 unless otherwise stated) Deborah Bull 12 2 14 23 Sir Andrew Burns 21 7 28 36 Baroness Deech (retired 22 October 2006) 9 5 14 23 Dermot Gleeson (appointed Trustee)1 12 7 19 26 Michael Grade (resigned 27 November 2006) 55 21 76 110 Professor Merfyn Jones 21 6 27 42 Professor Fabian Monds 21 2 23 29 Jeremy Peat (appointed Trustee)1 21 2 23 34 Anthony Salz2 26 3 29 35 Angela Sarkis (retired 22 October 2006) 9 2 11 25 Ranjit Sondhi (retired 22 October 2006) 16 1 17 32 Richard Tait (appointed Trustee)1 12 2 14 19 Total Governors 235 60 295 434 1Dermot Gleeson, Jeremy Peat and Richard Tait received fees as Governors until 31 December 2006 2Anthony Salz was Acting Chairman of the Board of Governors following Michael Grade’s resignation on 27 November 2006 until his term ended on 31 December 2006, and received fees at the Chairman’s level during this period There were no payments in respect of termination or compensation for loss of office paid to or receivable by Governors during the year. The fees payable to the Governors were determined by the Secretary of State for Culture, Media and Sport Part One:BBCAnnual Report and Accounts 2006/2007 | 49 “It is like a candy store, you don’t like everything in there, but what you do like, you actually really love.” Spontaneous definition of BBC Two. Male, age 25–44, Cardiff, contributing to Trust consultation on service licences.