Price is not right for some as ITV seeks saviour to avert disaster

LONDON BRIEFING: The package on offer to head ITV is lavish enough to make even a banker blush

WHEN ITV poached BBC boss Michael Grade to be its executive chairman almost two years ago, the move was hailed as a stunning coup. It was certainly a huge surprise – Grade had been thought wedded to his then relatively new role at the BBC and was never even rumoured as a potential candidate.

How different things are this time round. In what has descended into a shambolic recruitment process, not only is the identity of the preferred candidate known, but also the finer detail of his pay demands. The only thing that hasn’t changed in the past two years is the parlous state of ITV.

After a five-month search, the ITV board has chosen Tony Ball, the former head of Rupert Murdoch’s BSkyB, as their new chief executive. But the broadcasting company made the very basic mistake of failing to agree terms with the candidate before details of the job offer leaked out and now the negotiations are being conducted under the glare of the media, ITV’s staff and the company’s increasingly irate shareholders.

Ball is well-regarded in the industry and a little bit of his magic has already rubbed off on ITV, which has seen its share price surge by almost 50 per cent since his name was first linked with the job back in May. But he was never going to come cheap – he earned £30 million in his four years at BSkyB, plus a further £10 million from a two-year non-compete agreement after he left to spend more time in his Spanish villa.

The package on offer from ITV is lavish enough to make even a banker blush – a performance-related deal said to be worth some £20 million over five years, on top of a salary of £1 million. But Ball is said to be holding out for even more – as much as £30 million, according to some reports.

That would be a generous package even for a chief executive of a successful FTSE 100 company, let alone a struggling broadcaster of ITV’s size. It remains the toughest job in broadcasting – just as it was when Grade took over – and there are some who say even Ball’s talents will not be enough to turn round a company in seemingly terminal decline.

Ball is no shrinking violet – he once famously described ITV executives as so incompetent they were “unable to run a bath”. That will make for some interesting exchanges over the water coolers at ITV, assuming he takes the job. He clearly wants the challenge – at the right price – and has been orchestrating support among shareholders for his candidature.

But amid the widespread backlash against boardroom greed, Ball’s demands have not gone down well with shareholders, nor among executives at the company charged with overseeing a wide-ranging cost-cutting programme aimed at delivering savings of more than £150 million this year and £285 million by 2011. Earlier this year the group axed 600 jobs and announced the closure of its Yorkshire Television studios in Leeds.

The disastrous recruitment process comes at a difficult time for ITV, which has a lengthy list of other problems to keep it fully occupied, problems such as the unprecedented collapse in advertising revenues and dwindling audience figures. The company suffered a loss of £105 million over the first half and axed its interim dividend; its debts top £700 million and the pension deficit is a hefty £500 million-plus.

ITV’s track record on new media is woefully inadequate, as demonstrated by the £25 million sale last month of Friends Reunited, which it bought in 2005 in a £175 million deal. The business, although now profitable, has never lived up to ITV’s expectations and has been overtaken by rival social networking sites.

At the same time, the broadcaster has been embroiled in tough negotiations with the regulators on how much it can charge advertisers. The Competition Commission ruled recently that restrictions must remain in place because, despite the huge growth of digital channels, ITV still claims a dominant market position.

ITV's shareholders were reminded yesterday of yet another difficulty hanging over the group, as it launched a £38 million legal claim against Scottish broadcaster STV. The two have been embroiled in a long-running row over STV's decision to drop popular programmes such as The Billand Midsomer Murdersfrom its schedules, with ITV claiming its network partner has not met its contractual obligations.

All these problems will land at the new chief executive’s feet – and the sooner Ball or someone else takes the job, the better. The bungled recruitment reflects badly not only on Ball – after all, just how much more money does a multimillionaire TV executive really need? – but also on the ITV board, which has backed itself into a nasty corner. Either directors give in to his demands, or they start the whole process over again, further delaying any chance of recovery for ITV.

Fiona Walsh writes for theGuardian newspaper in London