It’s February 2013 and the ABC’s Four Corners is back on air with a story that veritably screeches “gold Walkley”. A prominent federal frontbencher, the program alleges, accepted secret payments from a company competing for a big government contract. The only problem, it turns out, is that the story was based on fraudulent documents concocted by a politically-motivated source.

Should Mark Scott, the ABC’s managing director, resign?

It’s a scenario loaded with significance following BBC director-general George Entwistle’s resignation on Saturday. The beeb boss quit after a Newsnight report wrongly suggested a retired Scottish politician, Lord McAlpine, was a p-edophile. Although none of the BBC’s news executives informed him about the program before it was broadcast, Entwistle said he had to go because, as the BBC’s editor-in-chief, he was ultimately responsible for all the corporation’s content. Both Labour and Tory MPs are now calling for the director-general’s executive director and editor-in-chief roles to be split.

ABC heavyweights are tracking the Entwistle saga closely, given the broadcaster’s editorial policies state: “The Managing Director is the Editor-in-Chief who has ultimate editorial power and responsibility.”

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Entwhistle’s departure has reopened a long-running Aunty debate about whether such sweeping editorial authority represents a dangerous management overreach or a strong system of accountability.

Media Watch host and former Four Corners executive producer Jonathan Holmes argues the director of news and current affairs should have the final call on controversial stories. “We shouldn’t be having an editor-in-chief who is the managing director,” Holmes told Crikey.

“Of course Mark Scott should be able to go to [news and current affairs boss] Kate Torney and say I want to redirect resources from the 7pm news to ABC News 24. On the broad, structural questions of where to spend money of course it’s his business. But on individual editorial decisions … I don’t think they should be up to him.

“He’s got a whole bloody army of journos beneath him who should be grown up enough to take responsibility … Kate is the supremo of all news output across TV, radio and online and she should be in the editor-in-chief role.”

In a piece for The Drum last week, Holmes recalled a 2001 example in which then-MD Jonathan Shier ordered a Four Corners report on Liberal Party dirt-digging be held over until he had it legalled externally.

Former ABC news and current affairs boss Peter Manning agrees with Holmes, saying that granting the MD ultimate editorial authority leads to an erosion of journalistic independence.

“Before the 1990s, no one thought of the managing director as editor-in-chief,” Manning said. “The given practice in the ABC in the 1950s, ’60s, ’70s was that the highest editorial director was the head of news and current affairs. If there was a need to refer something up to the MD it wasn’t about editorial — it was about legal or financial matters.”

ABC managing directors, Manning says, often come from non-journalistic backgrounds and have many responsibilities beyond news and current affairs. “I think the idea of managing directors’ heads being chopped off because of a biased or inaccurate report is inappropriate,” he said. “If the head of news makes the wrong judgement regularly their head should roll, but not the managing director’s. The MD might be fantastic at drama or comedy or managing the budget.”

But David Hill, who was ABC managing director from 1987-1995, believes the current arrangements work well and sees no need for change.

“Jonathan and these journalists take themselves too seriously if they think they are the only people who can apply editorial standards,” he told Crikey. “I don’t accept at all the idea of editorial independence starting below the point where authority lies. Independence shouldn’t mean giving somebody carte blanche.”

News directors, he says, usually only refer matters to the MD “to cover their arse”.

Hill says he adjudicated on contentious matters “half a dozen times” during his tenure — including on Chris Masters’ groundbreaking report on institutionalised corruption in Queensland — and gave the go ahead to broadcast in every case bar one. The exception was a lewd 1980s Andrew Denton sketch involving a condom that he, and the head of comedy, believed breached decency standards.

Mark Scott — who has embraced the editor-in-chief title with gusto — is travelling and was unavailable for comment. The ABC’s head of policy Alan Sunderland told Crikey certain stories, such as those involving hidden camera footage, must always be referred to the MD. Scott is also routinely briefed on controversial stories before they go to air.

However: “It is rare for an actual editorial decision to be referred to the MD prior to broadcast, and I cannot think of any recent examples off the top of my head.”

Former ABC staff-elected director Quentin Dempster says he would like to see a review of the ABC’s upward referral policies and how aware staff are of them. But he supports the managing director remaining as editor-in-chief because poor  journalism could tarnish the entire corporation’s reputation — not just an individual program or journalist’s.

“What are these hierarchies for — just to scapegoat down the line if something goes wrong?” he asked.