BBC director general Mark Thompson thrown by PD James's detective work

He has faced down his organisation's fiercest interrogators, including John Humphrys and Jeremy Paxman, but BBC director general Mark Thompson finally met his match today when he was grilled by the 89-year-old crime writer PD James.

Baroness James, a former governor of the BBC, had Thompson firmly on the back foot when she interviewed him as one of the guest editors of BBC Radio 4's Today.

She was scathing about the large salaries being paid to BBC executives, programmes such as Dog Borstal and Britain's Most Embarrassing Pets, and the controversial decision to drop Arlene Phillips as a judge from Strictly Come Dancing, which she said could "only be a kind of ageism".

The BBC, said James, was like a "large and unwieldy ship … with a crew that was somewhat discontented and a little mutinous, the ship sinking close to the Plimsoll line and the customers feeling they have paid too much for their journey and not quite sure where they are going or who is the captain".

The director general defended the six-figure pay packets of some of the corporation's top management, after figures released last month showed that 37 BBC executives – not including on-air talent – earned more than the Prime Minister's salary of £198,000, with more than 300 paid over £100,000. James said the "extraordinarily large salaries" were "very difficult to justify".

Thompson said most of the BBC's highest earners could make more in the commercial sector. "I think most people would accept that if we want to have the best people working for the BBC, delivering the best programmes and best services... the BBC has to bear to some extent in mind the external market," he said.

"The controller of BBC1 is going to be spending about £1bn a year on television programmes for that channel. We really want to make sure we have got the best person doing that job.

"The current controller of BBC1 was working for a commercial broadcaster and we got her to come back. She will – like most of the people on that list – get less from the BBC than they were earning or could earn otherwise. They have to take a pay cut. We are still absolutely losing key staff to commercial broadcasters who are still paying top dollar."

James said some BBC programmes were indistinguishable from those being provided by its commercial rivals. Asked by Thompson to provide examples – "You need to give me a couple of shockers I can respond to" – she cited Britain's Most Embarrassing Pets, Britain's Tallest Man, Britain's Worst Teeth, Dog Borstal, and Help Me Anthea I'm Infested, presented by Anthea Turner.

"I missed Dog Borstal, I don't know whether you managed to catch it," joked Thompson. "It sounds potentially rather interesting."

Thompson denied the decision to drop 66-year-old Phillips from Strictly Come Dancing had been motivated by her age. But he accepted that the BBC had to do more to combat ageism in its choice of presenters and more accurately reflect the age make-up of the population. "I don't believe the decision taken around Arlene Phillips was ageism. But in so far as from time to time people make decisions on the basis of age, they really shouldn't."

When he pointed out that Phillips would return in a new dance programme on the BBC in the new year, James told him: "That was probably a response to the outrage when she went [from Strictly Come Dancing]."

James also took the director general to task on BBC bureaucracy. "You have a director of marketing, communications and audiences who gets over £300,000, then there is a director of communications. Well, I thought that's what the previous director was doing, and he gets £225,000. One wonders what actually is going on here?"

Thompson admitted bureaucracy was a "real issue" at the BBC, saying: "It is a many headed hydra. You cut off one head and two more appear. So let's be honest about the fact it's a real issue. One of the things we are looking at is whether we can simply make a fully accountable commitment to how much of the licence fee we actually spend on content."

Thompson said the BBC had tried over the past five years to get its spending on overheads down.

But he insisted that the 17-fold ratio between his own £834,000 package and average BBC pay was far smaller than in most FTSE-listed private companies, where top bosses could earn 100 or more times as much as average staff members. "It really is a privilege (to work at the BBC) and everyone here in the senior echelons should accept that there will be a very big discount, they will get paid much less than they could earn outside the BBC," he said.

James, one of six guest editors in what has become an end of year tradition for Today, was made a life peer in 1991 and sits on the Conservative benches in the House of Lords. She has written more than 20 books, many of which feature her most famous creation, detective Adam Dalgliesh, and was a governor of the BBC between 1988 and 1993.

Today presenter Evan Davis was clearly impressed. "She shouldn't be guest editing, she should be permanently presenting the programme," he said. "Very interesting indeed."

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