The decision to drop Newsnight's report into Jimmy Savile's decades long campaign of sexual abuse was "flawed" and plunged the BBC into "chaos and confusion", according to a review carried out by former Sky News executive Nick Pollard.
The document paints a picture of a top-down organisation with rivalries and faction fighting.
It said the BBC's management system "proved completely incapable of dealing" with the issues raised by the axing of the story and "the level of chaos and confusion was even greater than was apparent at the time".
The report found: "The decision to drop the original investigation was flawed and the way it was taken was wrong but I believe it was done in good faith. It was not done to protect the Savile tribute programmes or for any improper reason."
The report was published at the same time as another review, by the BBC Trust, concluded that airing a Newsnight report that led to Lord McAlpine being wrongly named as a paedophile had resulted largely from a failure by members of the team to follow the BBC's own editorial guidelines.
Among the senior figures criticised in the Pollard report are former Director General George Entwistle and director of news Helen Boaden.
The review blamed in part an "apparent adherence to rigid management chains" for the failure to deal with the issue.
It said Ms Boaden's attempt to alert Mr Entwistle to potential problems posed by the story during an industry lunch was "too casual" and she is criticised for not taking "greater responsibility" as the crisis grew.
Mr Entwistle, who resigned after 54 days in the top job, was criticised for appearing to "have taken a long time to take any real control" of the problems at the BBC.
The BBC has now said Newsnight will get a new Editor and Deputy Editor and added that incoming Director General, Tony Hall, will be asked to reform its "management culture".