Reed Elsevier’s chief executive, Ian Smith, has quit the publisher by mutual agreement with the Anglo Dutch publisher’s board after just eight months in the job.
Mr Smith is being replaced with immediate effect by Erik Engstrom, who has been promoted from the role of chief executive of Elsevier, the Dutch division of the company. Shares in the group fell 5 per cent, down 24.4p, to 460p today.
Commenting on Mr Smith’s departure, a spokesman for Reed Elsevier, said: “It was felt both by Ian and the board that it wasn’t the right role for him in the current economic circumstances.”
He will be receiving a £1.1 million pay off, representing seven months notice, a bonus of 35 per cent of his £900,000 base salary and another 30 per cent of his salary in cash in lieu of a pension top up.
Anthony Habgood, the chairman of Reed Elsevier, said: “Ian has had the difficult task of leading Reed Elsevier during unprecedentedly turbulent economic times. The boards and I would like to thank him for his contribution in this respect and wish him well for the future.”
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He added: “Erik is a proven international executive with over 15 years management experience in the media sector in the US and Europe including five highly successful years developing our worldwide Elsevier business as its chief executive.
“He is now well suited to lead Reed Elsevier, to create value for our shareholders and to deliver growth as economic conditions improve.”
Mr Smith’s departure has raised questions over whether there was a rift between the chief executive and management. It is understood that Mr Smith had hoped to make acquisitions to restore organic growth but the board remained committed to an earlier plan to improve margins through cost cutting.
It is understood that Mr Engstrom was an internal candidate for the chief executive job in early 2008 when the board first started the search for a replacement for Sir Crispin Davies.
Since then, he has shown a strong track record of improving performance at Elsevier and the board, headed by new chairman Mr Habgood since April, decided he was ready to take the reins.
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The board combined its shock announcement with a lacklustre trading statement which said that the weak trends of the first half of the year, with slowing subscription revenue for its professional journals and advertising revenues hit by the recession, had “broadly continued in the second half”.
It warned that the trend would continue and margins would be weaker next year.
Mr Smith’s original appointment to replace Sir Crispin, announced in November last year, raised some eyebrows in the City since his previous experience had been as chief executive of Taylor Woodrow, the house builder, which he left after its merger with George Wimpey. He had no previous experience in the publishing industry.
His appointment was made under the chairmanship of Jan Hommen, who quit in April to join ING and was replaced by Mr Habgood.
Mr Hommen described him at the time as “an outstanding business leader who will build on Reed Elsevier’s strong foundations of global leadership positions, a growing digital presence and a dynamic management team.”
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He joined the board in January and took over as chief executive in March when Sir Crispin retired. But the share price has failed to revive since despite raising £800 million in a share issue in July.
The company is battling with falling advertising revenues, particularly for legal and other professional journals.