Reed Elsevier's chief executive quits after just eight months

Publisher names internal replacement for Ian Smith after agreed departure
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The Independent Online

The chief executive of Reed Elsevier, publisher of New Scientist and Variety, shocked the market yesterday by resigning after just eight months.

Reed announced that Ian Smith had resigned "by mutual agreement and has with effect from today stepped down from the boards," adding "We felt it wasn't the right role for him in the current economic situation."

Mr Smith, a former chief executive of the housebuilder Taylor Woodrow, became chief executive designate in January, and took over the role fully in March.

He had no experience of the media sector, which surprised some at the time of his appointment, and after eight months it was beginning to tell, according to sources close to the company.

Other factors went against Mr Smith, including Jan Hommen, the chairman who appointed him, leaving shortly after the chief executive joined to run ING, to be replaced by Anthony Habgood. The turbulent state of the economy and publishing in particular didn't help.

"There were no personality clashes or shareholder revolts or issues of strategy. It was more how he was running the company," the source said.

Alex DeGroote, analyst at Panmure Gordon said: "In itself this is a surprise, though Smith has not made much positive impact on investors since he assumed the role earlier this year."

Analysts at Singer were also surprised by how short Mr Smith's tenure was. "We suspect that the disposal programme has faltered and now looks unrealistic," they said, raising questions over who would buy the troubled Reed Business Information (RBI) assets.

The company named Erik Engstrom as his replacement with immediate effect. Mr Engstrom, chief executive of the Elsevier arm, joined Reed in 2004 from the private equity company General Atlantic Partners. He oversaw consistent growth at Elsevier, which had a turnover of £1.7bn in 2008. He will be handed a £1m pay packet and a bonus and long-term incentive scheme that will deliver three-and-a-half times that if targets are met. The source added that there was unlikely to be a substantial shift in strategy after the changes.

Mr Engstrom spoke of his "delight" at taking control yesterday. "The business is strongly positioned in attractive markets and I am confident that we have the resources and ambition to be highly competitive," he said.

This was not the first surprise Mr Smith sprung on investors. He launched an equity placing of £842m in July to reduce the group's £5bn debt pile. He also put a number of the US titles up for sale.

At the half-year results, Mr Smith unveiled a 52 per cent fall in pre-tax profits as Reed Exhibitions and RBI missed expectations, and warned on the company's full-year profits.

As well as yesterday's announcement the group put out another profit warning for next year, due to operational gearing. While there were few hard numbers for 2009, the group said the tough conditions from the first half were likely to continue for the rest of the year.

Short but sweet: Quitting while you're ahead

There's no disgrace in quitting a job that doesn't feel right, and Mr Smith is by no means alone in standing down after only a short period at the top.

He hasn't stayed as long as John Thain, who managed 13 months at the US investment bank Merrill Lynch before being forced out earlier this year over the amount he had spent on refurbishments of his office suite – and the bonuses allegedly rushed through for staff before the takeover of Merrills by Bank of America. Nor has Mr Smith quite matched Angela Spindler, hired as the first managing director of Debenhams in February 2008 – she lasted 10 months.

Still, Mr Smith beats the NHS 24 boss Sandy Forrest, who quit the public sector organisation in 2007 after six months. And he's miles ahead of Michael O'Neill, the US banker hired as Barclays chief executive in 1999 on a £10m three-year deal. He quit on his first day, following a health scare.

Still, the prize for the shortest tenure goes to Jim Leng, who earlier this year quit as chairman of the miner Rio Tinto, two months before he formally took up the role, after a disagreement with his board over fundraising plans.