Mr Davis quit the Anglo-Dutch publishing company in June because he felt unhappy with a proposed management structure that would have made him give up much of the day-to-day operational responsibility for the group.
He will receive pounds 652,000 in cash as compensation for loss of office plus temporary benefits, such as the provision of an office, worth up to pounds 70,000. Mr Davis will also receive a contribution to his pension worth about pounds 1.3m.
The company said that by leaving when he did, Mr Davis forfeited the additional enhancement of his penion that would have occurred had he worked for the balance of his notice period and that this would be made up by the company. In addition he has more than 138,440 share options worth an unspecified amount.
Mr Davis was on a three-year rolling contract, which obliges a company to give a minimum of three years' notice - or compensation in lieu - if it wishes to end a director's employment without due cause. Such contracts are opposed by a growing number of institutional shareholders.
Although at the time of his resignation Mr Davis was said to have left under his own steam, a spokeswoman explained that he had resigned because the company was 'attempting to change his job' and was thus in breach of his contract and obliged to pay compensation.
Reed said the pay-off 'fairly reflected Mr Davis's contribution to the increase in shareholder value during his eight years in office, and a leading role in the successful Reed Elsevier merger'.
At the time of his departure, Mr Davis's salary was pounds 500,000 a year, plus incentives, pension and fringe benefits. The company valued his contract at pounds 3m, but mitigation of around a third was negotiated to reflect his chances of getting another job during the period covered by the contract, as well as the fact he would be receiving the money as a lump sum.
Negotiations were handled by Reed's remuneration committee, chaired by Sir Christopher Lewinton, chairman of TI group. Other members include Anthony Greener, chairman of Guinness, Paul Hamlyn, founder of Octopus books, now part of Reed, David Webster, deputy chairman of Argyll, and four members of the Elsevier supervisory board.
There have been a number of high-profile payouts recently. Dr Ernest Mario, ousted in March 1993 as chief executive of Glaxo, received a pay-off worth about pounds 3m; Bob Horton, sacked as BP's boss in 1992, left with pounds 1.5m; and David Dworkin, ex-chief executive of the retailer Storehouse, left recently with a deal worth about pounds 3.2m.
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