Shareholders protest over Reed incentive plan

Up to a third of voting shareholders in Reed Elsevier came out against the publisher's incentive payment plans for its executive directors.

The company's annual general meeting yesterday, in a London hotel, produced sizeable protest votes on the three resolutions that were to approve new controversial share option and bonus schemes. The rebellion came despite the fact that Reed had offered concessions a week ahead of the meeting, by adding more performance criteria to the schemes.

On the long-term incentive plan, 33 per cent voted against, while 26 per cent rejected the share option scheme. The bonus investment plan attracted a 10 per cent vote against.

The company is replacing its existing schemes, which are unlikely to pay out because of Reed's share price performance, with new plans, based on earnings per share criteria – on which the company has done well. Directors stand to make £20m from the new plans, which will run for three years from 2004.

Rolf Stomberg, chairman of Reed's remuneration committee, told the meeting that the company must offer large rewards to its executives to recruit and retain them, reflecting its exposure to the US. He said the existing package, introduced in 2000, had seemed "rich" but it was "barely competitive in the US".

"The terms must be competitive in the US market, the UK and the Netherlands are not the relevant comparatives.... our top team is the target of poachers, who offer very generous terms to them, especially from private equity," Mr Stomberg said.

He said the final incentive proposals had followed wide consultations with shareholders but he added that it was not possible to satisfy all investors. He said that there had never been any thought of simply changing the terms of the existing schemes.

After the meeting, which marked the centennial year of the company, Crispin Davis, its chief executive, said the dialogue with shareholders in recent weeks had been "constructive" and there had "never been any hostility". He added that the last-minute changes to the incentive plans had been "modest". Earlier this week Mr Davis cashed in £2m worth of shares given to him when he joined the group in 1999.

In a trading update, Reed said it was sticking to its financial targets for this year, of double-digit earnings growth and "above market" revenue increase.