Directors’ remuneration report
Introduction from Remuneration Committee Chairman
Given the backdrop of the challenging year and volatile business environment described by the Chairman and the CEO, the Remuneration Committee has been actively engaged in the review and management of all of our executive compensation programmes.
First we decided for a second year in a row that there will be no increases in base salaries, except for Erik Engstrom who received a promotional increase on his appointment as CEO of Reed Elsevier.
The continuing volatile economic environment makes the setting of targets and management of performance within a narrow range significantly more difficult. Therefore, our second action was a decision to flatten the payout slope in the annual incentive plan for 2010. This means that a smaller bonus would start to accrue for achieving 94% of target and the level of outperformance required to earn a bonus in excess of target has been substantially increased. In addition, the Committee has determined that for 2010, executive directors will only be able to earn the target bonus if 2010 profit performance exceeds 2009. The target and maximum bonus opportunities remain unchanged.
Finally, during the year the Committee reviewed the long-term incentive arrangements in the context of the significant changes in the senior leadership team, a challenging business environment with the late cycle impact on our professional markets and Reed Elsevier’s strategy.
The review resulted in the formulation of a set of proposals for new long-term incentive (LTI) arrangements on which we consulted with some 30 major shareholders and shareholder representative bodies in the UK, the Netherlands and the US in early 2010. The input and feedback received during the consultation process shaped the LTI arrangements for which we will be seeking shareholder approval at the Annual General Meetings in April. The new arrangements are designed to drive sustainable performance in the longer term by focusing on a balance of returns and earnings metrics that hold the executives accountable for the delivery of the strategy. A detailed description of the new arrangements is set out in the notes to the notices of the Annual General Meetings of shareholders.
In developing the LTI proposals, the Committee was sensitive to and mindful of the need to ensure that the level of the overall incentive opportunity available under the new proposals remains within the parameters of the incentive framework previously approved by shareholders.
In other matters, standard terms and conditions were applied to the retirement of Sir Crispin Davis and the departure of Ian Smith. Sir Crispin’s terms were reported in last year’s remuneration report. The payment for loss of office provided to Ian Smith, who resigned by mutual agreement, was limited to base salary and benefits. In accordance with policy, part of the payment for loss of office is subject to mitigation. All of his share-based incentives lapsed on termination.
As in previous years, our approach to preparing this report has been to meet the highest standards of disclosure, balancing relevant requirements in the UK and the Netherlands, whilst aiming to produce a clear and understandable report.
Mark Elliott
Chairman, Remuneration Committee
This report describes how Reed Elsevier applies the principles of good governance relating to directors’ remuneration. In respect of the disclosures contained in this report, we have sought to comply with the substance and spirit of prevailing legislation and corporate governance guidelines in the UK and the Netherlands. The Remuneration Committee (the Committee) has sought to balance in a thoughtful and responsible manner the UK legislative requirements with best practice guidelines on disclosure in the Netherlands. This report has been prepared by the Remuneration Committee of Reed Elsevier Group plc in accordance with regulations made under the Companies Act 2006 and the Dutch Corporate Governance Code (the Dutch Code).
The Directors’ Remuneration Report was approved by the boards of Reed Elsevier Group plc, Reed Elsevier PLC and Reed Elsevier NV and will be submitted to shareholders for an advisory vote at the Annual General Meeting of Reed Elsevier PLC. Separate resolutions will be submitted to the Annual General Meetings, of Reed Elsevier PLC and Reed Elsevier NV in respect of the long-term incentive arrangements proposed for 2010. In addition, a resolution relating to policy changes on annual incentives will be submitted to the Annual General Meeting of Reed Elsevier NV.
The audited parts of the Directors’ Remuneration Report In compliance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, and under Title 9, Book 2 of the Civil Code in the Netherlands the following elements of this report have been audited: the table entitled ‘Transfer value of accrued pension benefits’; the tables showing ‘Aggregate emoluments’ and ‘Individual fees of non-executive directors’; the tables on ‘Individual emoluments of executive directors’ and ‘Directors’ shareholdings in Reed Elsevier PLC and Reed Elsevier NV’; and the section ‘Share-based awards in Reed Elsevier PLC and Reed Elsevier NV in Reed Elsevier PLC and Reed Elsevier NV’.
Approved by the Board of Reed Elsevier Group plc on 17 February 2010
Mark Elliott
Chairman of the Remuneration Committee
Approved by the Board of Reed Elsevier PLC
on 17 February 2010
Mark Elliott
Non-Executive Director
Approved by the Combined Board of Reed Elsevier NV on 17 February 2010
Mark Elliott
Member of the Supervisory Board
