The directors of each of Reed Elsevier PLC, Reed Elsevier NV, Reed Elsevier Group plc and Elsevier Reed Finance BV at February 15, 2005 were:
Name (Age) Reed Elsevier PLC Reed Elsevier NV
Reed Elsevier Group plc
Elsevier Reed Finance BV Gerard van de Aast (47) Executive Director Member of the
Executive Board
Executive Director ç Mark Armour (50) Executive Director
and Chief Financial O⁄cer
Member of the Executive Board and Chief Financial O⁄cer
Executive Director and Chief Financial O⁄cer
Member of the Supervisory Board
Jacques Billy (34) ç ç ç Member of the
Management Board
Willem Boellaard (74) ç ç ç Member of the
Management Board Dien de Boer-Kruyt (60) ç Member of the
Supervisory Board(4)
ç Member of the
Supervisory Board John Brock (56) Non-executive
Director(1)(4) Member of the Supervisory Board(1)(4) Non-executive Director(1) ç
Sir Crispin Davis (55) Executive Director and Chief Executive O⁄cer(3)
Chairman of the Executive Board and Chief Executive O⁄cer(3)
Executive Director and Chief Executive O⁄cer(5)
ç
Mark Elliott (55) Non-executive Director(4) Member of the Supervisory Board(4) Non-executive Director(2)(5) ç
Erik Engstrom (41) Executive Director ç Executive Director ç
Cees van Lede (62) Non-executive Director(3)(4) Member of the Supervisory Board(3)(4) Non-executive Director(2) ç
Roelof Nelissen (73) ç ç ç Chairman of the
Supervisory Board Andrew Prozes (59) Executive Director Member of the
Executive Board
Executive Director ç David Reid (58) Non-executive
Director(1)(4) Member of the Supervisory Board(1)(4) Non-executive Director(1)(5) ç
Lord Sharman (62) Non-executive Director(1)(3)(4) Member of the Supervisory Board(1)(3)(4) Non-executive Director(1) ç
Rolf Stomberg (64) Non-executive Director(3)(4)(6) Member of the Supervisory Board(3)(4)(6) Non-executive Director(2)(6) ç
Morris Tabaksblat (67) Non-executive Chairman(3)(4) Chairman of the Supervisory Board(3)(4) Non-executive Chairman(5) ç
Patrick Tierney (59) Executive Director Member of the Executive Board
Executive Director ç
(1) Member of the Audit Committee.
(2) Member of the Remuneration Committee of the board of Reed Elsevier Group plc.
(3) Member of the joint Nominations Committee of the boards of Reed Elsevier PLC and Reed Elsevier NV. (4) Member of the joint Corporate Governance Committee of the boards of Reed Elsevier PLC and Reed Elsevier NV. (5) Member of the Strategy Committee of the board of Reed Elsevier Group plc.
(6) Senior independent Non-executive Director, as de¢ned by The Combined Code: Principles of Good Governance and Code of Best Practice in the United Kingdom.
A person described as a Non-executive Director of Reed Elsevier PLC or Reed Elsevier Group plc or a member of the Supervisory Board of Reed Elsevier NV is a director not employed by such company in an executive capacity.
Gerard van de Aast is Chief Executive O⁄cer of the Business division, Reed Business. Appointed a director of Reed Elsevier Group plc and Reed Elsevier PLC in December 2000 and director of Reed Elsevier NV in April 2001. Prior to joining Reed Elsevier was Vice President and General Manager of Compaq’s Enterprise business in Europe, Middle East and Africa.
Mark Armour was appointed Chief Financial O⁄cer of Reed Elsevier Group plc and Reed Elsevier PLC in 1996, and of Reed Elsevier NV in April 1999. Appointed a member of the Supervisory Board of Elsevier Reed Finance BV in December 1998. He was Deputy Chief Financial O⁄cer of Reed Elsevier from 1995 to 1996. Prior to joining Reed Elsevier was a partner in Price Waterhouse.
Jacques Billy was appointed a member of the Management Board of Elsevier Reed Finance BV on February 15, 2002. He is Managing Director of Elsevier Finance SA, having joined that company as Finance Manager in 1999.
Willem Boellaard was appointed a member of the Management Board of Elsevier Reed Finance BV in December 1998. He joined Reed Elsevier PLC in 1990.
Dien de Boer-Kruyt was appointed a member of the Supervisory Board of Reed Elsevier NV and of Elsevier Reed Finance BV in 2000. She is Chairman of the Supervisory Board of C/Tac, and a member of the Supervisory Boards of Allianz Nederland Group NV, Imtech NV and Sara Lee/DE, a subsidiary of Sara Lee Corporation.
John Brock was appointed a non-executive director of Reed Elsevier Group plc and Reed Elsevier PLC, and member of the Supervisory Board of Reed Elsevier NV, in April 1999. Chief Executive O⁄cer of InBev and a director of AmBrew and Campbell Soup Company. Was Chief Operating O⁄cer of Cadbury Schweppes plc until 2002.
Sir Crispin Davis was appointed Chief Executive O⁄cer of Reed Elsevier Group plc, Reed Elsevier PLC and Reed Elsevier NV in September 1999. Non-executive director of GlaxoSmithKline plc since July 2003. Knighted in the June 2004 honours list. Chief Executive O⁄cer of Aegis Group plc from 1994 to 1999. From 1990 to 1993 he was at Guinness Group plc, where he was an executive director and held the position of Group Managing Director of United Distillers. Prior to that he spent 20 years at Proctor & Gamble, latterly as President, North American Food Division.
Mark Elliott was appointed a non-executive director of Reed Elsevier Group plc, Reed Elsevier PLC and a member of the Supervisory Board of Reed Elsevier NV in April 2003. General Manager IBM, Global ISV Solutions.
Erik Engstrom is Chief Executive O⁄cer of Elsevier. He joined Reed Elsevier on August 23, 2004, when he was also appointed a director of Reed Elsevier Group plc and Reed Elsevier PLC. A non-executive director of Eniro AB. He will be nominated for appointment to the board of Reed Elsevier NV at the company’s AGM in April 2005. Prior to joining Reed Elsevier was general partner at General Atlantic Partners from 2001 until 2004. Before that he was president and chief operating o⁄cer of Random House and president and chief executive o⁄cer of Bantam Doubleday Dell, North America. He began his career as a consultant with McKinsey.
Cees van Lede was appointed a non-executive director of Reed Elsevier Group plc, Reed Elsevier PLC and a member of the Supervisory Board of Reed Elsevier NV in April 2003. A member of the supervisory board of Air Liquide, Akzo Nobel, Philips Electronics, Heineken and AF/KL, and a non-executive director of Sara Lee Corporation. He was chairman of the board of management of Akzo Nobel until his retirement in May 2003.
Andrew Prozes is Chief Executive O⁄cer of LexisNexis. Appointed a director of Reed Elsevier Group plc and Reed Elsevier PLC in July 2000 and director of Reed Elsevier NV in April 2001. Non-executive director of Cott Corporation since January 2005. Prior to joining Reed Elsevier was an Executive Vice President with the West Group, part of the Thomson Corporation, and Group President of Southam Inc.
David Reid was appointed a non-executive director of Reed Elsevier Group plc, Reed Elsevier PLC and a member of the Supervisory Board of Reed Elsevier NV in April 2003. Non-executive Chairman of Tesco PLC since April 2004. Was executive deputy chairman of Tesco until December 2003, and ¢nance director from 1985 to 1997.
Lord Sharman was appointed a non-executive director of Reed Elsevier Group plc and Reed Elsevier PLC in January 2002, and a member of the Supervisory Board of Reed Elsevier NV in April 2002. Non-executive chairman of Aegis Group plc since 2000 and a non-executive director of BG Group plc, Group 4 Securicor plc and Aviva plc, and a member of the Supervisory Board of ABN-AMRO since April 2003. Joined KPMG in 1966 where he was elected UK Senior Partner in 1994 and also joined both the International and Executive Committees of KPMG. Between 1997 and 1999 he was Chairman of KPMG Worldwide. Became a member of the House of Lords in October 1999.
Rolf Stomberg was appointed a non-executive director of Reed Elsevier Group plc and Reed Elsevier PLC in January 1999 and a member of the Supervisory Board of Reed Elsevier NV in April 1999. Chairman of Management Consulting Group PLC and Lanxess AG. A non-executive director of Smith & Nephew PLC and serves on the boards of Scania AB, TPG NV, Deutsche BP AG, Hoyer GmbH and Biesterfeld AG.
Morris Tabaksblat was appointed a member of the Supervisory Board of Reed Elsevier NV in April 1998 and a non- executive director of Reed Elsevier Group plc in June 1998. Chairman of Reed Elsevier Group plc and Reed Elsevier PLC and
Chairman of the Supervisory Board of Reed Elsevier NV since 1999. Chairman of the Supervisory Boards of AEGON NV and of TPG NV (until April 2005). Was Chairman of Unilever NV from 1994 until his retirement in 1999 and a member and former Chairman of the European Round Table of Industrialists (until 2001). As announced on March 1, 2005, Mr Tabaksblat is reducing his business commitments for personal reasons, and will step down from his roles within Reed Elsevier at the end of the Reed Elsevier PLC and Reed Elsevier NV Annual General Meetings in April 2005. It is proposed that Jan Hommen will succeed Mr Tabaksblat. Mr Hommen will be proposed for appointment as a non-executive director of Reed Elsevier PLC and a member of the supervisory board of Reed Elsevier NV at the Annual General Meetings in April 2005 and will assume the chairmanships on Mr Tabaksblat’s retirement. Information concerning Mr Hommen appears below.
Patrick Tierney is Chief Executive O⁄cer of the Education division, Harcourt Education. Joined Reed Elsevier in January 2003 and appointed a director of Reed Elsevier Group plc, Reed Elsevier PLC and Reed Elsevier NV in April 2003. Prior to joining Reed Elsevier, Mr Tierney was with The Thomson Corporation, a US based provider of business information, where he was chief executive o⁄cer of Thomson Financial.
Jan Hommen is presently Vice Chairman of the Board of Management and Chief Financial O⁄cer and Executive Vice President of Royal Philips Electronics. He will be standing down from these positions on May 1, 2005, when he reaches the statutory retirement age of 62. He is currently a member of the supervisory boards of Koninklijke Ahold NV, and of TPG NV and is a director of MedQuist Inc, a quoted US subsidiary of Philips. He started his career in 1970 at Alcoa where he held positions of increasing seniority until his appointment as Executive Vice President and Chief Financial O⁄cer in 1991. In 1997, he became Executive Vice President and Chief Financial O⁄cer of Royal Philips Electronics. He was later appointed Vice Chairman of the Board of Management and tasked with responsibility for the Philips Medical Systems business.
SENIOR MANAGEMENT
The executive o⁄cers of Reed Elsevier Group plc, other than directors, at February 15, 2005 were:
Nick Baker: Chief Strategy O⁄cer. A member of the Reed Elsevier management committee. He has been with Reed Elsevier since 1986 and within Corporate Strategy since 1997.
Stephen Cowden: General Counsel and Company Secretary of Reed Elsevier PLC and Reed Elsevier Group plc. A UK lawyer. Joined Reed Elsevier in 2000 as General Counsel, and was appointed Company Secretary of Reed Elsevier Group plc and Reed Elsevier PLC in 2001. Prior to joining Reed Elsevier was Group Company Secretary of Glaxo Wellcome plc.
Erik Ekker: Legal Director Continental Europe and Company Secretary Reed Elsevier NV and Company Secretary of Elsevier Reed Finance BV. A Dutch lawyer. Has been Legal Director (Continental Europe) of Reed Elsevier Group plc since 1993. Joined Reed Elsevier NV in 1977 as Legal Counsel.
Keith McGarr: Chief Technology O⁄cer. A member of the Reed Elsevier management committee. Joined the company in 2000. Previously Mr McGarr was with Federal Express Corporation where he was responsible for IT network-based and distributed services and the design of network architecture.
COMPENSATION Remuneration Committee
The Remuneration Committee is responsible for recommending to the boards the remuneration (in all its forms), and the terms of the service contracts and all other terms and conditions of employment of the executive directors, and for providing advice to the Chief Executive O⁄cer on major policy issues a¡ecting the remuneration of executives at a senior level below the board. A copy of the terms of reference of the Committee is published on the Reed Elsevier website, www.reedelsevier.com.
Throughout 2004 the Committee consisted wholly of independent non-executive directors. Rolf Stomberg (Chairman of the Committee), Mark Elliott and Cees van Lede. At the invitation of the Chairman, the Chief Executive O⁄cer attends meetings of the Committee, except when his own remuneration is under consideration.
The Committee has appointed Towers Perrin, an external consultancy which has wide experience of executive remuneration in multinational companies, to advise in developing its performance-related remuneration policy. Towers Perrin also provides actuarial and other human resources consultancy services direct to some Reed Elsevier companies.
In addition to Towers Perrin, the following provided material advice or services to the Committee during the year: Jean- Luc Augustin, Human Resources Director (until June 2004); Phil Wills, Director, Compensation and Bene¢ts; and Sir Crispin Davis, Chief Executive O⁄cer.
Compliance with the best practice provisions
The Committee has complied during the year with UK Combined Code of Corporate Governance issued in July 2003 and the Dutch Corporate Governance Code issued in December 2003.
Remuneration policy
The remuneration policy is set out below. (a) Objectives
The principal objectives of the remuneration policy are to attract, retain and motivate people of the highest calibre and experience needed to shape and execute strategy and deliver shareholder value in the context of an ever more competitive and increasingly global employment market.
The Board and the Committee believes that this requires:
(i) a competitive package of pay and bene¢ts, commensurate with comparable packages available within other leading multinational companies operating in global markets; the Committee believes this needs to deliver upper quartile total remuneration for clearly superior levels of performance and to provide a consistent approach toward senior executives, including the directors, irrespective of geographical location;
(ii) to link reward to individual directors’ performance, company performance and share price performance so as to align the interests of the directors with those of Reed Elsevier and the shareholders of the parent companies and to avoid rewarding failure; and
(iii) to ensure that it encourages enhanced performance by directors and fairly recognises the contribution of individual directors to the attainment of the results of Reed Elsevier in the short term, and in the longer term, whilst also encouraging a team approach which will work towards achieving the long term strategic objectives of Reed Elsevier.
In order to meet the above objectives, the remuneration of executive directors comprises a balance between ‘‘¢xed’’ remuneration and ‘‘variable performance-related’’ incentives. The policy is that the predominant proportion of reward potential should be linked to performance, and the remuneration structure for 2004 shows that for superior performance over 70% of the total remuneration is performance related. Since January 2003 the Committee has operated a policy of common levels, irrespective of geographical location, for both annual and longer term incentives for executive directors, re£ecting the global nature of the role of each director.
(b) Remuneration elements
Executive directors’ remuneration consists of the following elements:
. Base salary, which is based on comparable positions in leading multinational businesses of similar size and complexity. To re£ect the geographical diversity of the business, the Committee reviews market practice in relation to major UK corporations with particular reference to the FTSE 50 for the UK, the AEX top 10 group of companies in The Netherlands and, in the US, the practice of major media companies. Salaries are reviewed annually by the Committee to take into account both market movement and individual performance.
. A variable annual cash bonus, based on achievement of three ¢nancial performance measures (revenue, pro¢t and cash £ow conversion rate) and individual key performance objectives. Targets are set at the beginning of the year by the Committee and are aligned with the annual budget and strategic business objectives. For 2004, no bonus will become payable in respect of an individual ¢nancial performance measure unless 94% of the set target for that measure is achieved. Up to 90% of salary may be earned for the achievement of highly stretching targets set by the Committee. For exceptional performance beyond these stretching targets, the Committee has the discretion to award up to 110% of salary.
. Bonus investment plan (‘‘BIP’’), under which directors and other senior executives were able to invest up to half of their annual performance related bonus in Reed Elsevier PLC/Reed Elsevier NV shares. Approximately 100 senior executives participated in the BIP in respect of their 2003 bonus. Subject to continuing to hold the shares and remaining in employment, at the end of a three year period the participants will be awarded an equivalent number of Reed Elsevier PLC/Reed Elsevier NV shares at nil cost. Awards under the BIP are made annually, and in 2004 are subject to a performance condition requiring the achievement of compound growth in the average of the Reed Elsevier PLC and Reed Elsevier NV adjusted EPS (ie before amortisation of goodwill and intangible assets, exceptional items and UK tax credit equalisation) measured at constant exchange rates (‘‘adjusted EPS’’) of at least 6% per annum compound during the three year vesting period.
. Share options (‘‘ESOS’’), where the directors and other senior executives are granted options annually over shares in Reed Elsevier PLC and Reed Elsevier NV at the market price at the date of grant. The Committee approves the grant of any option and sets performance conditions attaching to options. At executive director level grants in 2004 were up to 3 times salary, and the awards are subject to a performance condition requiring the achievement of at least 6% per annum compound growth in adjusted EPS at constant exchange rates during the three years following the grant. There will be no re-testing of the 3 year EPS performance period. The overall size of the annual grant pool is determined by the Committee by reference to the compound annual growth in adjusted EPS over the three years prior to grant, with individual grant size determined by the Committee based on individual performances. At compound growth of between 8% and 10% per annum, the pool of options available for the 2005 grant will be approximately 80% of the 2004 pool.
. Long term incentives (‘‘LTIS’’), where the Committee made the ¢rst awards to directors and a small number of key senior executives (approximately 40) during 2004. This award covers the period 2004 to 2006 during which time no further awards under the LTIS will be made to existing participants. Approximately 50% of the total implied value of grants took the form of nil cost conditional shares and 50% took the form of conventional market value options. This resulted in a grant to directors of 2.5 times salary in conditional shares and 5.5 times salary in conventional