Ian Smith, the chief executive of Reed Elsevier, walked away with a £1.1 million payoff yesterday as he was forced out of the information giant only eight months after taking charge.

Mr Smith’s tenure, one of the shortest for a FTSE 100 chief executive, ended after he fell out with Anthony Habgood, the new chairman, and key managers and failed to impress shareholders.

Mr Habgood is understood to have believed that Mr Smith, who had run Taylor Woodrow, the housebuilder, and General Healthcare, the private healthcare provider, lacked sufficient knowledge of Reed to lead it during a downturn.

The failed appointment process was handled by Anna Mann, of MWM Consulting, although the final decision was made by the board of Reed, which said that it had no plans to try to claw back the headhunter’s fee.

Reed insiders argued that the global economic situation had “changed dramatically” since Mr Smith was appointed and that the international company could not afford the luxury of a newcomer who had no overseas business experience. A statement said that Mr Smith had left by “mutual agreement”.

His replacement is the well-regarded Erik Engstrom, who has been running the company’s scientific publications operation. He was pointedly described by Mr Habgood as “a proven international executive with over 15 years’ management experience in the media sector in the US and Europe”.

Those close to the business said that Mr Smith did not get on with Mr Engstrom or with Reed’s other powerful divisional heads. He also failed to forge a working relationship with Mr Habgood, who arrived at the company in June. Mr Habgood decided only in the past few days to force Mr Smith out, although the thought was clearly on his mind for weeks because he is understood to have scrutinised several candidates for the chief executive’s job before settling on Mr Engstrom.

Mr Smith also struggled with shareholders, who were disappointed by his handling of the City after the information group raised £824 million in a placing in July purely to ensure the company’s investment-grade credit rating.

A top ten shareholder, who requested anonymity, said: “He had an opportunity to demonstrate his credentials but didn’t go down terribly well. He had an odd provenance, having worked in several other sectors and no obvious knowledge of the company.” The investor described Mr Engstrom’s appointment as one that “looks very credible”.

Mr Smith, an Arabic speaker who began his career working for Shell in the Middle East, has changed jobs often in recent years. He ran General Healthcare for three years from 2004 but left after it was sold by BC Partners, its private equity owner. A Labour supporter from Birkenhead, he then tried to become chief executive of the NHS, with the backing of Patricia Hewitt, the Health Secretary at the time, but lost out to David Nicholson, an insider. Mr Smith became chief executive of Taylor Woodrow but lasted only months because he agreed to a merger with Wimpey, a rival, and failed to land the top job.

Last November he emerged as a surprise choice to run Reed, taking over from Sir Crispin Davis. He pledged a different strategy to the portfolio management approach adopted by Sir Crispin, telling friends that it was “time to stop running the company like a plc” and concentrate on the group’s operations.

Reed Elsevier’s shares, which have failed to rise with most other media stocks, fell 19.5p, or 4 per cent, to 465p. The company was also set back by a trading update, which indicated that business was soft and that results for the year were likely to be at the bottom of consensus forecasts, with earnings of about 44p a share.

Just shows, you can’t win them all

Nic Fildes: Behind the news

After 30 years in the recruitment sector, Anna Mann, who recommended Ian Smith as Sir Crispin Davis’s replacement at Reed Elsevier, has a formidable reputation in most FTSE 100 boardrooms.

However Reed Elsevier’s U-turn is not the first time that Dr Mann has found herself at the centre of a mis-match controversy. She was also a crucial player in Sir Ian Prosser’s appointment as the new chairman of J Sainsbury in 2004.

That appointment triggered a shareholder revolt and was withdrawn within a week. It led to her exit from Whitehead Mann, the recruitment company that she co-founded. Dr Mann has also been involved in other boardroom disappointments. A plan to parachute in Philip Yea at British Land fell through when he took another role weeks before he was to be announced as the property company’s chief executive.

BP’s search for a chairman become tortuous after Dr Mann’s suggested candidate, Paul Skinner, the Rio Tinto chairman, pulled out of the race a long way into the process. She also recommended Luc Vandevelde as the man to turn around Marks & Spencer earlier this decade — an appointment that turned out to be a disappointment.

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