Ericsson is facing a possible shareholder revolt at its annual general meeting (AGM) this week amid discontent surrounding the way the company has handled an investigation into alleged payments to ISIS terrorists in Iraq.
Activist investor Cevian Capital and Norway’s sovereign wealth fund are among those who will vote against a motion that would limit Ericsson board members’ responsibility over the incident, which came to light last month.
In 2016, the Swedish telecoms equipment manufacturer settled a US Department of Justice (DoJ) probe into alleged payments in five other countries but failed to disclose another investigation into similar activity in Iraq.
The company has admitted that it may have made payments to ISIS in order to gain access to transport routes in Iraq, but was unable to identify the ultimate recipient nor any Ericsson employee involved.
This conclusion has dissatisfied both investors, given the negative impact to Ericsson’s reputation and share price, and the US, which has suggested the firm could have breached the terms of its 2016 settlement.
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Under Swedish company law, it is customary for shareholders to approve the actions of the chief executive over the past twelve months. However, if a group representing 10% of investors does not do so, board members can be exposed to legal action.
Cevian and others say Ericsson has not been sufficiently transparent about the issue and so could not make an informed decision on the matter
Ericsson said it would comment after the AGM, but in a statement last week outlined its support for chief executive Börje Ekholm and its measures to address the matter. This includes the appointment of a new chief legal officer to lead a review into the process and to identify any shortcomings.
“While Ericsson since 2017 has taken significant steps in improving the culture of ethics and compliance, further efforts are underway to help ensure that the company operates at all times ethically and with integrity including in relation to the current issues before the DOJ,” said Ronnie Leten, chairman of the board.
“CEO Börje Ekholm has the full confidence of the board, not only in regard to driving the company’s performance, but also in regard to the ethical and compliance transformation of the organisation, which he continues to lead.”
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Via The Times (opens in new tab)