Several of Ericsson’s investors have rejected the vendor’s proposal to clear its CEO and certain board members of liability over the alleged payment of bribes to military groups in Iraq.
Cevian Capital, together with Norway’s sovereign wealth fund, confirmed that it would vote against the motion at Ericsson’s AGM, which was held yesterday (29th March). Local outlet STV noted that the objection of these two shareholders is significant as it means that investors representing 10% of Ericsson’s equity now oppose the proposal, meaning that legal action against the board and CEO is now a possibility.
In a statement, Cevian said: “We still lack the information necessary to make an informed judgment of what went wrong, why, and who should be held responsible. Given the lack of information and the magnitude of the damage, we have no choice but to hold the entire board accountable.”
Shareholders in major Swedish firms typically approve the discharge of liability, so the fact that this threshold has been crossed demonstrates the depth of the disquiet among Ericsson’s shareholders. While Cevian aims to hold the board accountable, this did not stop it from supporting the re-election of both Ericsson’s board and CEO Borje Ekholm – both of which were confirmed at the AGM.
Following his re-election, Ekholm acknowledged shareholder concerns and offered assurance, saying: “I want to state my commitment to continuing to lead Ericsson in the transformation of our company and its culture, executing on global 5G technology leadership, and strengthening our ethics and compliance performance to ensure lasting change.”
Ekholm was appointed CEO of Ericsson in 2016, with The Economic Times reporting that this was due to shareholder pressure for a change of the vendor’s management. The company’s fortunes have improved under his leadership, with Ekholm resolving a 2019 US investigation into a number of bribes paid by Ericsson. In the same year, Ericsson carried out an internal investigation into allegations of bribe payments to military organisations in Iraq without revealing its findings to shareholders. The current scandal arose when the story broke in the media.
Nonetheless, Ericsson chair Ronnie Leten backed Ekholm’s re-election, stating that the CEO had “led the focus on ethics and compliance and executed the performance turnaround of Ericsson” during his tenure.