Ericsson CEO faces investor ire over handling of Iraq probe

Investor AB

29/03/2022 06:00

By Supantha Mukherjee
    STOCKHOLM, March 29 (Reuters) - Ericsson  ERICb.ST  Chief
Executive Borje Ekholm faces his toughest challenge yet as
shareholders vote on Tuesday on his handling of a probe into
possible corruption in Iraq, a scandal which has upset investors
and hammered the share price.
    Shareholders are angry the company did not give more
information about an internal probe from 2019 into potential
payments to Islamic State militants until February.  urn:newsml:reuters.com:*:nL5N2VV1C9
    And when the company did, after enquiries from media
outlets, its shares lost more than a quarter of their value.
 urn:newsml:reuters.com:*:nL1N2UQ20B
    At Ericsson's annual general meeting, shareholders will,
among other things, vote on whether Ekholm and other board
members could be personally liable for their actions. 
    Under Swedish law, if board members are not discharged of
their liabilities for the previous year by shareholders owning
at least 10% of the stock they can be sued by the company and
its investors.
    Based on the responses of shareholders contacted by Reuters,
the votes will pass the 10% threshold.  urn:newsml:reuters.com:*:nL5N2VV1C9
    While losing the vote may not mean Ekholm has to immediately
step down, it could dent his efforts to turn the company around.
    Ekholm took https://www.reuters.com/article/ericsson-ceo-idINASM00072G
 the helm at Ericsson in 2016 after a string of poor results https://www.reuters.com/article/us-ericsson-ceo-idUSKCN1050IT
 and when the company was under investigation by U.S.
authorities over bribery allegations.
    Backed by top shareholder Investor AB, Ekholm revived the
company's performance and paid https://www.reuters.com/article/us-usa-ericsson-idUSKBN1YA2HU
 a $1 billion fine to the U.S. Justice Department to settle
bribery cases in several countries.
    But in the same year, Ericsson's internal investigation
showed another potential bribery case in Iraq. 
    While Ekholm has been fostering transparency and urging
employees to speak up about improprieties, the company decided
not to disclose details of the new probe to shareholders.
    Ekholm told Reuters in February the substance of its
findings did not pass the threshold to make a disclosure.
    But it later emerged that even the U.S. Justice Department
was not aware of the full findings of the investigation, as it
was supposed to under a 2019 agreement.  urn:newsml:reuters.com:*:nL1N2V50JC
    Ekholm said last week he had instructed his staff to
disclose the investigation to the authorities. Earlier this
month, the company replaced Chief Legal Officer Xavier Dedullen,
who handled the settlement in 2019.  urn:newsml:reuters.com:*:nL5N2VJ4JB  urn:newsml:reuters.com:*:nL3N2VP3PL
    Cevian, which owns just under 5% of Ericsson shares, said it
would have to vote against discharging board members of their
liabilities because it did not have enough information to do
otherwise. But it still plans to support their re-election.
    "Cevian remains convinced of the strength and potential of
Ericsson and its businesses," it said. "Overall, we have
confidence that the board and the CEO are capable of realizing
that potential, and we will be voting for their re-election."   
   

 (Reporting by Supantha Mukherjee in Stockholm
Editing by Mark Potter)
 ((supantha.mukherjee@thomsonreuters.com; +46 70 721 1004;
Reuters Messaging:
supantha.mukherjee.thomsonreuters.com@reuters.net))