Ericsson CEO faces investor ire over handling of Iraq probe (updated)

Investor AB

29/03/2022 11:35

(Recasts with more details)
    By Supantha Mukherjee
    STOCKHOLM, March 29 (Reuters) - Investors are set to
publicly rebuke Ericsson  ERICb.ST  Chief Executive Borje Ekholm
over a scandal involving potential payments to Islamic State in
a vote on Tuesday.
    Ekholm's handling of an internal probe into Ericsson's
operations in Iraq has come under scrutiny after the U.S.
Department of Justice (DoJ) said the company was in breach of a
2019 deferred prosecution agreement for failing to inform U.S.
authorities of potential misconduct it had uncovered there.
    The risk of a hefty fine for that breach has shaved a
quarter off Ericsson's market cap and angered investors who were
not given any information about the company probe until media
inquiries about it earlier this year.  urn:newsml:reuters.com:*:nL5N2VV1C9 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 step down,
it will raise further questions over his stewardship of the
group.
    Ekholm, the company's chief financial offcer Carl Mellander
and Ericsson have been named as defendants in a U.S. class
action lawsuit for misleading investors over its dealings in
Iraq.
    In 2014, a scandal over business dealings in Uzbekistan of
telecoms company Telia Company  TELIA.ST , then called
TeliaSonera, led shareholders to vote against discharging former
CEO Lars Nyberg from personal liability in 2014.
    Nyberg was later charged with bribery, but was acquitted by
a Swedish court.

    TRANSPARENCY            
    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 DoJ to settle bribery cases in several
countries.
    In the same year, a company probe into its operations in
Iraq identified payments designed to circumvent customs at a
time when militant organizations, including Islamic State,
controlled some routes.
    While Ekholm has been fostering transparency and urging
employees to speak up about improprieties, the company did not
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.
    Last week he told investors that he had instructed his staff
to disclose the investigation to the authorities. The company
replaced Chief Legal Officer Xavier Dedullen, who handled the
settlement in 2019, earlier this month.  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 and Carmel Crimmins)
 ((supantha.mukherjee@thomsonreuters.com; +46 70 721 1004;
Reuters Messaging:
supantha.mukherjee.thomsonreuters.com@reuters.net))