Cevian Capital and other major Ericsson shareholders are set to vote against plans to clear five of the company’s board of directors of responsibility for the Iraq bribery scandal
Back in February, Ericsson announced that it had uncovered several breaches of compliance related to its Iraqi operations from back in 2018, including potentially making payments to terrorist groups for access to transport routes across the country. Upon news of the potential bribing of terrorist organisations, Ericsson’s share price collapsed by around a third.
Towards the end of last month, the issue was further exacerbated when it was reported that Ericsson workers sent to negotiate with ISIS regarding these payments had been taken hostage. One hostage was reportedly freed after a month; it is unclear whether Ericsson paid a ransom for his release.
A full report of the spending has yet to be released, with the investigation still ongoing.
By the start of March, the extent of the internal turmoil being caused by this situation was beginning apparent. Cevian Capital, which owns the second largest stake in Ericsson, said that there was “a complete lack of trust in Ericsson’s corporate governance”, arguing that the company needed to make sweeping changes to re-establish this trust.
“We really need to sharpen up every aspect of corporate governance in the company,” said Cevian’s co-founder Christer Gardell.
Now, Ericsson is preparing to hold its Annual General Meeting tomorrow and all signs indicate that there could be fireworks surrounding the issue of culpability.
The company’s board of directors is set to table a motion to grant a discharge of liability for five members of the board over the bribery scandal, but two significant shareholders, Cevian and Norway’s sovereign wealth fund, have both indicated that they will vote against the motion.
“We still lack the information necessary to make an informed judgment of what went wrong, why, and who should be held responsible,” Cevian said in a statement. “Given the lack of information and the magnitude of the damage, we have no choice but to hold the entire board accountable.”
The motion will reportedly be defeated if 10% of more of the company’s shareholders votes against it. Cevian alone holds a 5.5% stake in the company.
Tomorrow will also see a vote taken to re-elect board members and the CEO.
Last week, the Ericsson board declared it had “full confidence” in CEO Borje Ekholm.
Two weeks ago, the company hired Scott Dresser as the company’s new Chief Legal Officer and Head of Group Function Legal Affairs & Compliance. Dresser will head the review of Ericsson’s conduct relating the bribery scandal.