Ericsson may face a shareholder rebellion at its annual general meeting (AGM) this week due to dissatisfaction with the company’s handling of an inquiry into potential payments to ISIS militants in Iraq.
Activist investor Cevian Capital and Norway’s public wealth fund are opposing a resolution to restrict Ericsson board members’ liability for the event, which was revealed last month.
The Swedish telecoms equipment company resolved a US Department of Justice (DoJ) investigation into suspected payments in five other countries in 2016 but neglected to reveal a second investigation into similar activities in Iraq.
The business agreed to make money to ISIS to acquire access to transportation routes in Iraq, but it could not identify the eventual receiver or any Ericsson employees engaged.
This finding has displeased both investors, given the detrimental impact on Ericsson’s image and share price, and the United States, which has claimed the company may have violated the conditions of its 2016 settlement.
Under Swedish company law, it is usual for shareholders to ratify the chief executive’s conduct over the previous twelve months. However, if a group representing 10% of investors fails to do so, board members may face legal action.
According to Cevian and others, Ericsson has not been adequately honest about the situation, preventing them from making an educated conclusion.
Ericsson said it would respond after the AGM, but last week’s statement detailed its support for CEO Börje Ekholm and its response to the situation. This involves hiring a new chief legal officer to oversee an investigation of the process and find any flaws.
“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 about the current issues before the DOJ,” said Ronnie Leten, chairman of the board.
“CEO Börje Ekholm has the board's full confidence regarding driving the company’s performance and regarding the ethical and compliance transformation of the organization, which he continues to lead.”