Ericsson CEO feels the heat from the US government over Iraq

Ericsson boss Börje Ekholm (pictured) was in the firing line again on Wednesday following fresh revelations about his company’s historical misconduct in Iraq.

The Swedish kit maker said it has been told by the US Department of Justice (DoJ) that it has breached the terms of the $1 billion settlement – referred to as the Deferred Prosecution Agreement (DPA) – it reached with the government in late 2019, which related to corrupt business practices in multiple markets between 2011 and 2019. The DoJ claims the disclosures Ericsson made about the internal investigation into Iraq ahead of that settlement were insufficient. It also alleges that Ericsson failed to make subsequent disclosures relating to the investigation after the settlement was agreed.

It is not clear what consequences Ericsson might face as a result, but the new development was sufficient to once again send the vendor’s share price tumbling. The DoJ’s move comes just days after the International Consortium of Investigative Journalists (ICIJ) ran an exposé based on what it claims is a leaked copy of Ericsson’s internal investigation into Iraq. It revealed in detail some of the corruption the company allegedly engaged in to maintain its Iraq operation.

One of the more shocking events concerns the 2014 kidnapping of a subcontractor working in ISIS-controlled Mosul. This is said to have happened less than a month after two Ericsson employees recommended halting operations in Mosul and elsewhere, a recommendation that was said to have been rejected by senior regional executives.

On a conference call on Wednesday, Ekholm would not be drawn on the specifics of the various reports, but described the historic misconduct as “hugely embarrassing and hugely unsatisfactory.”

He said Ericsson is on a journey to change the culture of the company to make sure behaviour like this stays in the past. One of those changes has been to encourage staff to speak up if they become aware of any misconduct, and to protect them when they do. In 2016, when this practice was first implemented, 146 concerns were raised, he said. Last year there were a thousand, which led to nearly 100 employees being sacked, and a further 20 resigning voluntarily.

“We are determined to really root out past misconduct and poor performance and I remain firmly committed to doing that,” Ekholm said.

“It is unfortunate when past events cast shadows over where we are, but that’s something we need to confront as well as part of this journey and that is what we’re doing. So you can count on us to investigate, to create a speak-up culture, [and] create the compliance systems that will detect anomalies, investigate them and remediate them,” he continued.

“We believe the only way Ericsson is going to be long-term successful is by combining a culture of technology leadership with compliant behaviour,” he added.

A conciliatory tone and resolving to ring in the changes may help a few worried investors to calm down, but there is no escaping the fact that even though Ekholm wasn’t CEO while all this was going on, he was sitting on Ericsson’s board. He still needs to prove that he is the one who can consign Ericsson’s shady past to history.