Ericsson investors won't let Ekholm off the hook for Iraq

It was never going to be an easy annual general meeting for embattled Swedish kit maker Ericsson.

On Tuesday, investors representing 10 percent of Ericsson’s shares voted against discharging the board and president from liability regarding the company’s performance in fiscal 2021. That 10 percent threshold is enshrined in Swedish corporate law, and if it is reached, it means individuals can be sued over their management – or mismanagement – of the company.

Anyone who follows telecoms who hasn’t been living under a rock for the past few months will know by now that Ericsson recently uncovered evidence that it indirectly bribed ISIS a few years ago. The revelations have sent its share price tumbling, caught the attention of the US authorities, and understandably upset a lot of investors, some of whom have filed a class action lawsuit against the company and its CEO, Börje Ekholm.

“I understand the concerns raised by our shareholders and these are important matters. I want to state my commitment to continuing to lead Ericsson in the transformation of our company and its culture, executing on global 5G technology leadership, and strengthening our ethics and compliance performance to ensure lasting change,” said Ekholm, in a statement issued after the AGM.

Chairman Ronnie Leten reiterated the board’s support for Ekholm and his management team.

“We have made good progress but there is much still to do. Conducting business responsibly and with integrity is essential to driving real and positive change. During five years at the helm, Börje has led the focus on ethics and compliance and executed the performance turnaround of Ericsson. He has made the company a leader in 5G globally and established a course for growing in wireless enterprise,” he said.

“Ericsson’s board is committed in its support for the continued transformation journey both in the business, and ethics and compliance performance,” he added.

There is no denying that the restructuring implemented by Ekholm did revive Ericsson’s fortunes. However, there is also no denying that even though he wasn’t CEO when the alleged bribery in Iraq took place, he was nonetheless a member of the board, and so was inextricably connected to the company while that was going on.

With that in mind, shareholders at Tuesday’s AGM also voted in favour of the board’s re-election. Usually this translates to a vote of confidence and a desire to maintain the status quo. For a company that’s under as much pressure as Ericsson, however, it might be the case that investors want to hold the board’s feet to the fire for another 12 months while the Iraq scandal plays out, and give them a chance to clear up this mess. It is also interesting to note that activist investor Cevian – which is agitating for a change to Ericsson’s share class structure in order to increase its influence – didn’t propose any candidates. It too might be keeping its powder dry until the fallout from Iraq becomes clearer.

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