FILE PHOTO: An Ericsson sign is seen at the third China International Import Expo (CIIE) in Shanghai, China November 5, 2020. REUTERS/Aly Song/File Photo

March 28, 2022

STOCKHOLM (Reuters) – Cevian Capital, one of Ericsson’s biggest investors, said on Monday it would vote against a motion this week that would clear some board members of responsibility over the possible payment of bribes to militant organisations in Iraq.

Norway’s sovereign wealth fund, another major shareholder, also said it would vote against the motion at the annual shareholders’ meeting on Tuesday.

Ericsson has been under fire from the U.S. Justice Department and its shareholders for not properly disclosing that its investigation in 2019 had showed the company may have paid militant organisations in Iraq.

“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.”

Cevian owns just under 5% shares in Ericsson. Investor AB is the largest shareholder, with Primecap Management, BlackRock, Swedbank Robur Fonder and AB Industrivärden making the list of major investors in the company.

Norway’s $1.3 trillion sovereign wealth fund, will vote against granting discharge to five company board members, including its president.

“When voting on a proposal to discharge the board of responsibilities, we will consider whether any information raises reasonable doubt about the board’s actions,” it said in a statement. The fund has a 1.45% stake in Ericsson worth $532 million at the end of 2021, according to fund data.

Other investors did not respond to requests for comment.

Under Swedish Companies Act, the company or shareholders can bring action against board members or the CEO if a group representing at least 10% shares of the company votes against ratifying acts of the CEO in the past year.

It is rare for shareholders of a top Swedish company to not grant discharge of liability, and any such move would likely raise pressure on the company’s board to overhaul its management.

In telecoms, a scandal over TeliaSonera’s business dealings in Uzbekistan pushed shareholders to vote against discharging former CEO Lars Nyberg from personal liability in 2014.

Borje Ekholm, who had served as CEO of the Wallenberg-backed investment firm Investor AB, took over as CEO of Ericsson in 2016 after pressure from shareholders to change its management.

Ekholm turned around the company and in 2019 settled a U.S. government probe for paying bribes from at least 2000 to 2016 in countries including China, Vietnam and Djibouti.

In the same year, Ericsson investigated allegation of bribes in Iraq but chose to not disclose the findings to shareholders. It released details only in February this year after media enquiries, sparking the current tension.

While Cevian is holding the board accountable, the investment firm said it has confidence in the board and Ekholm, and would vote for their re-election.

The Ericsson board, including Chairman Ronnie Leten, has also been backing Ekholm, after proxy firms including Glass Lewis had recommended shareholders vote to remove him following the disclosure and a sharp fall in the company’s share price.

(Reporting by Supantha Mukherjee and Helena Soderpalm in Stockholm; additional reporting by Terje Solsvik and Gwladys Fouche in Oslo, editing by Niklas Pollard; editing by David Evans)

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