Ericsson investors revolt over ISIS payments scandal: ‘We don’t trust them’

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Shareholders of Ericsson are revolting against the Swedish telecom giant’s executives – including top boss Börje Ekholm – after their admission that the company may have inadvertently made payments to ISIS.

European activist investment firm Cevian Capital and Norway’s $1.3 trillion sovereign wealth fund, two of Ericcson’s top 10 shareholders, will vote against a measure shielding Ekhold and other board members from liability over the scandal.

Last month, Ekholm noted “unusual expenses dating back to 2018” as the company attempted to gain access to truck routes in Iraq that were controlled by terrorist groups, including ISIS. Ekholm said the company hasn’t determined who was the “final recipient” of the money.

“Basically, we don’t trust them. We wonder whether they’re hiding something, otherwise they would come clean. The governance is dysfunctional,” one individual identified as a top-10 shareholder of Ericsson stock told the Financial Times.

Norway’s fund told the outlet it “cannot discharge based on the information we have now.”

Meanwhile, Cevian addressed its plan vote against the liability discharge by noting it “still [lacks] the information necessary to make an informed judgment of what went wrong, why, and who should be held responsible.”

Some shareholders plan to vote against a measure shielding Ericsson CEO Borje Ekholm and others from liability over the scandal.
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The pressure campaign over Ericsson management’s handling of the saga is likely to fail – with the telecom firm’s three largest shareholders all expected to vote to discharge the executives from liability, according to FT.

In a separate initiative, prominent proxy advisory firms Glass Lewis and ISS are pushing for shareholders to vote against Ekholm and other members of the board of directors.

Ericsson on Tuesday declined to comment on the shareholder pressure.

Ericsson shares are down about 25% since mid-February, when Ekhold first disclosed the incident. Earlier this month, the Justice Department accused Ericsson of violating a $1 billion deferred prosecution settlement involving corruption allegations imposed in 2019 by failing to disclose information about its probe into the potentially shady payments.

Ericsson has expressed support for Ekholm, arguing the company has improved its ethics standards since 2017 despite the scandal

“CEO Börje Ekholm has the full confidence of the board, not only in regard to driving the company’s performance, but also in regard to the ethical and compliance transformation of the organization, which he continues to lead,” the company said in a statement earlier this month.

Ekhold initially discussed Ericsson’s findings in an interview with newspaper Dagens Industri. The company also elaborated in a lengthy Feb. 15 statement regarding the scandal.

“The investigating team also identified payments to intermediaries and the use of alternate transport routes in connection with circumventing Iraqi Customs, at a time when terrorist organizations, including ISIS, controlled some transport routes,” the company’s statement said.

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