Here’s why Ericsson shareholders are angry with the CEO of the telecom major

Ericsson Chief Executive Borje Ekholm faces his toughest challenge yet as shareholders vote on Tuesday on his handling of a probe into possible corruption in Iraq, a scandal which has upset investors and hammered the share price.

Shareholders are angry the company did not give more information about an internal probe from 2019 into potential payments to Islamic State militants until February.

And when the company did, after enquiries from media outlets, its shares lost more than a quarter of their value.

At Ericsson’s annual general meeting, shareholders will, among other things, vote on whether Ekholm and other board members could be personally liable for their actions.

Under Swedish law, if board members are not discharged of their liabilities for the previous year by shareholders owning at least 10% of the stock they can be sued by the company and its investors.

Based on the responses of shareholders contacted by Reuters, the votes will pass the 10% threshold.

While losing the vote may not mean Ekholm has to immediately step down, it could dent his efforts to turn the company around.

Ekholm took the helm at Ericsson in 2016 after a string of poor results and when the company was under investigation by U.S. authorities over bribery allegations.

Backed by top shareholder Investor AB, Ekholm revived the company’s performance and paid a $1 billion fine to the U.S. Justice Department to settle bribery cases in several countries.

But in the same year, Ericsson’s internal investigation showed another potential bribery case in Iraq.

While Ekholm has been fostering transparency and urging employees to speak up about improprieties, the company decided not to disclose details of the new probe to shareholders.

Ekholm told Reuters in February the substance of its findings did not pass the threshold to make a disclosure.

But it later emerged that even the U.S. Justice Department was not aware of the full findings of the investigation, as it was supposed to under a 2019 agreement.

Ekholm said last week he had instructed his staff to disclose the investigation to the authorities. Earlier this month, the company replaced Chief Legal Officer Xavier Dedullen, who handled the settlement in 2019.

Cevian, which owns just under 5% of Ericsson shares, said it would have to vote against discharging board members of their liabilities because it did not have enough information to do otherwise. But it still plans to support their re-election.

“Cevian remains convinced of the strength and potential of Ericsson and its businesses,” it said. “Overall, we have confidence that the board and the CEO are capable of realizing that potential, and we will be voting for their re-election.”

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