Shareholders in Swedish telecom giant Ericsson on Tuesday sanctioned the company’s board and chief executive over its handling of a corruption scandal involving possible payments to the Islamic State group in Iraq.
Shareholders representing more than the required 10 percent voted against discharging the board and CEO Borje Ekholm from liabilities, a normally routine decision, at the company’s annual general meeting.
Both Ekholm and the board were nonetheless re-elected to their positions.
Ekholm, who took over as Ericsson chief executive in 2017, has been credited with turning the then-struggling company around.
“This unacceptable behaviour that went on for several years started a long time ago,” he told shareholders.
“The consequences have continued under my leadership… (but) we have accomplished durable change,” he said, adding: “We have zero tolerance for corruption”.
The telecoms giant has been under scrutiny in recent months after a media investigation coordinated by the International Consortium of Investigative Journalists (ICIJ) revealed that an internal Ericsson investigation from 2019 was never made public.
The internal probe had identified possible corruption between 2011 and 2019 in the group’s Iraqi operations, including the potential payment of bribes to IS to get its road transports through the country.
Ericsson has insisted that it is cooperating with the US Department of Justice (DoJ) and therefore is prohibited from speaking openly about the details.
The Swedish group has already paid one billion dollars to the DoJ to close a case of corruption in five countries from 2011-2019, as part of a “deferred prosecution agreement” (DPA).
But the DoJ has criticised Ericsson for failing to make further disclosures related to the 2019 investigation after the DPA was reached.
Several institutional investors had already made their intentions to vote against the board known ahead of the meeting on Tuesday.
“Ericsson has failed to provide necessary transparency around the Iraq issues. We are therefore missing the information needed to make a well-informed assessment of what went wrong, why, and who should be held responsible,” Cevian Capital, which owns a 4.5-percent stake in Ericsson, said on Monday.
Cevian said it “had no other choice than to hold the entire board accountable”.
However, Cevian insisted that the question of accountability was directed at past events and it had faith in the board going forward.
Ericsson’s share price has tumbled by 26 percent since late February.
After losing momentum in the mid-2010s amid fierce competition from China’s Huawei, now the world leader in network equipment, Ericsson launched a major plan in 2017 to rebound.
Along with Finland’s Nokia, the company is second only to Huawei building 5G networks around the world.
