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Ericsson shareholders to deal blow to CEO over possible Isis payments

Foreign shareholders will take a swipe at Ericsson’s CEO and board of directors for handling possible payments to the terrorist group Isis, which wiped out a third of its share price.

Norway’s $1.3 trillion oil fund, the world’s largest sovereign wealth fund and one of Ericsson’s top 10 shareholders, will vote against the discharge CEO Borje Ekholm and several other directors from liability at Tuesday’s annual meeting.

Cevian Capital, Europe’s largest activist investor and one of Ericsson’s top five shareholders, said Monday morning that it would also vote against discharging all board members, including Ekholm.

Glass Lewis and ISS, the two largest proxy advisory firms whose advice many investors take, have both recommended shareholders vote against Ekholm and other directors.

Ekholm said that last month payments were made for transportation routes in Iraq in areas controlled by terrorist groups including Isis, but that Ericsson could not find any evidence as to whether the money went to Isis or not.

The US Department of Justice responded earlier this month by saying Ericsson did so breached his agreement to defer prosecution – imposed in a bribery settlement in five countries in 2019 – for the second time. Ericsson shares fell a third in two weeks before recovering somewhat in recent days.

“Basically, we don’t trust them. We wonder if they are hiding something, otherwise they would come in. The governance is dysfunctional,” a top 10 shareholder told the Financial Times.

Ericsson’s three largest shareholders – Wallenberg family investment vehicle Investor, holding company Industrivarden and Swedish pension fund AMF – will all vote to relieve Ekholm and the board of liability, with Ericsson almost guaranteed a majority.

Anders Oscarsson, AMF’s head of equities, said his fund lost a lot of money and asked Ericsson a lot of questions, but there was too much uncertainty on the issue to vote against the company.

“Because I don’t know if something was done wrong or when it was done wrong or who did it. You make that decision [on discharge] on the information you have when you take it. I don’t have the material to find you guilty,” he told the Financial Times.

The Norwegian oil fund takes a different approach. “We cannot release ourselves based on the information we now have,” it said.

Cevian justified his vote with the words: “We still lack the necessary information to make an informed judgment about what went wrong, why and who should be held responsible.”

However, the activist added that he remains “convinced of Ericsson’s strength and potential” and will vote to re-elect the board and chief executive officer.

Cevian recently sharp criticism expressed of investor and industrivards and their ability to control the company through Class A shares, which have ten times as many votes as the ordinary Class B shares.

“There is a complete lack of trust in Ericsson’s management. It needs to be restored,” Christer Gardell, a co-founder of Cevian, told the FT in early March.

The scandal has put enormous pressure on Ekholm, which until recently was widely praised for its turnaround from Ericsson and re-establishing Ericsson as the leading network equipment maker ahead of China’s Huawei and Finland’s Nokia.

Cevian wants Investor and Industrivarden each to lose their vice chair positions. Board of Ericsson problematic a statement of support in Ekholm last week.

Oscarsson has criticized voting rights agencies for recommending votes against specific directors without proposing alternative candidates. “If you don’t trust the people on the board, you have to say this is the person we want instead. I think we need to get the answers before we accuse someone of making a mistake,” he added.

Ericsson shareholders to deal blow to CEO over possible Isis payments Source link Ericsson shareholders to deal blow to CEO over possible Isis payments

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