(Bloomberg) -- Ericsson AB’s chairman, chief executive officer and several other board members could be held financially responsible for one of Sweden’s worst corporate corruption scandals after shareholders voted against discharging them from liability.
It was the second consecutive year that CEO Borje Ekholm and board members lost a vote over the matter. Of the 11-member board only Carolina Dybeck Happe, who joined the board last year, and Annika Salomonsson, an employee representative, were cleared.
A minority representing at least 10% of shareholders voted against discharge of liability for the board, Ericsson said in a statement. That leaves the members open to future legal actions regarding conduct over the last fiscal year. Under Swedish companies law, shareholders may claim damages concerning a director’s management provided that they represent more than 10% of a company’s capital base.
A group of minority owners, including the Swedish Shareholders’ Association, said Ericsson failed to bring clarity on what the board and management knew about the contents of a 2019 internal report before it leaked to investigative journalists. News reports detailed an alleged cash-for access program in Iraq that may have ultimately helped fund the ISIS terror organization.
Confronted by shareholders, outgoing Chairman Ronnie Leten said he didn’t regret not having communicated the report to the market as it contained “speculation” and “not facts.”
Since then, Ericsson has agreed to pay $207 million for violating an agreement with the US authorities over international bribe payments and said it would plead guilty to two deferred charges. The company remains under a compliance monitor until June 2024 and still faces a US probe over its Iraq operations.
“We are cooperating fully,” with the US authorities, Chairman Jan Carlson said. “We have full transparency, but when it comes to the process it’s still in their hands.”
Still, the results of the vote show the board will need to “listen to the minority,” Carlson said in an interview after he was elected to the position at the annual general meeting on Wednesday. “We would have of course preferred a discharge, but one has to respect that there’s a minority that has voted differently.”
While Ekholm has reshuffled the company’s legal and compliance leadership, his own position remains unaffected by the scandal even as Ericsson’s share price has dropped by about 32% in the past 12 months. Seen over the six years of Ekholm’s tenure, Ericsson’s market value has increased by only 9%.
The new chairman said he thinks Ekholm is the right person to lead the company. “Borje is a great person, he has done a lot of progress with the organization we support him fully,” Carlson said.
Ekholm addressed the scandal and clean-up in his speech at the AGM. “We need to be a role model in how we do business,” Ekhom said. “The 2019 DOJ agreement showed that we had problems with our culture. We have worked hard at correcting historic missteps. We know that we can do better.”
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