Ericsson AB Chief Executive Officer Borje Ekholm welcomed one of his company’s staunchest critics, activist investor Cevian Capital AB, which is seeking a seat on the 10-person board.
(Bloomberg) — Ericsson AB Chief Executive Officer Borje Ekholm welcomed one of his company’s staunchest critics, activist investor Cevian Capital AB, which is seeking a seat on the 10-person board.
Cevian, which first invested in the Swedish telecommunications networks maker in 2017 and now has a stake of about 5%, is looking to name a director to the board at an upcoming shareholder meeting in March.
This would be a first for the activist investor at Ericsson. It has been critical about a need to accelerate efficiencies in the networks business to offset cost increases and “drain the swamp of losses” in the cloud and enterprise businesses. Cevian voted against discharging Ekholm from liability at the previous general meeting, after revelations about a pay-for-access scandal in Iraq.
“It’s important that they now sit on the board so they will be part of the company in a different way,” Ekholm said in an interview at the World Economic Forum in Davos on Tuesday. “I think that’s actually a positive. It’s always good to get, you know, perspectives.”
The activist investor has made a plea for major corporate governance reform at Ericsson, including pushing it to adjust the rules on its share classes, to allow shares with more voting power to be converted to less powerful stock. It also wants the company’s internal audit function to report only to the board and not the management.
Cevian’s stake in Ericsson peaked in 2018, when it reported a holding of more than 10% in Class B stock. It has since cut its ownership, saying in 2021 the sale then was to free up capital. Its entry onto the board comes as the company prepares to switch its chairman, with Jan Carlson proposed to take over from Ronnie Leten, who decided not to stand for reelection.
The Swedish telecom-equipment giant has been managing various investigations tied to alleged violations of the US Foreign Corrupt Practices Act. Ericsson’s also being probed over payments in Iraq that may have ultimately gone to the ISIS terror organization. That scandal, which erupted in February 2022, prompted a management shake-up and in March 2022 more than 10% of shareholders voted against shielding the CEO and board from liability. That means the door is open to future legal action against them.
“We clearly had a culture that was not appropriate at Ericsson,” Ekholm said of the events prior to 2019. “We’re a completely different company today, but we have a lot more to do. We need to ingrain compliance in the business.”
–With assistance from Jacqueline Simmons.
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