Cevian Capital calls for governance overhaul at Ericsson after Isis payments
Swedish activist investor Cevian Capital has called for a governance overhaul at telecoms giant Ericsson after the firm was found to have made possible payments to terror group Isis.
Shares in Ericsson have plunged over 25 per cent since boss Borje Ekholm conceded last month that the firm may have breached compliance rules and made payments for transport routes controlled by the terrorist organisation.
Cevian, which holds the second largest equity stake in Ericsson, has now called for the powers of two of Ericsson’s long standing investors to be curbed by overhauling shareholder rules which have allowed them to dominate the board with a deputy chair position each.
Christer Gardell, co-founder of Cevian, told the Financial Times there was “a complete lack of trust” in Ericsson’s corporate governance.
“It needs to be re-established. Inferior corporate governance of Ericsson is costing shareholders SKr135bn ($14bn). It’s a crazy amount,” he said.
It comes after investigators said they could not determine the recipient of payments made by Ericsson for alternative transport routes but they occurred at a time when Isis and other terror organisations controlled the areas in question.
The telecoms firm is also facing a US Department of Justice investigation for breaching a ‘deferred prosecution agreement’ over a 2019 $1bn settlement over bribery and corruption in China, Indonesia, Vietnam, Djibouti and Kuwait.
Citi bank analysts have labelled Ericcsson as “uninvestable” while the US Department of Justice determines what punishment to slap on the telecoms firm for the breach.