Discharge of Liability Vote at the 2022 Annual General Meeting
Under the Swedish Companies Act, the Annual General Meeting (AGM) of Swedish limited liability companies includes a vote on whether or not [the Company] should discharge each individual member of the Board and the CEO and President from legal liability [owed to the Company] for the previous financial year. If shareholders representing at least 10% of the Company’s share capital vote against this discharge of liability, an action for damages on behalf of the Company may be brought within one year.
A vote against the discharge of liability does not predicate, or in itself lead to, legal action.
Strong Majority of Shareholders support Discharge in 2022
At the 2022 AGM, a large majority (more than 70%) of shareholders voted in favor of a discharging each director from liability, while also re-electing all nominated Board members. This is seen as a clear instruction from a strong majority of shareholder to the Board not to pursue any legal actions against directors (assuming there were any basis for such an action).
Following the 2022 AGM, the Board has thoroughly followed and overseen the extensive review (done together with external Company and Board counsel) into the two non-criminal breaches of the DPA. As announced on 2 March 2023, these breaches have been finally resolved and the resulting Plea Agreement and Statement of Facts establish the basis of these breaches. In the Plea Agreement, the DOJ comments that Ericsson “has significantly enhanced its compliance program and internal accounting controls through structural and leadership changes, including but not limited to the hiring of a new Chief Legal Officer and new Head of Corporate and Government Investigations and the establishment of a multi-disciplinary Business Risk Committee comprised of Group-level senior executives … and has committed to continuing to implement and test further enhancements” and further that Ericsson “has significantly enhanced its cooperation and information sharing efforts”.
In light of the foregoing, and noting that a clear majority at the 2022 AGM voted in favour of discharge from liability for each of the members of the Board and the CEO and President, the Board considers itself as having performed its duties and obligations both during 2022 and other years. It therefore sees no basis for any action for damages.
External Auditors, Deloitte, Support Discharge
In addition, the Company’s external auditors, Deloitte, “recommend to the general meeting of shareholders that . . . the members of the Board of Directors and the Managing Director be discharged from liability for the financial year [2022]”. In making this recommendation, they note their responsibility and review process as follows: “[T]o obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:
– has undertaken any action or been guilty of any omission which can give rise to liability to the company, or
– in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.”
Board Actively responds to Shareholder concerns expressed in 2022
While not pursuing action, the Board of Directors acknowledged the vote against discharge from liability and took, and continues to take, extensive action to enhance its governance and compliance, and doubled down on culture transformation. Indeed, the Board has and will continue to work actively with management to meet its ongoing fiduciary obligations and continuously improve Ericsson's internal controls, governance, risk management and compliance program, recognizing the critical importance of these areas to the Company's overall strength and competitiveness. The embedding of a sustainable and strong culture of integrity and ethics into all of Ericsson’s businesses and operations continues to be a priority.
Since the 2022 AGM, this Board has:
- Has continued to bring new perspectives and strong experience and expertise by the Nomination Committee nominating three new independent directors (Carolina Dybeck Happe at 2022 AGM, and Christy Wyatt and Jonas Synnergren at 2023 AGM)
- Ensured execution by recruiting highly experienced executives, including a new Chief Legal Officer and Head of Group Function Legal Affairs & Compliance (CLO) and a new Head of Corporate & Government Investigations
- Improved enterprise risk management by establishing a multi-disciplinary Group Business Risk Committee (BRC), co-chaired by the CLO and CFO
- Ensured compliance in high-risk areas by expanding anti-corruption risk assessments to address country-specific compliance risks, and increasing third-party relationship monitoring
- Driven integrity and continued cultural transformation across the global employee base
- Bolstered accountability by incorporating Ethics & Compliance KPIs into Executives’ Short-Term Variable Pay
- Driven shareholder engagement, per the Board Responsiveness Summary, by engaging with shareholders representing over 70% of shares outstanding. Most recently, the Company has prioritized director participation, with the Chair of Audit and Compliance Committee, as well as the Independent Board Chair nominee, engaging with shareholders representing approximately 52% of shares outstanding.
Glass Lewis Supports Discharge
In its report issued in March 2023, Glass Lewis noted:
“In light of the Company's response to the shareholders dissent, the proposed board refreshment, the actions the Company has taken to improve its oversight measures and the fact that the DOJ investigation has reached a conclusion, we don't see a cause for shareholder concern regarding the ratification of board and CEO acts at this time and believe shareholders can be reasonably satisfied with the board's response and performance in the past fiscal year”.