By Supantha Mukherjee

STOCKHOLM – Ericsson BS: Chief Executive Borje Ekholm is facing his biggest challenge to date as shareholders decide on Tuesday how he will handle a probe into potential corruption in Iraq. The scandal, which upset investors and hammered shares price, has posed a problem for the company’s shareholders.

Shareholders were upset that the company didn’t provide more details about an internal investigation from 2019 regarding possible payments to Islamic State militants. This was February.

After media inquiries, the shares of the company lost over a quarter their value.

Ericsson shareholders can vote at the annual general meeting whether Ekholm or other board members are personally responsible for their actions.

Swedish law states that if shareholders have at least 10% ownership of stock, the board member cannot be discharged from their liability for the preceding year. The company can sue its investors and the board.

Based upon the responses received by Reuters from shareholders, it is expected that the votes will exceed the 10% threshold.

Although Ekholm may not lose the election, this could affect his attempts to transform the company.

Ericsson was in trouble and Ekholm assumed the leadership of the business after poor results.

Ekholm was supported by top shareholder Investor AB and paid a $1 million fine to the U.S. Justice Department in settlement of bribery cases across several countries.

Ericsson also discovered another case of bribery in Iraq during an internal investigation in that same year.

Ekholm had been encouraging transparency among employees and exhorting them to report any improprieties to the employer, but the company chose not to reveal details about the investigation to shareholders.

Ekholm informed Reuters in February that the substance its findings didn’t meet the threshold for disclosure.

Later, it became clear that the U.S. Justice Department did not know the complete findings of the investigation as required by a 2019 agreement.

Ekholm claimed last week that the company had given his staff instructions to reveal the investigation to authorities. Xavier Dedullen was the Chief Legal Officer of the company. He handled the settlement in 2019.

Cevian owns just 5% shares in Ericsson and said it would be against discharging members of the board of their liabilities as it does not have enough information. It still intends to vote for their reelection.

It stated that Cevian is still convinced about Ericsson’s strength and potential and that it will continue to invest in its business. “Overall we are positive that the board of directors and CEO can achieve that potential. We will vote to elect them again.”