A look at the number of ethics and compliance-related questions that Ericsson is getting from employees provides some evidence that compliance has become more top of mind since the vendor undertook company-culture overhaul after it was embroiled in bribery and corruption scandals, with issues still playing out today.
Laurie Waddy, Ericsson’s chief compliance officer, reiterated during Tuesday’s shareholder update ahead of its annual general meeting, regarding updates on investigations and disclosures over corruption allegations in Iraq and a related breach of an earlier 2019 DoJ agreement, that an increase in reports or allegations, whether or not they’ve been confirmed or validated, reflect the work Ericsson has done to encourage a culture for employees to speak up.
CEO Borje Ekholm said the company saw allegations rise to more than 1,000 in 2021, compared to less than about 150 in 2016.
In opening remarks, Waddy said Ericsson’s compliance help desk – where employees can ask questions and advice for compliance related matters, saw an increase in the number of ethics and compliance related questions of 721% between 2019 and 2021 “reflecting employees’ engagement in the program.”
Since entering into a deferred prosecution agreement (DPA) with the DoJ, it also expanded its team of ethics and compliance employees to more than 100, compared to just 21 in 2019, who are located both at headquarters and in-country, and supported by approximately 150 other roles such as internal controls, finance, anti-corruption auditors and others.
As to the more than 250 employees who exited or were fired from the company since 2019 after violations of the company’s code of ethics, one investor questioned if that is a normal amount and what to expect in the years to come.
Waddy said Ericsson benchmarks its activity levels and “believe we are in line with others for our size and complexity,” while reiterating a zero-tolerance policy for corrupt behavior.
Scott Dresser, Ericsson’s new chief legal officer, added that when an organization of Ericsson’s size enters into a deferred prosecution agreement (DPA) as Ericsson did with the DoJ in 2019 and undertakes major compliance changes, it affects the number of personnel exits and the figure is not an unusual considering the number of allegations and reports.
“As you strengthen the organization, obviously these things move down and the number of exits are reduced,” adding that it’s a gradual downward trend. “We certainly are moving toward a place where it will be reduced, but it does take time when you’re undergoing this sort of change.”
Operating in conflict zones
Other shareholders wanted to know what kind of internal risk management and assessment Ericson’s conducting about the countries it operates so that employees aren’t put in situations where there’s unnecessary risk to begin with that requires speak-up activity.
Ericsson operates in 180 countries, and in challenging regions, Dresser said it will ensure they apply heightened scrutiny and governance, including with partners and third parties, citing it as a top priority.
Earlier they noted the company has upped its team of ethics and compliance members to more than 100, up from just 21 in 2019. Those include people working in-country to address issues in real-time.
Ekholm also said that when Ericsson first enters a market it may not be a high-risk country at the time, pointing to the fast-changing environment in war-torn Ukraine since Russia’s invasion. The nature of its business of providing critical infrastructure is a long-term commitment, he said. In Ukraine, for example, he said mobile traffic is up 3-5-times, and during upheaval, it’s not the time for the company to look at ways to pull out.
In related news, Ekholm will be retiring from his role as an independent director on Alibaba’s board to focus on his work at Ericsson. He is remaining on the board of Trimble, which Leten positioned as a positive, to help provide the CEO with good insights on hot IoT is developing in the market.
During the update, Leten reiterated the board’s full confidence and support of Ekholm, who has also been named in a class action lawsuit related to allegations of bribery tied to ISIS. Read more on the investor meeting here.