STOCKHOLM — Ericsson AB, one the world’s largest suppliers of wireless-telecom equipment, has informed its 110,000-strong workforce it was indefinitely halting a long-running employee stock program, amid further quarterly losses and pressure from large shareholders.
Börje Ekholm, the Swedish company’s new chief executive, said resolutions that would have defined terms of the stock plan for 2017 have been left out of the agenda of the March 29 shareholders’ annual meeting.
The move effectively suspends the generous program, established in 2002, under which employees received a number of free shares, equivalent to the Ericsson stock portfolio they had held for three years.
“Shareholders have ultimately said: ‘we’re not going to support that,'” Mr. Ekholm said in an interview.
According to an internal memo seen by The Wall Street Journal, Ericsson shareholders complained the stock plan diluted their own stakes, an impact exacerbated by the sharp drop in company shares, which have lost over half of their value since April 2015.
“Therefore, Ericsson and the Board have decided to not propose a Stock Purchase Plan for 2017 and onwards,” the memo said.
Ericsson confirmed the document was genuine.
The CEO voiced concerns that the decision would dent employee morale at a time when Ericsson is conducting a far-reaching cost- and job-cut plan in a bid to restore profitability and counter the rise of Asian rivals such as Huawei Technologies Co.
“Employees are our most valuable asset,” he said. “They go home every day, they shut off the light and we want them to come back turning on the light in the morning.”
The absence of an appealing stock plan could make it harder for Ericsson to recruit the skilled engineers the company needs to keep up with rivals in the highly innovative and competitive technology business.
Between 2008 and 2016, Ericsson drifted from the second to the 12th spot on an employer-attractiveness ranking among Swedish master students in engineering, compiled by consulting company Universum. Ericsson was overtaken by the likes of Spotify AB, the Swedish music-streaming service, which ranked sixth.
“We need to keep employees motivated,” Ericsson Chief Technology Officer Ulf Ewaldsson said in an interview last year. “We need to do a better job at that.”
Earlier Thursday, Ericsson shed its dividend as a slowing telecom-equipment market and fierce Asian competition pushed the company to a fourth-quarter loss.
It reported a net loss for the three months ended Dec. 31 of 1.60 billion Swedish kronor ($181.4 million), compared with a 6.98 billion kronor profit a year earlier. Revenue was down 11% at 65.22 billion kronor from 73.57 billion kronor.
Union representative Andreas Brissman warned the stock-plan news would add to the strain caused by layoffs.
“Many of our members are disappointed,” said Mr. Brissman, a delegate with the IF Metall union. “People are feeling that they lost something.”
The decision puts the CEO in a delicate spot because one of the shareholders that lobbied to halt the program, according to a person familiar with the matter, was Investor AB — -Mr. Ekholm’s employer until he joined Ericsson earlier this month.
Mr. Ekholm declined to name the Ericsson shareholders who put pressure on management to scrap the stock plan, saying only he had failed to persuade them to keep it.
There are decisions a CEO “can’t impact,” he said. “We need to manage it.”
Officials at Investor, the main investment vehicle of Sweden’s Wallenberg family and Ericsson’s largest shareholder, couldn’t be reached for comment.
Before joining Ericsson’s executive team, Mr. Ekholm was CEO of Investor from 2005 to 2015, and most recently headed Patricia Industries, a division within Investor.
Mr. Ekholm was appointed after Investor and Industrivärden AB, the company’s second-biggest shareholder, supported the ousting of CEO Hans Vestberg in July last year.
Write to Matthias Verbergt at Matthias.Verbergt@wsj.com
View more information: https://www.marketwatch.com/story/ericsson-halts-employee-stock-plan-indefinitely-2017-01-26