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      • Better to have one investigation too many than one too few

Better to have one investigation too many than one too few

Although Folksam’s proposal for an independent investigation was voted down at Lundin's AGM, the outcome must be seen as a wake-up call to the company’s management. It cannot continue time after time to dismiss the company’s responsibility in former areas of conflict.

There is a film show for shareholders and other interested parties in the Winter Garden of Grand Hotel. We go along on a journey from the oil platforms in the North Sea to the villages in Africa, where the elders tell us what kind of deeds the Lundin family company is doing. We are allowed to see a boy who has been badly bitten by hyenas and is now receiving urgent medical care, sponsored by Lundin. He will subsequently make a full recovery.

In the evening the stormy Lundin AGM dominates the news reports on TV. Aktuellt shows an earlier interview with eyewitness James Koung Ninrew. He says that first his village was bombed, then ground troops arrived and killed more people, and drove off the rest of the inhabitants. "They searched the area and ensured that no people remained and then they rang Lundin. ‘Now the area is secure, come along in,’” he says making a gesture as if holding a phone.

These contributions do not match up with each other. Which one is right? Or are they both right despite everything?

Those of us watching them become confused and begin to mistrust what Lundin Petroleum’s representatives are claiming.

During the film show at Grand Hôtel it emerges that Lundin (in this case its sister company Africa Oil) shares the profits from prospecting and extraction of oil and gas with the state. Then the state distributes the surplus to those communities where the oil is to be found. Representatives for Lundin Petroleum say in the film that they never operate in an area if the local population does not also receive a share of the supply of raw materials. But how much do they get really?

This is an expensive advertising firm for the Lundin Group, which does not raise the problems of what it is like to operate in countries with a great deal of corruption or a weak central government. In this way, confidence in the company is not enhanced on the part of institutional shareholders, politicians, leader writers and others who have been critical.

As a member of society, it is easy to sympathise with the idea that the company should not initiate anything which might interfere with the preliminary investigation being run by the district prosecutor. For a shareholder, it is instead about trust and the value of the company. The prosecutor’s investigation is expected to continue for several years, and all the time the displacement of the local people in Sudan will haunt the company. The compact resistance on the part of the board and CEO against setting up a further enquiry means that one must suspect that they are worried about what the investigators might discover.

When the vote at the AGM has been completed, it turns out that 78% have rejected Folksam’s demand for an independent enquiry. But this self-evident outcome is an illusion, resulting from the fact that the Lundin family has a large proportion of the shares. Among other shareholders there is a majority in favour of Folksam’s proposal, which is remarkable and indicates a credibility gap.

For those of us who are outsiders, it is not yet possible to ascertain who has supported the enquiry. Several Swedish institutions say they have done so, among others Swedbank Robur and Andra AP-fonden. Most fascinating would be if the Norwegian state pensions fund, one of the largest shareholders in Lundin Petroleum, supported Folksam. Norway is, of course, a very important region for the prospecting company. Even last year the Norwegian state’s representative voted, for example, against their choice of board.

In which case, it is clear that several overseas shareholders have followed the advice of Institutional Shareholder Services, ISS. This company may be likened to a consultant who helps a pension fund on different shareholder issues – for example, how they should vote on a question at the AGM.

The foreign resistance should give Lundin Petroleum’s board pause for thought. They have a relationship (albeit a somewhat frosty one from time to time) with the Swedish institutions, but with voting consultants for state employees in New Mexico, doctors in Ontario, the Lutheran Church in the USA etc. it is a more difficult story. In these cases decisions are often about minimising the risk of being sued. In other words: by all means have one investigation too many rather than one too few.

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