Toyota Motor Chairman Akio Toyoda is unlikely to face re-election at the automaker’s annual general meeting on Tuesday, but any further significant declines in shareholder support could lead to increased action on reform of governance.
This year’s annual general meeting will follow scandals over certification testing violations at Toyota and its group companies, including compact car maker Daihatsu and truck company Hino Motors.
Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis recommended that Toyoda not be re-elected, citing governance and board independence issues. Since then, another scandal involving testing violations has also come to light.
Toyoda’s approval rating fell to 85% last year, down from 96% in 2022, but he only needs a majority to be re-elected and, scandals aside, business has been good.
The grandson of the automaker’s founder, Mr. Toyoda has served on the board since 2000, making him the company’s longest-serving director. It is expected to benefit from the support of individual investors as well as the many suppliers and companies of the Toyota group which are among the shareholders.
“I don’t think Akio Toyoda-san won’t be reappointed,” said James Hong, head of mobility research at Macquarie. “It’s just that the drop in approval rating will be a wake-up call to management.
Hong said steps Toyota could take to address criticism over governance could include accelerating its efforts to unwind cross-shareholdings, particularly stakes in non-automotive businesses such as financial firms or the company. of KDDI telecommunications.
The result of the vote will be announced on Tuesday, but the approval rating will not be disclosed until Wednesday.
The ISS has challenged the automaker’s handling of certification irregularities within the Toyota Group, saying Toyoda should be considered “ultimately responsible” for the errors.
“It is important that the company establishes appropriate compliance mechanisms under the direction of the board of directors,” ISS said in a report. “The time has come to make changes following incidents in the group’s companies.
Glass Lewis, who is recommending that Toyoda not be re-elected for the second year in a row, said he was responsible for the board’s lack of independence and also raised concerns about strategic holdings and corporate performance. equity.
Asked about the advisers’ recommendations, Toyota told Reuters that the record of its mistakes had long been embedded in its corporate culture and that Toyoda would take the lead in reinstilling that culture and working with group companies to ensure a effective governance.
Toyota shares have lost 10% since the latest scandal emerged earlier this month. That said, the stock is still up 17% year to date, outperforming the broader market and adding to a 43% gain last year.
The automaker retained its crown as the world’s largest automaker for the fourth consecutive year in 2023, thanks to the weak yen and increasing sales of hybrid vehicles. It posted a record profit for the last financial year which ended in March.
“Toyoda should be highly regarded because he has delivered results and led Toyota to growth,” said Koji Endo, head of equity research at SBI Securities.
