Toyota Chairman Akio Toyoda Faces Rebuke from Shareholders

195

Akio Toyoda, chairman of Toyota, the world’s largest automaker, saw his approval rating from shareholders plummet to a record low during the company’s annual general meeting on Wednesday. This marks a significant shift for the traditionally revered leader and the Japanese corporate landscape as a whole.

Toyoda’s support dropped to just 72%, a stark contrast to the overwhelming backing he received in previous years (85% in 2023 and 96% in 2022). This dramatic decline can be attributed to two key factors: ongoing certification testing scandals and concerns about corporate governance.

The certification testing scandals involve Toyota and its subsidiary, Daihatsu, and have raised questions about the company’s commitment to quality control. Proxy advisory firms, influential institutions that advise shareholders on voting, took particular issue with Toyota’s handling of these issues. Institutional Shareholder Services (ISS) and Glass Lewis both recommended against Toyoda’s re-election, citing these concerns alongside a lack of board independence and low return on equity.

This situation highlights a growing trend in Japan. Traditionally, Japanese corporations have been known for a more insular approach to governance, with executives often enjoying near-guaranteed re-election. However, the influence of U.S.-style corporate governance, which emphasizes transparency and accountability, appears to be gaining traction. This is particularly evident with the increased scrutiny from foreign investors, who make up a quarter of Toyota’s shareholders and were a major source of the decreased support for Toyoda. Major institutions like U.S. public pension CalPERS and Canadian pension investor CPP Investments were among those who voted against his re-election.

Despite the low approval rating, Toyoda was ultimately re-elected, likely due to factors like the significant shareholdings within the Toyota group itself and his continued popularity among Japanese retail investors. However, Toyota has acknowledged the feedback from shareholders.  In a statement, the company described the approval rating as “candid feedback” and outlined plans to address concerns.  These plans include clarifying the roles and expectations of non-company executives on the board, revising the criteria for assessing board independence, and selling off cross-shareholdings between Toyota and other companies. Critics view cross-shareholdings as a hindrance to good governance, fostering a culture of complacency within management due to a lack of external pressure.

Looking ahead, analysts expect to see further changes within Toyota’s governance structure, reflecting a response to shareholder demands. While Toyoda may have weathered this storm, the incident serves as a clear message that even established leaders are not immune to scrutiny in the evolving world of corporate governance.

The article also touches on a separate but related point: Toyota’s strategy for electric vehicles (EVs).  While the company has been criticized for its perceived slow adoption of EVs, its continued investment in hybrid and hydrogen fuel cell technologies may prove to be a wise move.  The recent slowdown in EV growth due to high prices and limited charging infrastructure suggests that Toyota’s “multi-pathway” approach, encompassing various alternative fuel options, may be more prescient than initially perceived.