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Shareholders question Toyota leadership

Ongoing scandals, motorsport ‘hobby’ raise shareholder doubts

20 Jun 2024

SHAREHOLDERS have openly criticised Toyota management at this year’s annual meeting, hitting out at the OEM for its ongoing safety testing and certification scandals, dragging its feet on electric vehicles, and accusing Toyota chairman Akio Toyoda of spending too much time on his motorsport ‘hobby’.


Earlier this month, Mr Toyoda said he was “astounded by the news” of acts deemed “fraudulent” by Japanese regulators; acts that forced Toyota to suspend production and sales while also undermining its hard-earned public trust.


Chairing the annual meeting, Toyota CEO Koji Sato apologised for the problems, saying they had “caused great concern on the part of our shareholders and customers”. Despite the investor backlash, Toyota management won the appointment of its full slate of nominated board members and fended off shareholder concerns.


During the question-and-answer session of the annual meeting, shareholders accused Mr Toyoda of treating motorsport as a personal hobby.


Mr Toyoda, 68, did not directly address the accusation, but said he considers it his role to oversee every aspect of the company, describing his current position as being a kind of “shadow cabinet” to Mr Sato and a younger generation of leaders now running Toyota on a daily basis.


“Governance is not about me trying to control everything,” he said. “I take responsibility and the executive members make the decisions. I will talk with them to give advice.”


Shareholders further questioned the root causes of recent safety testing and certification scandals with two prominent proxy groups recommending against reappointing Mr Toyoda to the top job.


Glass Lewis & Co and Institutional Shareholders Services both said Mr Toyoda should be held responsible for the wave of testing scandals that have swept through Toyota Group companies (see links below for full details).


Full results of Toyota’s own review of its testing and certification processes have yet to be reported. The company is still wading through years of emissions, fuel consumption, and safety testing with some reporting that the scandal may yet broaden into other overseas markets.


Two of the United States’ largest pension funds – the California Public Employees’ Retirement System and the Office of the New York City Comptroller – also voted against the reappointment of Mr Toyoda as chairman.


“Our vote against Mr Toyoda was driven by a pattern of safety and compliance concerns,” stated Office of the New York City Comptroller assistant comptroller for corporate governance Michael Garland in an emailed statement.


“Setting a tone at the top is critical. As investors, we see a lack of independent board oversight as a major governance issue, particularly as the company works to change its culture in response to mounting safety and regulatory violations.”


The California Public Employees’ Retirement System (CalPERS) voted against every company executive nominated for reappointment to the board – a total of six of the 10 nominations. In addition to rejecting Mr Toyoda, they voted down vice chairman Shigeru Hayakawa, CEO Koji Sato, CTO Hiroki Nakajama, CFO Yoichi Miyazaki, and global design chief Simon Humphries.


CalPERS also spurned Masahiko Oshima, a former vice chairman of Sumitomo Mitsui Banking, which has been pinged for being one of Toyota’s go-to financial houses.


Even before the latest safety testing and certification scandals were brought to light, Glass Lewis & Co and Institutional Shareholders Services said Mr Toyota should be held responsible for the breaches, and the culture perpetuating them.


“In consideration of the current situation, where a spate of certification irregularities occurred in the Toyota Motor Group, shareholders are advised to vote against chairman Akio Toyoda,” said Institutional Shareholders Services in its position paper for Toyota’s annual meeting.


“Fundamentally, corporate culture will be created from the top down, not vice versa. When no changes are being made at the directorial level, it appears questionable whether the company’s approach is effective.”


Glass Lewis & Co faulted Mr Toyoda for overseeing a board it says is “insufficiently independent”. The advisory group classifies only three directors of the newly proposed 10-member board as “truly independent”.


With Automotive News Europe.

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