Akio Toyoda re-elected as TMC chairman but facing growing criticism

Toyota Motor Corporation’s chairman, Akio Toyoda, and nine other members of the automaker’s board were re-elected at an annual general meeting on Tuesday. Shareholders finally shrugged off concerns about governance and certification test scandals.

Two leading proxy advisers had recommended against Toyoda’s re-election. But his re-appointment was widely expected, given the automaker’s shareholdings owned by other Toyota group firms, record business results, and his popularity among Japanese retail investors.

Only 72% left

Chairman Akio Toyoda slid for a second straight year, results from its annual general meeting showed on Wednesday, with his support rate dropping to 72% amid certification scandals and governance concerns. The result marks the lowest level of backing for Toyoda, the grandson of the company’s founder, since the world’s largest automaker started disclosing the breakdown of shareholder votes in 2010.
It is likely to be seen as an embarrassing rebuke for one of the giants of corporate Japan, where executives are traditionally re-elected to boards with overwhelming support. The result follows recommendations by proxy advisers to vote against Toyoda’s re-election. It comes after an approval rating of 85% last year and 96% in 2022.
Institutional Shareholder Services (ISS) and Glass Lewis criticized the company’s handling of ongoing certification testing violations involving Toyota and group companies such as compact carmaker Daihatsu.
Glass Lewis, which had recommended that Toyoda not be re-elected for a second year, also expressed concerns about the board’s independence and return on equity. Foreign investors, who account for a quarter of Toyota’s shareholders, are expected to have caused most of the support slippage.

Candid feedback

Toyota said in a statement it saw the approval ratings as candid feedback from institutional investors and that to enhance the independence of its board, it had clarified the roles and expectations of outside executives and redefined the criteria for assessing independence.
It added that to accelerate its transformation, it would sell cross-shareholdings. Critics say cross-shareholdings between Japanese firms encourage lax governance by ensuring a too-cozy relationship between management and shareholders.
“The governance or holding structure side is where we expect changes to accelerate. Obviously, that has been the focus of the shareholders, and shareholders have been demanding faster changes there,” said James Hong, head of mobility research at Macquarie.

Still a lot of support

Given his shareholdings in the automaker owned by other Toyota group firms, the record business results, and his popularity among Japanese retail investors, Toyoda was never expected to lose his re-election.
Though the automaker has been under fire in recent years for its slow shift to battery electric vehicles, its so-called “multi-pathway” strategy – where it also heavily invests in hybrids and hydrogen fuel cells – now appears prescient.
It benefited from its strong hybrid line-up last year as growth for battery EVs in major markets slowed due to relatively high prices and worries about the lack of charging infrastructure.
Toyota’s shares have fallen 9% since early June, when revelations of further certification testing violations came to light, but they are still up 20% for the year.

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