Toyota shareholders re-elect Akio Toyoda as president despite governance problems

TOYOTA CITY, Japan — Toyota Chairman Akio Toyoda and nine other members of the automaker’s board were re-elected Tuesday at an annual general meeting, with shareholders ignoring concerns about governance scandals and certification tests.

Two key proxy advisers had spoken out against Toyoda’s re-election. But his renewal was widely expected given the stakes in the automaker held by other Toyota group companies, record business results and its popularity with Japanese retail investors.

That said, any significant drop in shareholder support for Toyoda – a figure to be released on Wednesday – will not only be embarrassing but could prompt further moves towards governance reforms. Analysts have cited an acceleration of efforts to unwind cross-shareholdings as a possible outcome.

Toyoda’s approval rating fell to 85% last year, down from 96% in 2022. Since then, the world’s largest automaker has been plagued by a wave of safety and other testing violations certification in group companies, notably the small car manufacturer Daihatsu, as well as in its parent company. .

Proxy advisor Institutional Shareholder Services (ISS) took issue with the automaker’s handling of the issues.

New York City’s public employee pension funds, for example, agreed with this position and voted against Toyoda.

“Setting the tone at the top is critical,” Michael Garland, who oversees the funds’ corporate governance, said in an emailed statement.

Glass Lewis, who had recommended 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 cited concerns about its strategic holdings and capital returns clean.

Most of the opposition to Toyoda is expected to come from foreign investors, who represent a quarter of Toyota’s shareholders.

But Toyoda, who is the grandson of the company’s founder, remains very popular with retail investors, who represent 12.6% of the automaker’s shareholders. Last year’s record profits and strong stock performance also worked in its favor.

“I bought Toyota shares with my retirement bonus,” Hidenori Takahashi, 84, told Reuters before the meeting, adding that he considered it “the best company in Japan” for shareholders.

He said the ongoing certification issues that have troubled the automaker were “a bad thing” but that Toyoda appeared eager to take steps to prevent such wrongdoing from happening again.

New certification irregularities have come to light since the proxy advisors made their recommendations.

In early June, Toyota said it had wrongly conducted six different vehicle certification tests in the past, including for three models still on sale.

Some tests were carried out under stricter conditions than those set by the government, thus invalidating their results, according to the press release.

Toyota shares have fallen 10% since the new revelations were revealed, but remain up 18% for the year.

Toyota CEO Koji Sato, who succeeded Toyoda as chief executive last year, reiterated his apologies for the certification issues, but neither he nor Toyoda responded directly to the proxy advisers’ recommendations.

Shareholders on Tuesday also rejected an investor proposal calling for greater disclosure of climate lobbying that Toyota had opposed.