Toyota Motor’s Chairman Akio Toyoda is poised for re-election at the automaker’s annual general meeting on Tuesday, despite recent scandals and growing governance concerns. While Toyoda is expected to secure the majority needed for re-election, any significant drop in shareholder support could catalyze further governance reforms.
This year’s AGM comes in the wake of several scandals involving certification test violations at Toyota and its group companies, including Daihatsu and Hino Motors. Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis have both recommended against Toyoda’s re-election, citing governance issues and the board’s lack of independence. The latest scandal over testing violations has further intensified scrutiny.
Toyoda’s approval rating dropped to 85% last year from 96% in 2022, but he remains the longest-serving director on Toyota’s board since joining in 2000. With support from individual investors and many Toyota group companies and suppliers among its shareholders, Toyoda’s re-election seems likely. However, a decline in the approval rate could signal a warning to management about the need for enhanced governance.
James Hong, head of mobility research at Macquarie, suggested that Toyota might respond to criticism by accelerating its efforts to unwind cross-shareholdings, especially in non-automotive sectors such as finance and telecommunications companies like KDDI. The vote outcome will be announced on Tuesday, with the approval rate disclosed on Wednesday.
ISS has criticized Toyota’s handling of certification irregularities, holding Toyoda “ultimately accountable” for these issues. The advisory firm emphasized the need for stronger compliance mechanisms under the board’s leadership, advocating for changes in light of recent incidents within the Toyota group.
Glass Lewis, advising against Toyoda’s re-election for the second consecutive year, highlighted concerns about the board’s independence, strategic shareholdings, and return on equity. In response, Toyota stated that acknowledging and addressing mistakes is deeply ingrained in its corporate culture, and Toyoda is committed to reinforcing this ethos and ensuring effective governance across the group.
Despite the scandals, Toyota’s shares have only dipped 10% since the latest issue emerged earlier this month. The stock is still up 17% year-to-date, outperforming the broader market and adding to a 43% gain last year. Toyota retained its position as the world’s top-selling car maker for the fourth consecutive year in 2023, driven by a weak yen and increasing hybrid vehicle sales. The company also recorded a record profit for the fiscal year ending in March.
Koji Endo, head of equities research at SBI Securities, praised Toyoda for delivering strong results and leading Toyota to sustained growth. As the automaker navigates these challenges, Toyoda’s re-election and potential governance reforms will be closely watched by investors and industry observers alike.
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