Toyota Motor Corporation’s annual general meeting on Tuesday saw Chairman Akio Toyoda and nine other board members re-elected, despite reservations expressed by leading proxy advisers and ongoing governance issues.
Two prominent proxy advisers had advised against Toyoda’s re-election, citing concerns over governance practices and the handling of certification test scandals involving Toyota group firms. Despite these recommendations, Toyoda’s re-appointment was widely anticipated, supported by the automaker’s strong business performance, significant shareholdings by Toyota group entities, and his popularity among Japanese retail investors.
The actual shareholder support figures for Toyoda will be disclosed on Wednesday, with analysts suggesting that any significant decline could prompt further calls for governance reforms. Toyoda’s approval rating dropped from 96% in 2022 to 85% last year amidst safety and certification testing violations at Toyota subsidiaries, including Daihatsu.
Institutional Shareholder Services (ISS) and Glass Lewis, two major proxy advisers, criticized Toyota’s governance approach, with ISS specifically highlighting concerns over the handling of corporate issues. New York City’s public employee pension funds, echoing ISS’s stance, voted against Toyoda, emphasizing the importance of leadership integrity in corporate governance.
Despite opposition primarily from overseas investors, who constitute a quarter of Toyota’s shareholders, Toyoda’s enduring popularity among retail investors, who own 12.6% of the company’s shares, and Toyota’s robust financial performance have bolstered his position. The company reported record profits last year, and its stock has shown strong performance, up 18% year-to-date despite recent setbacks.
Looking forward, Toyota continues to address certification irregularities that have surfaced recently, including the mismanagement of vehicle tests. These issues, although acknowledged by Toyoda and CEO Koji Sato, were not directly addressed in response to the proxy advisers’ recommendations during the meeting.
In addition to re-electing board members, shareholders also rejected a proposal for increased disclosure on climate lobbying, underscoring ongoing tensions between investor demands for transparency and the company’s strategic direction.
Toyota’s stock, which initially fell 10% following revelations of certification irregularities, has since shown resilience, reflecting investor confidence in the automaker’s long-term prospects despite governance challenges.
Overall, the re-election of Akio Toyoda underscores the delicate balance Toyota faces in navigating governance issues while maintaining shareholder support and market performance in a competitive global automotive landscape.
