TOKYO (AP) — Toyota’s Chairman Akio Toyoda will face some disgruntled shareholders this week as two major proxy groups demand a vote against keeping the founder’s grandson on the board.
The vote expected at the June 18 annual shareholder meeting comes after Toyota recently apologized for fraudulent vehicle certification testing, a major embarrassment for a company that prides itself on its reputation for excellent quality. The series of problems at Japanese automakers, including Toyota, are said to pose no safety concerns and no recalls have been announced. But Toyota suspended production of three models produced by group companies in Japan.
Toyota’s stock prices had tripled over the past five years to nearly 3,800 yen ($24) before tumbling amid the latest troubles. The shares now trade at more than 3,000 yen ($20) – a loss of about 3 trillion Japanese yen ($18 billion) in market value.
Institutional Shareholder Services, majority owned by German capital markets firm Deutsche Borse Group, which advises investors, said in its proxy report that Toyoda “must be considered ultimately responsible.”
It was noted that his promises for change did not involve a reshuffle of the board. Although Toyota said it plans to communicate better with workers on the ground, that was likely not enough to prevent a recurrence of testing fraud issues, according to ISS.
“The company’s tendency to maintain its corporate culture is in fact suspect, and Toyoda must be held accountable for it,” the report said.
ISS does not oppose the appointment of other board members, including Toyota Chief Executive Koji Sato, who took up his position in 2023.
The past year has brought a wave of scandals over improper vehicle checks, including crash tests, at group companies Daihatsu Motor Co., which makes small models, truck maker Hino Motors and Toyota Industries Corp., a maker of forklifts and other machinery.
Japanese officials say such violations have also been found at Honda Motor Co., Mazda Motor Corp. and Suzuki Motor Corp.
Another major shareholder, proxy advisory firm Glass Lewis & Co., recommended voting against the reappointment of Toyoda and Shigeru Hayakawa, another top executive.
“More specifically, we believe that Mr Toyoda is responsible for his failure to ensure that the Group maintained appropriate internal controls and for the failure to ensure that appropriate governance measures were implemented at the Group companies,” the report said in its proxy report.
“Additionally, given the widespread occurrence of problems within the Toyota Group, this raises further questions about the corporate culture that has developed under Mr. Toyoda’s leadership.”
Hayakawa oversaw board appointments, and there should be more independent board members, according to San Francisco-based Glass Lewis. It also recommended voting against a proposal on Toyota lobbying on climate change, stressing the need for greater disclosure.
Under Toyoda, the automaker has promoted a “multi-pathway” approach to ecological vehicles, focusing on hybrids, which have both a gasoline engine and an electric motor, and using hydrogen as fuel rather than focusing on battery-electric vehicles which some ecologists prefer to cut back on cars. emissions.
Toyoda is unlikely to be ousted at the general shareholders’ meeting, which will be held at the company’s headquarters in the central Japanese city named after the maker of the Prius hybrid, Lexus luxury models and the Camry sedan.
The largest of Toyota’s nearly 1 million shareholders are Japanese companies such as Japanese banks and financial institutions, which are unlikely to challenge the automaker. Toyota Industries, a group company, is the second shareholder.
The cross-shareholdings among member companies, which long prevailed in Japan, are gradually disappearing, but long-standing loyalty is probably strong enough to keep Toyoda in his post. Last year he won re-election with almost 85% of the vote, although in 2022 that figure was still 96%.
In a recent report on Toyota, Kazunori Maki, an auto analyst at SMBC Nikko Securities, noted that Toyota’s suspended deliveries affected only 1% or 2% of global sales.
He also hinted that factory workers may have skirted rules that were considered rigorous but not essential to safety.
In the fiscal year ended in March, Toyota’s profit doubled from the previous year to 4.9 trillion yen ($31.9 billion), beating its own expectations as auto sales surged and a weak Japanese yen boosted foreign boosted profits.
Even though Toyota has lagged in the move to electric vehicles, the company is still the world’s largest automaker, selling 9.4 million vehicles in the fiscal year that ended in March.
The company is doing well, said Aaron Ho, equity analyst at CFRA Research. The recent scandal would only make “a small dent,” he said. “So there are no fundamental problems. We just think that as production is halted — probably for a few months, we estimate — deliveries will be affected,” he told The Associated Press.
“We really don’t see any deterioration in the corporate culture or the way the company is managed.”
In his apology for the latest troubles, Toyoda referenced how he faced a major recall scandal in the US shortly after becoming CEO in 2009 due to what was called “unintended acceleration.”
Toyoda was questioned by Congress and apologized. This time he seemed to reassure both himself and the public that Toyota had been through worse and survived.
“We are not a perfect company. But if we see something wrong, we will step back and continue to try to correct it,” he said.
___
Yuri Kageyama is at X: https://twitter.com/yurikageyama
