Akio Toyoda Re-Elected As Toyota Chairman By Shareholders

Akio Toyoda with the GR Supra sportscar model. The recently re-elected chairman is widely credited for rebooting Toyota's sporty images through his brainchild that is the Gazoo Racing banner.

Despite governance and certification test scandals, renowned chairman of Toyota Motor Corp. (Toyota) Akio Toyoda has been re-elected by the company’s shareholders to continuing helming said position. He, along with nine other board members,  were successfully re-elected at the annual general meeting on Tuesday.

This outcome was expected due to significant shareholdings by other Toyota group firms, record business performance, and Toyoda's popularity among Japanese retail investors. However, Toyoda's re-election faced opposition from two leading proxy advisers, who had recommended against it. 

Nevertheless, the substantial influence of Toyota group shareholdings ensured his return to the board. The actual level of shareholder support, to be released on Wednesday, could still prompt governance reforms if significantly reduced. 

Analysts also reportedly suggest this might lead to accelerated efforts to unwind cross-shareholdings.

Institutional Shareholder Services (ISS), a proxy adviser, criticized Toyota's response to these problems. New York City’s public employee pension funds aligned with ISS and voted against Toyoda, emphasising the need for strong leadership in corporate governance. 

Toyoda's re-election as chairman comes despite recent governance issues and the safety scandal involving Daihatsu.

Michael Garland, overseeing corporate governance for the funds, stressed the importance of setting a tone at the top. Another proxy adviser, Glass Lewis, also opposed Toyoda’s re-election, citing the board’s lack of independence and concerns over strategic shareholdings and return on equity. 

Toyoda's approval rating dropped to 85% last year from 96% in 2022, coinciding with a series of safety and certification testing violations within the Toyota group, including issues at Daihatsu and the parent company. Opposition towards Toyoda primarily stemmed from overseas investors, who comprise 25% of Toyota’s shareholders. 

However, Toyoda remains highly popular among retail investors, who hold 12.6% of the shares. His support is bolstered by Toyota’s record profits and strong stock performance.

Hidenori Takahashi, an 84-year-old retail investor, expressed confidence in Toyoda, stating that Toyota is the best company in Japan for shareholders.  Although he acknowledged the certification issues, he believed Toyoda was committed to preventing future problems.

In early June, Toyota disclosed it had improperly conducted six vehicle certification tests, including tests for three models still on sale. Despite these revelations causing a 10% drop in Toyota’s share price, the shares are still up 18% for the year. 

CEO Koji Sato, who succeeded Toyoda last year, apologised for the certification issues but did not address the proxy advisers' concerns directly. KR

Sources: Reuters, Nikkei Asia