Toyota shareholders re-elect chairman despite governance concerns

Toyota shareholders have opted to re-elect Chairman Akio Toyoda and nine other board members at the automaker’s recent annual general meeting, despite lingering concerns over governance and certification test scandals. Despite opposition from leading proxy advisers, Toyoda’s re-appointment was widely anticipated, bolstered by support from other Toyota group entities, robust business performance, and popularity among Japanese retail investors.

Although specific figures detailing Toyoda’s shareholder support will be released on Wednesday, any significant decline could prompt intensified calls for governance reforms. Analysts speculate that efforts to unwind cross-shareholdings may accelerate in response to shareholder sentiment.

Toyoda’s approval rating dipped to 85% last year from 96% in 2022, coinciding with safety and certification testing issues plaguing Toyota subsidiaries like Daihatsu and the parent company itself.

Institutional Shareholder Services (ISS) and Glass Lewis, prominent proxy advisers, had expressed reservations about Toyota’s governance practices. ISS criticised the handling of corporate issues, while Glass Lewis highlighted concerns about board independence, strategic shareholdings, and return on equity.

The dissent against Toyoda is expected largely from overseas investors, who represent a significant portion of Toyota’s shareholder base, contrasting with the strong backing from domestic retail investors, constituting 12.6% of shareholders.

Despite recent challenges, including additional certification irregularities reported by Toyota in June, shareholders like 84-year-old Hidenori Takahashi remain steadfast in their support. Takahashi, who views Toyota as Japan’s premier company for shareholders, acknowledged concerns over certification issues but expressed confidence in Toyoda’s commitment to addressing and preventing future misconduct.

While CEO Koji Sato reiterated apologies for the certification problems, neither he nor Toyoda directly addressed the proxy advisers’ recommendations during the meeting. Additionally, shareholders dismissed a proposal advocating for greater disclosure of Toyota’s climate lobbying activities.

Despite recent turbulence impacting Toyota’s stock, with a 10% drop following the latest certification revelations, shares remain up 18% for the year, underscoring ongoing investor confidence in the automaker’s resilience and leadership.