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Written by Maki Shiraki and Daniel Losinc
TOYOTA CITY, Japan (Reuters) – Toyota Chairman Akio Toyoda and nine other members of the automaker’s board were re-elected at an annual general meeting on Tuesday, with shareholders shrugging off concerns over governance scandals and certification testing.
Two senior acting advisors have recommended that Toyoda not be re-elected. But his reappointment was widely expected given his ownership of shares in the automaker owned by others Toyota (NYSE:) group companies, record business results and popularity among Japanese retail investors.
However, any significant decline in shareholder support for Toyoda – a figure to be released on Wednesday – would not only be embarrassing, but could prompt further action on management reforms. Analysts have pointed to accelerated efforts to break up mutual shareholders as one possible outcome.
Toyoda’s approval rate fell to 85% last year from 96% in 2022. Since then, the world’s largest automaker has suffered a series of safety and other certification test violations at group companies including small automaker Daihatsu as well as in Its parent company. .
Dealer counsel Institutional Shareholder Services (ISS) took issue with the way the automaker handled the issues.
For example, New York City’s public employee pension funds agreed with this position and voted against Toyoda.
“Setting the tone at the top is critical,” Michael Garland, who oversees corporate governance for the funds, said in an emailed statement.
Glass Lewis, who recommended that Toyoda not be re-elected for the second year in a row, said he was responsible for the board’s lack of independence and also cited concerns about its strategic stakes and return on equity.
Most of the opposition to Toyoda is expected to come from foreign investors, who represent a quarter of Toyota’s shareholders.
But Toyoda, the grandson of the company’s founder, remains popular among retail investors, who represent 12.6% of shareholders in the automaker. Last year’s record profits and strong stock performance were also in his favour.
“I bought shares in Toyota with my retirement bonus,” Hidenori Takahashi, 84, told Reuters before the meeting, adding that he believed it was “the best company in Japan” for shareholders.
He said the ongoing certification issues that had troubled the automaker were a “bad thing” but that Toyoda appeared keen to take steps to prevent repeat violations.
More certification violations have been uncovered since the dealership’s advisors made their recommendations.
In early June, Toyota said it had incorrectly conducted six different vehicle certification tests in the past, including three models that are still being sold.
It said some tests were conducted under conditions more stringent than those set by the government, resulting in their results being invalidated.
Toyota shares are down 10% since the new revelation came out, but are still up 18% on the year.
Toyota CEO Koji Sato, who succeeded Toyoda as CEO last year, repeated his apologies for the certification problems, but neither he nor Toyoda directly addressed the recommendations made by the agency’s advisers.
Shareholders on Tuesday also rejected an investor proposal urging greater disclosure of climate lobbying that Toyota has opposed.
