Toyota shareholders back board after governance criticism

Investors in Toyota have backed the company’s management and rejected a shareholder challenge on its climate policy, after the world’s largest carmaker by sales came under unprecedented pressure to improve its governance.

The outcome of the annual meeting, though widely expected, briefly lifted Toyota’s shares by 8 per cent on Wednesday, adding to the previous session’s 5 per cent rally after the company unveiled ambitions to commercialise its solid-state battery technology in an electric vehicle by 2027 at the earliest.

Governance experts and environmental activists say the unusual challenge to the country’s largest company by market capitalisation marks significant shifts under way in the Japanese market, as shareholders seek higher governance standards and transparency. 

Ahead of the AGM, the US proxy adviser Glass Lewis recommended that shareholders vote against the reappointment as Toyota chair of Akio Toyoda, the grandson of the company’s founder and a figure widely tipped to be a future head of Japan’s powerful Keidanren business lobby. 

Glass Lewis argued that Toyoda had presided over a board that did not have enough independent directors. Toyoda stepped down as the group’s president last month but remains chair of the board. 

In response, Toyota has said it is taking steps to increase diversity and reduce the number of internal directors. 

Another proxy adviser, ISS, also recommended investors support a shareholder proposal, submitted by AkademikerPension, a $20bn Danish fund, and two other European asset managers, seeking more disclosure on the carmaker’s climate lobbying efforts.

Following the recommendations, two of the largest US public pension systems — the California Public Employees’ Retirement System and the Office of the New York City Comptroller — voted against the re-election of Toyoda. Along with the Church of England Pensions Board, the US pension plans also backed a shareholder proposal on the company’s climate policy. 

“The fact that this kind of proposal exists is quite significant in itself. It shows that dialogue alone is clearly insufficient,” said Daniel Read, climate and energy campaigner at Greenpeace east Asia, after attending the company’s meeting in Toyota city. 

Shareholders voted in favour of Toyoda and nine other members of the board, but the breakdown of the vote has yet to be released. 

Despite the recommendations from proxy advisers, there was no major risk that Toyoda would be ousted since the company has large cross-shareholdings and is strongly backed by retail investors.

Still, with Toyoda enjoying an approval rating of 96 per cent last year, analysts say any visible drop in the figure would signal investor dissatisfaction with the company’s strategy.

On the manufacturing side, the carmaker has been criticised in recent years for not being aggressive enough in rolling out electric vehicles and appearing overly protective of its hybrid technology. 

In response to a shareholder question about Toyota’s marginal share in global sales of electric vehicles, executives on Wednesday repeated their stance that a multi-pathway approach was needed, according to participants.