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Toyota holds AGM under pressure from overseas, but with wide support at home

By Thomson Reuters Jun 17, 2024 | 9:37 PM

By Maki Shiraki and Daniel Leussink

TOYOTA CITY, Japan (Reuters) – Toyota Motor Chairman Akio Toyoda may be under pressure from global investors over governance and scandals, but he remains popular among mom-and-pop investors who attended its annual shareholder meeting on Tuesday.

Toyoda is likely to be re-elected as chairman of the world’s largest automaker at the meeting, even though two influential proxy advisory firms have recommended voting against him, citing concerns about governance and certification test scandals.

The grandson of the company’s founder, Toyoda remains deeply popular among retail shareholders, many of whom praise him for steering the company to another year of record profits and strong stock performance last year.

“I bought Toyota shares with my retirement bonus,” 84-year-old Hidenori Takahashi told Reuters, adding he believed it was the “best company in Japan” for shareholders.

He said the ongoing certification issues that had roiled the automaker were “a bad thing” but that Toyoda seemed eager to take steps to prevent the wrongdoing from recurring.

While Toyoda faces little risk of not being re-elected, a big fall in his approval rating could be an embarrassment for a company that has been the world’s top-selling automaker four years in a row.

Toyoda’s approval rating fell to 85% last year from 96% in 2022.

The automaker has been bedevilled by a spate of safety and other certification testing violations at Toyota and its group companies, including small car maker Daihatsu. Institutional Shareholder Services (ISS) has taken issue with the way the automaker has dealt with problem.

New York City’s public-employee pension funds agrees and is voting against Toyoda’s re-election. Michael Garland, who oversees corporate governance for the funds, said the vote against Toyoda was driven by safety and compliance concerns.

“Setting a tone at the top is critical,” Garland said in an emailed statement.

Glass Lewis, which is recommending that Toyoda not be re-elected for a second year in a row, said that he is responsible for the board’s lack of independence and also cited concerns about its strategic shareholding and return on equity.

More certification irregularities have come to light since the proxy advisers made their recommendations.

In early June, Toyota said it had wrongly conducted six different vehicle certification tests in the past, including for three models that were still being sold.

It has said its wrongdoing included conducting some of the tests under more strict conditions than those set out by the government, invalidating their results.

Toyota’s shares have fallen 10% since then, but are still up 18% for the year.

Toyota has told Reuters previously that taking stock of its mistakes was long rooted in its corporate culture and Toyoda would take the lead in re-instilling that culture and working with group companies to ensure effective governance.

Also up for vote is a shareholder proposal from Danish pension fund AkademikerPension that urges Toyota to improve disclosure of its lobbying on climate change.

Toyota’s board has opposed the proposal.

(Reporting by Maki Shiraki in Toyota City and Daniel Leussink in Tokyo; Editing by David Dolan and Edwina Gibbs)