In Tokyo, Toyota’s chairman Akio Toyoda is gearing up to address some unhappy shareholders this week. Two major proxy groups are calling for a vote against keeping the founder’s grandson on its board.
This vote, scheduled for the annual shareholders meeting on June 18, follows Toyota’s recent apology for fraudulent certification tests on vehicles. This issue has been a significant embarrassment for a company known for its commitment to high-quality standards. While there haven’t been any safety concerns reported, Toyota did suspend production of three models produced by its group companies in Japan.
Over the past five years, Toyota’s stock prices soared, reaching nearly 3,800 yen ($24). However, recent troubles have caused a sharp decline, with shares now trading at above 3,000 yen ($20). This represents a loss of about 3 trillion Japanese yen ($18 billion) in market value.
Institutional Shareholder Services, which advises investors and is mostly owned by the German capital market company Deutsche Borse Group, emphasized in its proxy report that Toyoda should be held accountable. Despite Toyoda’s promises for change, which did not include reshuffling the board, ISS expressed doubts that Toyota’s plans would be sufficient to prevent future problems.
Another proxy advisory company, Glass Lewis & Co., also recommended voting against the reappointment of Toyoda and another top executive, Shigeru Hayakawa. They argued that Toyoda failed to ensure appropriate internal controls and governance measures were implemented within the group companies.
Despite these challenges, Toyoda is unlikely to be removed from his position at the upcoming shareholders’ meeting. Japanese institutional shareholders, including banks and financial institutions, are unlikely to challenge the automaker due to longstanding loyalties and cross-shareholdings among affiliates.
Despite the recent scandal, Toyota’s profits doubled in the fiscal year ending in March, exceeding its own projections. Analysts believe that the company’s fundamentals remain strong, with the recent issues expected to have only a minor impact on operations.
In his recent apology, Toyoda referenced a previous recall scandal in the U.S. during his tenure as chief executive, reassuring both himself and the public about the company’s ability to overcome challenges.