Resilient Support: Toyota Shareholders Stand by Board Amid Governance Scrutiny

Despite facing unprecedented pressure to enhance its governance and climate policy, Toyota received strong support from its investors, who rejected a shareholder challenge. The outcome of the annual meeting, although widely anticipated, caused a brief surge of 8 percent in Toyota's shares on Wednesday. This increase followed a previous 5 percent rally after the company announced its plans to potentially introduce solid-state battery technology in an electric vehicle as early as 2027.

According to governance experts and environmental activists, the notable challenge faced by Japan's largest company, in terms of market capitalization, signifies significant shifts occurring in the Japanese market. Shareholders are increasingly demanding improved governance standards and transparency. Prior to the annual general meeting (AGM), Glass Lewis, a US proxy adviser, advised shareholders to vote against the reappointment of Akio Toyoda as Toyota's chairperson. Akio Toyoda, the grandson of the company's founder and a prominent candidate for future leadership of Japan's influential Keidanren business lobby, was the subject of this recommendation.

Glass Lewis contended that Toyoda had overseen a board lacking sufficient independent directors. Although Toyoda relinquished his role as the group's president last month, he continues to serve as the board's chair.In response to these concerns, Toyota has announced its commitment to enhancing diversity and decreasing the number of internal directors.

ISS, another proxy adviser, also endorsed a shareholder proposal put forth by AkademikerPension, a Danish fund worth $20 billion, along with two other European asset managers. This proposal seeks greater transparency regarding the carmaker's climate lobbying endeavors.