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Resilient Support: Toyota Shareholders Stand by Board Amid Governance Scrutiny

Amid increasing corporate activism, Japan's largest company successfully overcomes a climate policy challenge

15 June 2023

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Jayashri Ghorpade

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  • Despite facing unprecedented pressure to enhance its governance, Toyota's management received strong support from investors who rejected a shareholder challenge regarding the company's climate policy.

  • As the world's largest carmaker by sales, Toyota's management has garnered confidence and backing from its investors.

  • Following the widely anticipated outcome of the annual meeting, Toyota's shares experienced a brief 8 percent surge on Wednesday.

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.

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In response to the recommendations, the California Public Employees' Retirement System and the Office of the New York City Comptroller, two major US public pension systems, took a stance against the re-election of Toyoda. Additionally, these US pension plans, along with the Church of England Pensions Board, supported a shareholder proposal regarding Toyota's climate policy. The existence of such a proposal is deemed significant, indicating that dialogue alone is insufficient, as stated by Daniel Read, a climate and energy campaigner at Greenpeace East Asia, following his attendance at the company's meeting in Toyota City.


The voting results regarding Toyoda and the other board members have not been disclosed yet, although shareholders voted in favor of their reappointment. Despite recommendations from proxy advisers, the chances of Toyoda being ousted were minimal due to the company's significant cross-shareholdings and strong support from retail investors. However, analysts suggest that even a slight decline in Toyoda's 96 percent approval rating from the previous year would indicate investor discontentment with the company's strategy.


Recent criticism has been directed at the carmaker for its perceived lack of aggressiveness in the widespread adoption of electric vehicles and its apparent protective stance towards hybrid technology. When questioned by a shareholder about Toyota's comparatively small market share in global electric vehicle sales, executives reiterated the company's position that a multi-pathway approach was necessary, as reported by participants.

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