Akio Toyoda has been on the board of his family’s Toyota Motor Co. since 2000, helping guide the company through the 2008 financial crisis and a massive safety scandal that cost billions of dollars and dozens of lives. Now, he’s facing a reckoning from investors.
Toyoda, the grandson of company founder Kiichiro Toyoda, stepped down in early 2023 after almost 14 years as the company’s CEO and moved to the role of board chairman. On Tuesday in Japan, Toyota will hold its annual meeting, where some investors are expected to oppose the re-election of Toyoda.
Proxy advisory firms Glass Lewis and Institutional Shareholder Services (ISS) have advised shareholders to vote against a board proposal to keep Toyoda on the board, citing active investigations into the company testing irregularities and governance concerns.
Toyota’s Daihatsu subsidiary admitted last year to rigging collision safety tests for some 88,000 vehicles, spurring widespread investigation. Toyota — and Toyoda himself ‚ have apologized for the falsehoods and pledged to correct them going forward.
At least four major Japanese automakers, including Toyota, have admitted to cheating on safety tests over the last several years, if not decades.
Both proxy advisors believe Toyoda is responsible for a lack of board independence and should be held accountable for the scandals. Glass Lewis had also recommended shareholders block Toyoda’s re-election as director in 2023.
“Given the widespread occurrence of issues throughout the Toyota Group, this further raises questions concerning the corporate culture which has developed under the leadership of Mr. Toyoda,” said Glass Lewis in its report.
Toyota stock has fallen 10% since the latest leg of the scandal was revealed earlier this month. Shares are down almost 2% in trading on Tuesday.
But, despite the scandal, Toyota has a lot to thank Toyoda for. Not only did he lead Toyota out of the financial crisis, but he helped cut costs and improve sales. The company has been the world’s biggest automaker by sales for the past four years.
He’s also been responsible for Toyota’s slowed approach to electric vehicles and reliance on hybrid models, which helped it reach record sales of 10.3 million for its latest fiscal year.
Toyoda “may have more influence than he wants, even, by virtue of the fact that when he offers an opinion people now take it as the word of God,” Jeffrey Liker, who leads consulting firm Liker Lean Advisors, told The New York Times.
The Times, citing three people with knowledge of the situation, reports that some board members are concerned that the success is helping Toyoda concentrate his power over the company, noting that six new directors were appointed to the board in 2023. People at seven large investor firms told the Times they would vote against Toyoda’s re-election.
Still, it’s more likely that Toyoda will maintain his position, albeit with a smaller show of support. Last year, his approval rate fell to 85% from 96% in 2022, but just a simple majority is required for his re-election.