Akio Toyoda Re-Elected Toyota Chairman amid Safety Test Scandal

Toyota shareholders re-elected Akio Toyoda as chairman at an annual general meeting on Tuesday despite unrest over a wide-ranging safety test scandal engulfing the world’s biggest car seller.

Toyoda’s re-appointment was widely expected given shareholdings in the automaker owned by other Toyota group firms, record business results and his popularity among Japanese retail investors.

But concerns over governance and the board’s independence have fuelled unrest against Toyoda, and any big drop in his shareholder support could spur action on reforms.

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Analysts say an acceleration of efforts to unwind cross-shareholdings could be one possible outcome.

Toyoda’s shareholder support data will be released on Wednesday.

Aside from Toyoda, shareholders also re-elected nine other Toyota board members. They also rejected an investor proposal urging greater disclosure of climate lobbying that had been opposed by Toyota.

Opposition from overseas investors

Toyoda retained his chairmanship even as two leading proxy advisers recommended against his re-election in the run-up to the vote.

Proxy adviser Institutional Shareholder Services (ISS) had taken issue with the way the automaker dealt with recent controversies.

Early this month, Toyota admitted it had rigged safety tests on seven car models, three of which were still in production. The misconduct affected 1.7 million vehicles.

Japan’s ministry ordered Toyota to suspend shipments of the affected models and raided its headquarters in Aichi Prefecture. Last week, Toyota decided to extend the suspension by a month — until at least 31 July — according to a report by Japan’s public broadcaster NHK.

The scandal came a year after Toyota-affiliate Daihatsu had admitted to falsifying collision test data for 88,000 small cars, most of which sold as Toyotas.

Japanese investigators eventually found issues involving 64 models from the automaker, suggesting the scandal was far greater and went back much further than previously thought. Daihatsu halted shipments of all of its vehicles in December.

ISS said Toyoda should be considered “ultimately accountable” for the errors. New York City’s public employee pension funds agreed with that stance and voted against Toyoda.

“Setting a tone at the top is critical,” Michael Garland, who oversees corporate governance for the funds, said in an emailed statement.

Meanwhile, the second proxy adviser, Glass Lewis, had recommended against Toyoda re-election, saying he was responsible for the board’s lack of independence.

Most of any opposition to Toyoda is expected to have come from overseas investors, which account for a quarter of Toyota’s shareholders.

‘Best company in Japan’

But Toyoda, who is the grandson of the company’s founder, remains deeply popular among retail investors, which account for 12.6% of the automaker’s shareholders. Last business year’s record profits and a strong stock performance have also worked in his favour.

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

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

Toyota’s shares have fallen 10% since fresh safety test irregularities came to light this month. But for the year, they are still up 18%.

At Toyota’s AGM, neither Toyota CEO Koji Sato nor Toyoda addressed the recommendations from the proxy advisers directly.

But Sato, who succeeded Toyoda as chief executive last year, reiterated apologies for the certification problems.

Reuters, with additional inputs from Vishakha Saxena

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]