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Toyota survives shareholder revolt over governance concerns

Several funds vote against the re-election of chairman Akio Toyoda.
pedestrians walking across with crowded traffic at Shibuya crossing square.Shibuya crossing is the busiest road crossing in the world. Shibuya, Tokyo, Japan,

Toyota chairman Akio Toyoda survived an attempt from a number of investors to block his re-election due to concerns about governance, albeit with a much lower approval rating than in recent years.

The two largest US public pension funds – CalPERS and CalSTRS – as well as several other asset managers voted against Toyoda’s re-election as chairman at the annual general meeting.

Toyoda, the grandson of the company’s founder who took over as chair in April after more than a decade as chief executive of the company, was re-elected with 85% of the vote

Last year, he was re-elected with a 96% share, albeit this was when he was still president and chief executive of the company.

Recently, a number of proxy advisers have called into question the independence of Toyota’s board, including Institutional Shareholders Service (ISS).

Japan has long frustrated investors because of its reluctance to embrace independent directors, although there have been encouraging signs in the last few years.

In 2014, Japan adopted the Stewardship Code and this was followed up a year later with the Corporate Governance Code, both of which were seen as important watersheds.

According to research from MSCI, in 2014, there were 54 constituents of the MSCI Japan index that were assessed as having zero independent directors, whereas today all constituents have at least one director who is considered fully independent.

Toyota has also drawn the ire of investors because of its climate lobbying. A group of pension funds led by Danish pension fund AkademikerPension tabled a resolution urging greater disclosure of its climate lobbying.

“We are glad to see so many investors supporting our resolution on disclosure of Toyota’s lobbying activities. The high backing should serve as a clear wake up call for the company to focus on being competitive in the transition to the net zero society instead of trying to water down important climate legislation, including phasing out of internal combustion engines,” AkademikerPension said in a statement.

This was voted down by shareholders as well.

Neither votes came as a surprise given the prevalence in Japan of cross-shareholdings, in which important suppliers and customers hold shares in companies they trade with.

CalPERS referred FSA to a statement detailing its recent proxy votes when asked for comment.

CalSTRTS said in a statement in response to FSA’s enquiries that “we actively cast our proxy votes in support of corporate board members and resolutions that align with our interests and philosophy. Please see our Corporate Governance Principles and Stewardship Priorities. We have nothing more to share on this particular vote.”

ISS referred FSA to its most recent report on Toyota, in which it labelled several of the company’s independent directors as affiliated.

Part of the Mark Allen Group.