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Toyota shareholders meeting: focus on chairman’s approval rating Reuters

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Daniel Reussink and Maki Shiraki

TOKYO (Reuters) – Toyota Toyota Motor Corp. (NYSE:) Chairman Toyoda Akio may not be in danger of losing reelection at the company’s annual shareholders meeting on Tuesday, but a further decline in shareholder support could spur a push for governance reforms.

This year’s shareholders meeting comes in the wake of a scandal over certification test violations at Toyota Motor Corp. and group companies including small car maker Daihatsu Motor Co. and truck division Hino Motors.

Proxy advisory firms Institutional Shareholder Services and Glass Lewis did not recommend Toyoda be re-elected, citing concerns about governance and board independence. A new scandal has since come to light over inspection violations.

Toyoda’s approval rating fell to 85% last year from 96% in 2022, but he only needs a majority of votes to be re-elected and has performed well barring scandals.

Toyoda, the grandson of Toyota’s founder, has served as a director since 2000, making him the company’s longest-serving director. Shareholders include many suppliers and Toyota group companies, but the deal is also expected to attract support from individual investors.

“We don’t expect Toyoda Akio to not be reappointed,” said James Hong, head of mobility research at Macquarie Bank, “but the declining approval rating is a bit of a warning for management.”

Hong said possible actions Toyota could take to counter criticism over its governance could include accelerating efforts to reduce cross-shareholdings in non-auto-related companies, such as financial firms and telecommunications company KDDI (OTC:).

The results of the vote are due to be announced on Tuesday, but approval ratings won’t be released until Wednesday.

ISS has taken issue with the way Toyota handled the certification fraud issue within the Toyota Group, and argues that President Toyoda should bear “ultimate responsibility.”

In its report, the company said, “It is important to establish an appropriate compliance system under the leadership of the board of directors,” and added, “Now that we are facing an incident at a group company, it is an opportune time to make change.”

Glass Lewis has rejected Toyoda’s re-election for a second consecutive year, blaming him for a lack of board independence and also citing concerns about strategic shareholdings and return on equity.

Asked about the proxy advisory firm’s recommendation, Toyota said in a statement to Reuters that reflection on mistakes has long been ingrained in the company’s corporate culture and that President Toyoda would take the lead in re-instilling that culture and working with group companies to ensure effective governance.

Toyota shares have fallen 10% since the latest scandal emerged earlier this month, but they are still up 17% this year, outpacing the overall market and adding to a 43% gain last year.

The company is expected to maintain its top position in global sales volume for the fourth consecutive year in 2023, buoyed by the weak yen and increased sales of hybrid vehicles. It posted record profits in the fiscal year ending March.

“Toyoda has delivered results and led Toyota to growth, so he should be highly praised,” said Endo Koji, head of equity research at SBI Securities.

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