TOKYO -- Toyota Motor Corp. said on Friday that it would slash the size of its 58-member board while strengthening its auditor system as it moves to improve management efficiency.
Toyota will cut its board to 20-30 members and take on executive officers, but responsibility for business execution will remain with the board, meaning it will not adopt a U.S.-style governance model that separates execution and oversight.
Toyota -- viewed as a prime example of a traditional Japanese business model that puts the emphasis on workers, customers and suppliers -- has the nation's biggest board, with no female, foreign or outside directors.
The auto maker said it would appoint 30-40 executive officers including foreigners, while expanding the number of corporate auditors to seven from six, with four auditors coming from outside the parent company.
Toyota's revamped board, due to take effect in June after an annual meeting of shareholders, is still far bigger than rival Nissan Motor Co.'s, which has nine members.
Despite its status as one of the nation's most respected firms because of its efficiency and financial strength, Toyota's management-from-within structure has been a target of criticism from advocates of Western-style corporate governance.
Corporate governance has gained in importance in the wake of last year's corporate scandals at home and abroad.
Investors, frustrated with three years of slumping Tokyo stock prices, are also intensifying calls for management transparency and efficiency.
"How on earth can 50 or more people hold a proper discussion? Reducing the board is a natural option and we welcome it," said an executive at a leading Japanese pension fund group.
"But I think Toyota will have to do more, namely making further cuts to the board or hiring external directors," he added.
Toyota is a typical Japanese company in that it has little need to listen to shareholders because of its extensive cross-shareholdings with banks and other strategic partners.
Banks and financial institutions dominate the automaker's top 10 shareholders, which together have a near 40 percent stake in the company.
Toyota's foreign ownership is only 15 percent -- almost half the 27 percent stake held by foreigners at rival Honda Motor Co.
But the cross-shareholding structure has recently backfired, as banks began actively unloading their cross-held shares to make them less vulnerable to stock market swings.
Toyota stock has been particularly hard hit.
Its shares have lost 12 percent in value so far this year, sharply underperforming a fall of about 3.5 percent in the benchmark Nikkei share average. Toyota ended down 1.75 percent on Friday at 2,805 yen before the announcement.