Toyota annual meeting promises shareholder showdown over Akio Toyoda, climate policy

TOKYO – When Toyota Motor Corp. convenes its annual shareholders' meeting on Wednesday, the world's biggest carmaker will be bracing for rare investor backlash, with some pension groups even voting against the appointment of longtime leader Akio Toyoda as company chairman.

The normally staid and tightly scripted event, traditionally held at Toyota's global headquarters in Toyota City, was thrown a curve ball this year by a proxy adviser campaign that questioned the board's independence and the company's environmental policies.

Among the orders of business is approving new board members, including the appointment of CEO Koji Sato as a director and the reappointment of former president Toyoda as chairman.

But also on the agenda is a shareholder proposal requiring Toyota to review its climate-related lobbying activities to determine whether they are truly in line with global carbon-neutral goals.

The proposal aims to strengthen disclosure of Toyota's environmental strategy and comes amid criticism from some investors and activists that Toyota is dragging its feet on electric vehicles.

Proxy problems

Meanwhile, proxy advisory group Glass Lewis & Co. recommends that shareholders vote against Toyoda's appointment as chairman, saying the board makeup lacks sufficient independence.

"The board does not have a sufficient number of independent directors, which raises serious concerns about its objectivity, independence and ability to perform proper oversight," Glass Lewis wrote in its recommendation. "We recommend that shareholders voice their concerns about this issue by voting against nominee Akio Toyoda, chair of the board, who we believe should be held accountable for allowing insufficient independent representation."

Glass Lewis aligns with Toyota's management stance, however, in recommending that investors reject the shareholder proposal on environmental lobbying activities.

Separately, another proxy firm, Institutional Shareholder Services, does the opposite.

ISS is advising that investors vote in support of Toyoda as chairman and also in support of the proposal on environmental disclosure. It argues that more disclosure and transparency would benefit investors. ISS also raised concerns about Toyota's continued support of gasoline-electric hybrids as many of its automotive rivals move more quickly into full EVs.

"There is a risk that when Toyota finally decides the time is right to make a big push into EVs, it will have lost too much ground compared to American, European, and Korean rivals, including new upstarts," ISS said. "Shareholder support for this proposal is warranted."

Toyota recommends rejecting the shareholder proposal, arguing that the company sufficiently discloses information about its climate-related public relations activities. It also argues that it sets aggressive carbon neutrality and EV rollout goals, including a strategy to sell some 3.5 million full electrics a year globally by 2030. The best way to make the biggest, quickest dent in carbon dioxide emissions, Toyota said, is to pursue a multi-pronged attack that also includes hybrids.

Investor relations

Ahead of the shareholder gathering, two of the largest U.S. pension funds had already voted against the re-appointment of Toyoda as chairman.

The California Public Employees' Retirement System and the Office of the New York City Comptroller also voted for the shareholder proposal to bolster environmental disclosures.

New York Comptroller Brad Lander cited Toyota’s EV strategy as a point of concern in the vote against Toyoda and for greater transparency in climate-change activities.

“The growing battery electric vehicle market represents an opportunity for Toyota to regain its status as an innovator and leader during the historic transition of the transportation industry,” Lander said in an emailed comment to Automotive News.  “A board that is genuinely independent of management and appropriately focused on maximizing long-term shareholder value can strengthen and affirm Toyota’s commitment to electric vehicles.”

CalPERS explained its vote as being consistent with its policy of turning down "non-independent directors due to board independence levels being below 50 percent.” And it backed the environmental lobbying provision saying that greater transparency benefited investors.

It is doubtful whether select shareholder pushback will muster enough widespread support to dislodge Toyoda or force the company to review its climate-change lobbying efforts.

Toyota's top investors include some of Japan's biggest banks, such as the Master Trust Bank of Japan, with a 14 percent holding. Also on board are other Toyota Group companies such as Toyota Industries Corp., with 8.79 percent, and mega-supplier Denso Corp., with its 3.31 percent stake.

They will likely back the status quo.

Plus, many investors may see little reason to complain, given recent share price performance.

Toyota Motor's stock has soared 20 percent this year as the company reports stellar profits and gears up for more expansion with the pandemic and microchip shortage in its rearview mirror.

Moreover, on June 13, the day before the shareholders' meeting, Toyota's share price shot up 5 percent in Tokyo on fresh news about Toyota's electric vehicle rollout strategy and upcoming technologies, including plans for solid-state batteries and new manufacturing breakthroughs.