Toyota investors can give chair a year for tune-up
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, May 29 (Reuters Breakingviews) -Toyota Motor's 7203.T chair is facing a fresh attack from proxy advisers Glass Lewis and Institutional Shareholder Services. They're arguing the $300 billion carmaker's shareholders should vote against re-electing Akio Toyoda to the role. They have a point. If he once again doesn't respond to their call for action, the case for booting him out will get stronger.
The pair have two valid complaints. Like last year, Glass Lewis warns that the board lacks independence, although the company complies with the requirements laid down by the Tokyo Stock Exchange. ISS also cites a series of scandals at subsidiaries. Affiliate Daihatsu said it had rigged safety tests, and there are separate governance issues at truck maker Hino Motors 7205.T and affiliate Toyota Industries 6201.T.
Toyoda deserves at least a portion of the blame as a key decision maker: he has been a director at Toyota for nearly a quarter of a century, after all. That extended tenure and his almost 14 years as president immediately before his successor Koji Sato are also governance concerns in their own right.
There are signs Toyoda is tinkering with the engine. He is using his authority as chair and a member of the founding family to advocate for a change in the way Toyota listens to and works with its affiliates. He is also leading by example, pledging to attend all of their annual meetings in June. The idea is to help Toyota communicate with the wider group, rather than sticking to a more top-down approach.
But the chair can do much more to help tackle his critics head-on. He has yet to confront criticism over the board's independence, for example. Seeking out one or more new directors and replacing Masahiko Oshima, whose position as advisor to at Toyota lender Sumitomo Mitsui Banking Corporation calls into question his credentials as an independent director, would be one concrete step to allay concerns.
True, he is ultimately unlikely to be voted out, which would be extremely unusual in conservative corporate Japan. But tussling over governance gripes is an unwelcome distraction as Toyota navigates a new strategy to accelerate efforts to make more electric and smart cars. Toyoda's tune-up is overdue - and his time to get it done deserves to be limited.
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CONTEXT NEWS
Proxy advisory firms Glass Lewis and Institutional Shareholder Services have recommended Toyota Motor shareholders vote against re-electing Chair Akio Toyoda at the Japanese automaker's annual general meeting in June.
Toyoda, the grandson of the company's founder and previously its chief executive, was re-elected to the board last year with around 85% approval, a drop from the previous year's almost 96%.
Editing by Antony Currie and Aditya Sriwatsav
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