Akio Toyoda became the board chairman of Toyota Motor, after resigning as CEO in early 2023, having served in that capacity for nearly 14 years. He is the grandson of the company’s founder Kiichiro Toyoda.
Despite Akio Toyoda’s re-election, there was nothing much to celebrate for the veteran in the recently concluded annual general meeting, as shareholder backing for his leadership reportedly slid for a second straight year (72%), amid certification scandals and governance concerns.
“The result marks the lowest level of backing for Toyoda, the grandson of the company’s founder, since the world’s largest automaker started disclosing the breakdown of shareholder votes in 2010,” reported Reuters.
In fact, there were recommendations by proxy advisers to vote against Toyoda’s re-election, despite the Toyota boss enjoying approval ratings of 85% and 96% in 2023 and 2022 respectively.
As per the reports, proxy advisers like Institutional Shareholder Services (ISS) and Glass Lewis had reservations with the way Toyota dealt with ongoing certification testing violations, involving the Japanese automaker and its group companies such as compact car maker Daihatsu. Daihatsu sparked a lengthy probe, after admitting in 2023 that it had rigged crash safety tests for about 88,000 cars.
Glass Lewis even recommended that Akio Toyoda should not be re-elected for a second year in a row, apart from expressing concerns about the board’s independence and return on equity.
However, Toyoda has not been new to controversies. Since joining the board of his family’s Toyota Motor in 2000, he assisted in guiding the business through two major crises: the financial crisis of 2008 and a significant safety scandal that claimed numerous lives and billions of dollars.
Early Life And Career
Akio Toyoda, previously the company’s president and Chief Executive Officer has held positions in every department related to the automotive industry, including marketing, production, and product development, both domestically and abroad.
He was employed by Toyota’s production joint venture with General Motors in California, and worked with New United Motor Manufacturing, as an executive vice president and board member, starting in April 1998.
Akio Toyoda went back to Japan in January 2000, and in June he was added to the Toyota Motor’s Board of Directors. In that role, he took on the development and management of gazoo.com, an online marketplace with dozens of virtual stores selling consumer goods and services as well as car-related information.
He oversaw operations in the Americas, production management consulting, and domestic marketing during this time as well. Akio Toyoda joined the Asia and China Operations Centre in June 2001 as its chief officer. He was promoted to managing director in June 2002.
He was appointed senior managing director in June 2003 (he changed this title to senior managing officer in June 2011). In January 2005, he was named chief officer of the Asia, Oceania & Middle East Operations Group as well as the China Operations Group. He was promoted to executive vice president and representative director in June 2005, with oversight over IT & ITS, quality, purchasing, product management, sales to Japan and other countries, and international operations. Akio Toyoda was appointed president of Toyota in June 2009. He was appointed the automaker’s chairman in April 2023.
Challenges Await The Top Boss
As per Reuters, most of the slippage in Toyota’s support is expected to have come from foreign investors which account for a quarter of the automaker’s shareholders. Those that voted against Toyoda included United States public pension CalPERS and Canadian pension investor CPP Investments.
Toyota, reacting to the development, stated that it saw the reduced approval ratings as “candid feedback” from institutional investors and that to enhance the independence of its board, it had clarified the roles and expectations of outside executives, apart from redefining the criteria for assessing independence. The venture will also start the sale of its cross-shareholdings. Critics often cite the practice of cross-shareholdings between Japanese firms as the factor encouraging lax governance by ensuring a too-cosy relationship between management and shareholders.
“The governance or holding structure side is where we expect changes to accelerate. Obviously, that has been the focus of the shareholders, and shareholders have been demanding faster changes there,” said James Hong, head of mobility research at Macquarie.
Akio Toyoda, despite his approval slippage, has remained popular in the global automobile circle and among Japanese retail investors, given Toyota’s record business results under his watch. However, the automaker has been under fire in recent days, due to its reluctance to adopt battery-electric vehicle standards. The venture follows a “multi-pathway” strategy, where it heavily invests in hybrids and hydrogen fuel cells, instead of going fully electric.
In 2023, the venture reportedly benefited from its strong hybrid line-up as growth for battery EVs in major markets slowed on relatively high prices and worries about the lack of charging infrastructure. The company recorded sales of 10.3 million for its most recent fiscal year.
According to Toyoda, the electric car segment will only ever account for a maximum of 30% of the market. He presented the Japanese automaker’s manufacturing plan to the media in Tokyo in March 2024, fielding questions and sharing his opinions on the global EV market.
“The enemy is CO2, proposing a multi-pathway approach that doesn’t rely on any particular powertrain. Customers, not regulations or politics should make the decision on what path to rely on,” Toyoda said further.
Toyota still plans to use a combination of internal combustion engine, hybrid, and hydrogen drivetrain cars as well as battery-electric vehicles (BEVs) in order to lower emissions. Toyoda predicted that these additional models would eventually account for 70% of the market.
However, safety has been the Achilles heel for Toyota. In 2024, Toyota admitted to rigging safety tests on seven car models, three of which were still in production. The misconduct reportedly affected 1.7 million vehicles.
Japan’s ministry ordered Toyota to suspend shipments of the affected models and raided its headquarters in Aichi Prefecture. Toyota has decided to extend the suspension by a month, until at least 31 July, according to a report by Japan’s public broadcaster NHK.
Japanese investigators have found issues involving 64 models from the automaker, suggesting the massive magnitude of the scandal that resulted in Daihatsu halting shipments of all of its vehicles in December 2024.
Toyoda’s Reaction To The Crisis
In June 2024, Toyoda issued an apology for the revelations of extensive cheating on certification tests for seven vehicle models. Toyota also suspended the production for three of the affected models: the Corolla Fielder, Corolla Axio, and Yaris Cross.
The misconduct allegedly involved a range of issues, including the use of inadequate/old data in collision tests, incorrect testing procedures for airbag inflation and rear-seat damage in crashes, and falsification of emissions tests.
Toyota has also assured its customers and the general public that the safety of existing vehicles, including the popular Corolla subcompact and Lexus luxury vehicles, remained unaffected.
While the revelations marked a significant setback for Toyota, renowned for its production finesse and corporate culture focused on quality and innovation, the company’s prompt response, led by Toyoda himself identifying the cause behind the crisis (in the form of the rush to complete tests amid a proliferation of model varieties), apart from the company’s senior executive Shinji Miyamoto announcing about the initiation of Toyota’s internal probe, gives hope to both its customers and investors that the company is taking its commitment towards quality and innovation seriously and will soon course-correct itself.