During his long tenure as CEO, Akio Toyoda led Toyota Motor to the top of the automobile industry.
Toyota now sells more cars than any other automaker in the world. It was Mr. Toyoda’s bet on the enduring popularity of gasoline-electric hybrid vehicles that helped Toyota achieve the biggest annual profit in Japanese history last year.
Mr. Toyoda, whose grandfather founded Toyota in 1937, is the force that propels the company — and that’s a problem, according to several people inside and outside Toyota.
In early 2023, Mr. Toyoda stepped down after nearly 14 years as chief executive to become chairman. But just over a year after the new chief executive arrived, some Toyota board members have raised concerns that Mr. Toyoda continues to lead major projects and could retain influence too uncontrolled within the company.
Several major Toyota investors said they plan to vote against his re-election to the board before the company’s annual shareholder meeting, which will be held Tuesday.
“You have a case of a particularly empowered executive taking on the role of chairman,” said Michael Garland, head of corporate governance at the New York City comptroller’s office, which runs the retirement fund system of the city, estimated at more than 260 billion dollars. “Toyota’s need for more independent board oversight is important.”
Replacing successful leaders, especially those who have been in a position for a long time, is often tricky. Companies must ensure they pave the way for their successors without compromising business practices that work and, more importantly, generate profits.
“Not having enough checks and balances is simply bad governance, but over-correcting course and a company can simply lose momentum,” said Howard Yu, director of the advanced management program at IMD Business School. “Toyota is at this critical juncture.”
Mr. Toyoda, 68, guided Toyota through several bruising episodes as chief executive. In 2009, when he took office, the global financial crisis put the company in the red and Toyota was beginning to face a series of quality problems that would escalate into the worst crisis in its history.
In 2009 and 2010, Toyota recalled millions of vehicles for repair after reports of its vehicles accelerating out of control emerged. Toyota would eventually face hundreds of wrongful death and personal injury lawsuits and be fined $1.2 billion by the United States Department of Justice.
In 2010, Mr. Toyoda apologized to Congress and pledged to address what he saw as a divide between Toyota’s leadership in Japan and the company’s global operations. He reduced the ranks of the executive, transferred power to regional leaders and cut costs. Toyota sales have soared.
In recent years, Mr. Toyoda has become known for his comments warning politicians and industry officials not to move too quickly toward electric vehicles, before consumers are ready to abandon their cars altogether. essence.
While other automakers in the United States, Europe and China began a radical transition to electric vehicles, Toyota continued to invest in hybrid cars launched in the late 1990s. This often made M .Toyoda the target of criticism from environmental groups.
In January 2023, Toyota announced that a longtime Toyota engineer, Koji Sato, would take over as CEO. Mr. Toyoda said Mr. Sato, 53 at the time, had the skills to guide Toyota into a new era of electric and software-driven cars.
Soon after Mr. Sato’s arrival, the dynamics of the global auto market changed. Sales of electric vehicles have slowed and demand for hybrid cars has soared, generating a boon for Toyota. Toyota reported more than 5 trillion yen ($32 billion) in operating profit for the fiscal year ended March, the largest ever for a Japanese company.
Internally, Toyota officials have said that recent profits — and the company’s expected strong performance over the next three to four years — should be credited to Mr. Toyoda for planning the transition to electric vehicles.
“Akio Toyoda was right,” said Jeffrey Liker, who runs the Ann Arbor, Mich., consulting firm Liker Lean Advisors and has written extensively about Toyota and its management.
Although he resigned as chief executive, Mr. Toyoda “may have more influence than he wants, even because when he gives an opinion, people now take it as the word of God,” Mr. Liker said.
Yet as Toyota’s profits soar, some board members worry that success will further cement what they see as a potentially problematic concentration of power on Mr. Toyoda’s part, according to three people with knowledge of the situation and not authorized to speak. on internal issues.
Mr. Toyoda has made big changes to Toyota’s management in recent years, and six new directors were named to the board in 2023. Earlier this year, Ikuro Sugawara, an outside director, told a Japanese magazine that these measures had left Mr. Toyoda surrounded by people who did not question him.
“Mr. Akio has changed,” Mr. Sugawara said in an interview with little publicity outside Japan, according to Shukan Bunshun magazine. “There were people around him who expressed their opinions.” Toyota did not report Mr. Sugawara available for interview.
Some members of Toyota management view Mr. Toyoda as serving as both chairman and chief executive, commanding the room in meetings and continuing to lead major company initiatives, such as as plans for a new range of combustion engines for hybrid cars announced last month. according to the three people with knowledge of the situation. Some administrators believe a slow transfer of power is appropriate, as Mr. Sato learned from his longtime boss, one of the sources said.
Toyota did not respond to requests for comment.
The internal turmoil has attracted the attention of investors. Representatives of seven major investor groups, some of whom were not authorized to speak publicly, told The New York Times that they were considering voting against Mr. Toyoda’s reelection because of concerns about independence. from the administration board.
Two prominent firms that advise investors on corporate matters, Glass Lewis and Institutional Shareholder Services, have urged shareholders to vote against Mr. Toyoda’s re-election due to governance issues and what they see as its responsibility for investigating problems in Japan recently revealed by Toyota and some of its group companies.
In Japan, board members are often re-elected with near unanimous support from shareholders, and investors voting against Mr. Toyoda’s reappointment will likely remain a small minority. Over the past decade, votes for Mr. Toyoda’s reappointment have received an average approval of more than 96 percent.
Last year, Mr. Toyoda last led Toyota’s annual shareholders’ meeting, which was held at the Toyota City headquarters, southwest of Tokyo. Mr. Toyoda cried and said he looked forward to seeing the future that Mr. Sato would create for Toyota.
This year will be the first time that Mr. Sato will chair the meeting.
How Toyota handles succession could determine the company’s future, according to IMD Business School’s Yu.
“A company would want to transfer power to a new generation to take a new direction,” Mr. Yu said. “The key question to ask about Toyota is whether, right now, it needs to reinvent itself – or not.”
Hisako Ueno reports contributed.