Akio Toyoda led Toyota Motor Corp. to the top of the auto industry during his long tenure as CEO.
Toyota now sells more cars than any other automaker in the world, and Mr Toyoda's bet that hybrid gasoline cars would stay popular helped it post Japan's biggest annual profit ever last year.
Toyoda, whose grandfather founded Toyota in 1937, is the driving force behind Toyota, but several people inside and outside the company say that's problematic.
Toyoda is set to step down as CEO after nearly 14 years and become chairman in early 2023. But more than a year after taking over as CEO, some Toyota directors have expressed concern that Toyoda continues to push ahead with major projects and maintain unchecked influence within the company.
Several major Toyota investors said they plan to vote against his re-election to the board ahead of the company's annual shareholders' meeting on Tuesday.
“This is a case of a specially empowered executive in the role of chairman,” said Michael Garland, chief of corporate governance for the New York City Comptroller's Office, which oversees the city's more than $260 billion retirement plans. “Toyota needs more independent oversight from its board of directors.”
Replacing a successful CEO, especially one who has been in the position for a long time, is often difficult, and companies need to ensure they have a smooth path for succession without undermining the business practices that work and, most importantly, generate profits.
“Not having enough checks and balances is just bad governance, but too many course corrections can cause a company to lose momentum altogether,” said Howard Yu, director of the advanced management program at IMD Business School. “Toyota is really at this critical juncture.”
As chief executive officer, Mr. Toyoda, 68, has led Toyota through a string of hardships. When he took over as president in 2009, the global financial crisis had plunged the company into the red and Toyota was grappling with a series of quality problems that began to spiral into the worst crisis in the company's history.
Toyota recalled millions of vehicles for repairs after reports of the vehicles accelerating uncontrollably surfaced in 2009 and 2010. Toyota ultimately faced hundreds of wrongful death and personal injury lawsuits and was fined $1.2 billion by the U.S. Department of Justice.
In 2010, Mr. Toyoda apologized before Congress and vowed to mend the disconnect between Toyota's executives in Japan and its global operations. He downsized executive ranks, delegated power to regional chiefs and cut costs. Toyota's sales rose.
In recent years, Toyoda has become known for comments warning politicians and industry players not to rush the transition to electric vehicles before consumers are ready to give up their gasoline-powered cars.
Mr. Toyoda has been a frequent target of criticism from environmental groups for continuing to invest in the hybrid vehicles it pioneered in the late 1990s as other automakers in the United States, Europe and China began a rapid shift to electric vehicles.
Toyota announced that longtime Toyota engineer Koji Sato would become its chief executive officer in January 2023. Toyoda said Sato, who was 53 at the time, had the skills needed to lead Toyota into a new era of electric and software-driven vehicles.
Soon after Mr. Sato took over, trends in the global auto market shifted. Sales of electric cars fell and demand for hybrids soared, delivering a windfall for Toyota, whose operating profit for the fiscal year ending in March topped 5 trillion yen ($32 billion), the highest ever for a Japanese company.
Inside Toyota, people say the company's recent performance, and the strong outlook for the next three to four years, is due in large part to Toyoda's planning of a transition to electric vehicles.
“Akio Toyoda has been proven right,” said Jeffrey Liker, president of the Ann Arbor, Michigan, consulting firm Liker Lean Advisors, and author of numerous books about Toyota and its management.
Liker said that even though Toyoda is no longer CEO, “when he speaks out, people take it as the word of God and he may have more influence than he wants.”
Yet even as Toyota's profits soar, some directors are growing concerned that its success will further solidify Mr Toyoda's potentially troubling concentration of power, according to three people familiar with the matter who were not authorized to discuss internal matters.
Toyoda has made major shakeups to Toyota's management in recent years, with six new directors appointed to the board in 2023. Earlier this year, outside director Ikuo Sugawara told a Japanese magazine that the moves have given Toyoda people around him who no longer question him.
“Akio has changed,” Shukan Bunshun quoted Sugawara as saying in an interview that received little attention outside Japan. “Before, there were people around Akio who would speak their minds.” Toyota did not make Sugawara available for an interview.
Some at Toyota see Toyoda, acting as both chairman and CEO, dominating meetings and continuing to drive the company's key plans, such as a new engine for hybrid vehicles announced last month, according to three people familiar with the matter.Some directors think it's appropriate to transfer power slowly as Sato learns from his longtime boss, one of the people said.
Toyota did not respond to a request for comment.
The internal turmoil has attracted investor attention: Sources from seven large investor groups, some of whom were not authorized to speak publicly, told The New York Times they plan to vote against Toyoda's reappointment due to concerns about the board's independence.
Glass Lewis and Institutional Shareholder Services, two major firms that advise investors on corporate issues, have urged shareholders to vote against Toyoda's reappointment, citing governance issues and his responsibility for recent disclosures of testing problems in Japan by Toyota and several of its group companies.
In Japan, directors are often re-elected with near-unanimous shareholder support, meaning investors would likely be in the minority voting against Toyoda's reappointment. Over the past decade, Toyoda's reappointment votes have averaged more than 96% approval.
Last year was Mr Toyoda's last time leading Toyota's annual shareholders meeting, held at the company's headquarters in the city of Toyota, southwest of Tokyo. Mr Toyoda, through tears, said he looked forward to the future that Mr Sato would create for Toyota.
This will be Sato's first year chairing the conference.
How Toyota handles the succession issue could determine the company's future, according to IMD Business School's Yu.
“Companies want to hand over power to a new generation to move in new directions,” Yu said. “The key question to ask about Toyota is whether it needs to reinvent itself now.”
Ueno Hisako Contributed report.