Toyota's Corporate Governance
1. Introduction and Company Overview
2008 was a crucial year for Toyota Motor Corporation (Toyota) since this was the year Toyota overtook it’s greatest competitor’s, General Motors, position as the world’s largest carmaker, selling 8.9 million cars to GM’s 8.35 million (Welch, 2009). Toyota was the bright star of the Japanese economic miracle and synonym for concepts like “Lean manufacturing”, business culture and production quality. All this changed as Toyota faced problems with unintended acceleration of its cars, which has throw the company into an even worse situation then the one caused by the global Financial Crisis. In February 2010 Toyota reported a 16 percent drop in January U.S. sales with the lowest market share since January 2006, pushing its share price in Tokyo down 5.7 percent. In February the company announced a recall of nearly 500.000 additional cars, summing up recalls to at least 7.6 million cars across five continents (Kitamura and Ohnsman, 2010 and Reuters, 2010). The recent events have drawn focus to Toyota’s management as some evidence reveals that the management has failed to address potentially quality problems. Critics have raised questions whether the absence of independent directors on Toyota’s board has marked the board culture in Toyota with secrecy.
The aim of this paper is thus to identify the Corporate Governance (CG) mechanisms in Toyota and evaluate them in terms of the recent events and to assess whether the CG policy has had an influence on Toyota’s performance. Hence, I ask: Is the Japanese CG regime the foundation stone for the crisis in Toyota?
2. Company Performance, Key Financial Figures and Capital Structure
Toyota has throughout the latest years been highly affected by the global Financial Crisis and the company’s problems with unintended acceleration of its cars. This resulted in a negative outcome for 2009 for the first time in Toyota’s history. This has lead to a deep fall in the company’s stock price that has
2008 was a crucial year for Toyota Motor Corporation (Toyota) since this was the year Toyota overtook it’s greatest competitor’s, General Motors, position as the world’s largest carmaker, selling 8.9 million cars to GM’s 8.35 million (Welch, 2009). Toyota was the bright star of the Japanese economic miracle and synonym for concepts like “Lean manufacturing”, business culture and production quality. All this changed as Toyota faced problems with unintended acceleration of its cars, which has throw the company into an even worse situation then the one caused by the global Financial Crisis. In February 2010 Toyota reported a 16 percent drop in January U.S. sales with the lowest market share since January 2006, pushing its share price in Tokyo down 5.7 percent. In February the company announced a recall of nearly 500.000 additional cars, summing up recalls to at least 7.6 million cars across five continents (Kitamura and Ohnsman, 2010 and Reuters, 2010). The recent events have drawn focus to Toyota’s management as some evidence reveals that the management has failed to address potentially quality problems. Critics have raised questions whether the absence of independent directors on Toyota’s board has marked the board culture in Toyota with secrecy.
The aim of this paper is thus to identify the Corporate Governance (CG) mechanisms in Toyota and evaluate them in terms of the recent events and to assess whether the CG policy has had an influence on Toyota’s performance. Hence, I ask: Is the Japanese CG regime the foundation stone for the crisis in Toyota?
2. Company Performance, Key Financial Figures and Capital Structure
Toyota has throughout the latest years been highly affected by the global Financial Crisis and the company’s problems with unintended acceleration of its cars. This resulted in a negative outcome for 2009 for the first time in Toyota’s history. This has lead to a deep fall in the company’s stock price that has