Toyota Motor Corp. faces opposition from several pension funds over a proposal to create a dual-class share voting structure.
The $193.1 billion California State Teachers’ Retirement System, West Sacramento, and the C$264.4 billion ($212.4 billion) Canada Pension Plan Investment Board, Toronto, plan to vote their respective 3.4 million and 6.1 million Toyota shares against the proposal, according to their proxy voting disclosures. The Florida State Board of Administration and the Ontario Teachers’ Pension Plan also intend to vote against the proposal.
“Toyota’s Model AA class shares would be unlisted and offered only in Japan, thus hindering investors outside of Japan from participating in the share offering,” Anne Sheehan, CalSTRS director of corporate governance, said in a statement Tuesday. “Additionally, the new share class proposed by Toyota would be structured as debt instruments, with guaranteed and defined dividend payments. Yet, these shares would also have voting rights equal to those of common stock that don’t enjoy this equity risk exposure shield.”
Toyota’s proposed AA shares “would also be convertible into common stock in five years at a conversion rate that has yet to be determined and will ultimately be decided upon by the Toyota board of directors,” Ms. Sheehan said. “This raises concerns about potential value dilution to existing common stockowners if a high conversion rate is set.”
CPPIB officials “consider dual-class share structures to be contrary to good governance” and are voting against them, according to its proxy-voting guidelines. “They can entrench management against shareholder pressure for change and undermine the basic principle linking voting to equity ownership on the basis of one-share, one-vote.”
CalSTRS plans to vote against the election as directors of 15 of the 16 nominees, including Takeshi Uchiyamada, chairman of the board, and Akio Toyoda, president and director, and against an annual bonus for directors, while CPPIB plans to vote in favor of all of the nominees and the bonus.
The $182.8 billion Tallahassee-based FSBA also plans to vote against the re-election of Mr. Uchiyamada, and two other directors, while supporting the rest of the nominees for the board. The C$154.4 billion Toronto-based OTPP will vote against Mr. Uchiyamada’s re-election.
Both FSBA and OTPP support a proposed annual bonus of a total yen 885 million ($7.1 million) for directors.
Aaron S. Fowles, corporate communications manager, Toyota Motor Sales U.S.A. Inc, said in an e-mailed statement: “We understand that there are a variety of different opinions on this topic. From our perspective, we would like to encourage shareholder investment that is aligned with the medium- to long-term nature of the expenses we incur during research and development. Going forward, we will continue to promote dialogue with all of our stakeholders around the world, starting with holders of common and class shares, and reflect the results of that dialogue in our management.”
CalSTRS’ shares were valued at $568.8 million and CPPIB’s shares at $809.8 million as of midday trading Tuesday.
Toyota Motor’s annual meeting is June 16 in Toyota, Japan.