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2006 GAR Accountability Profile - Toyota

2006 GAR Accountability Profile - Toyota

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Published by: ankitpareek on Sep 26, 2010
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Toyota Motor Corporation

Organisational Information
Toyota Motor Corporation (Toyota) is the largest producer of automobiles in Japan and the world's second largest automotive manufacturer based on production and sales. In 2005, Toyota sold 7.4 1 million vehicles. Toyota's diversified operations include financial services, telecommunications, prefabricated housing, and leisure boats. Toyota was first established in 1937 as a spin-off from Toyoda Automatic Loom Works, one of the world's leading manufacturers of weaving machinery. The patent rights to one of the machines was sold and provided the seed-money for the development and test-building of Toyota's first automobiles. Besides its 12 plants and a number of manufacturing subsidiaries and affiliates in Japan, Toyota has 52 manufacturing companies in 27 countries, which produce Lexus- and Toyota-brand vehicles and components. Toyota employs approximately 285,900 people worldwide, and markets vehicles in more 2 than 170 countries. The company is headquartered in Tokyo, Japan and had an operating income of 3 approximately US$16 billion for 2006. Toyota did not actively engage in the data collection process for the 2006 Global Accountability Report. Indicators were therefore scored based solely on public information and data collected from independent experts and stakeholders of the company. Transparency | Participation | Evaluation | Complaint and Response

Organisational Structure
As with all other corporations, the governing body of Toyota is the General Meeting of Shareholders, which is convened in June of each year. Only those shareholders that own above a certain threshold of shares may attend and vote at the General Meeting. Toyota’s executive body is the Board of Directors. This is composed of a total 25 Directors that include the Chairman, Vice Chairman, President, 8 Executive Vice Presidents, 12 Senior Managing Directors, an Honorary Chairman, and Senior Advisor. None of these are independent directors. There are four committees that feed into the Board, including the Labour-Management Council, the Corporate Philanthropy Committee, the Stock Option Committee, and the Toyota Environment Committee.

Transparency Dimension
Toyota rank eighth among the ten assessed corporations for their transparency capabilities with a score of 15 percent. Toyota does not have an information disclosure policy; however, they do make a general commitment to company-wide transparency in two key policy documents. In the Toyota Code of Conduct they state "[i]n order to become an 'open company' and win the trust of society, Toyota strives to communicate accurately and timely information to its stakeholders through active public relations and public dialogue, so as to enhance its corporate image and transparency….” And in Toyota's Contribution towards Sustainable Development, they state "…we will endeavour to build and maintain strong relationships with our stakeholders through open and fair communication". In neither of these documents however, does Toyota identify how they are going to translate these general commitments into practice. In this respect, the policies lack good principles such as committing to respond to all information requests within a certain period of time and making a commitment to full transparency other than when a set of narrowly defined conditions apply (e.g. contractual confidentiality, staff issues etc).
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2005 Annual Report 2006 Toyota Up Close http://www.toyota.co.jp/en/pdf/2006/toyota_up_close0611.pdf 3 2006 Annual Report http://www.toyota.co.jp/en/ir/library/annual/pdf/2006/ar06_e.pdf

" The Code does not meet any of the good practice principles on stakeholder engagement. Member Control Toyota does not score well in member control. Toyota is also one of only two organisations assessed in the 2006 Global Accountability Report that do no have a function on their website that allows stakeholders to contact the organisation. Based on publicly available information. to propose agenda items requires 1 percent of all voting rights for over six months. Additionally. however. As was mentioned above. or that Toyota have institutionalised the involvement of external stakeholders in corporate decision-making. to nominate candidates to the Board of Directors requires shareholders to have more than 1 percent of voting rights or more than 300 voting rights. Toyota does not have a specific policy on external stakeholder engagement.The Information Disclosure Committee oversees company-wide transparency at Toyota. shareholders have one voting right for each unit of shares that they own. no evidence was found to suggest that training is provided to staff on engagement practices. Evaluation Dimension 4 Japanese Corporation Act. Based on Toyota’s 2003 Environmental and Social Report. the a certain level of share ownership is required to utilize such rights. and initiate a process of dismissal of a Board member. Shareholder must also have at least one unit share (100 shares) to attend the General Meeting of Shareholders Toyota’s Articles of Incorporation do stipulate that candidates for the Board of Directors must be elected through a majority vote. the Code of Conduct is not disseminated through more than one medium or available in languages other than English and Japanese. and incorporates these as appropriate into its business. nor does it commit to being open about how stakeholder inputs affect decision-making. it does not identify the conditions under which stakeholders can expect to be involved in corporate decisionmaking. Any number of shares less than a full unit carry no voting rights. External Stakeholder Engagement Based on publicly available information. and to initiate a process of dismissal of a Board member requires a 4 shareholder to own over 3 percent of voting rights for more than six months. The Code of Conduct states: "Toyota listens to and respects its stakeholders' criticisms and suggestions. Participation Dimension Toyota’s participation capabilities rank ninth among the ten assessed corporations with a score of 31 percent. There is a section. the Corporate Ethics Committee appears to have responsibility for ensuring compliance with the Code of Conduct (the document in which the commitment to external stakeholder engagement is made). Although Japanese law states that shareholders can nominate candidates to the Board of Directors. leading to small shareholders not having the right to vote. where 100 shares constitute one unit. the law stipulates that rights are granted through ‘unit shares’ instead of individual shares. the Code of Conduct was found to be available only in English and Japanese. For example. While Japanese law provides shareholders with some rights. for example. Under this system. . primarily because of the weak shareholder protections provided by Japanese corporate law. on engaging stakeholders in the Toyota Code of Conduct that identifies the principles that should underpin the company’s relationship with different stakeholder groups. add items to the General Shareholder Meeting’s agenda. Based on publicly available information. no evidence was found to suggest that Toyota provides training to staff on how to comply with the company’s transparency commitments or that they disseminate the Code of Conduct through more than one medium. The officer responsible for the accounting division chairs this group.

No evidence was found to suggest that Toyota have a policy for handling and responding to complaints from external stakeholders. no further good practice principles were identified. no evidence was found of a similar policy guiding the evaluation of Toyota’s social impact. Toyota should develop a document that guides the evaluation of their social impact. The Secretariat of this committee is the Environmental Affairs Division. Conclusion Toyota’s evaluation capabilities are the most developed dimension of their accountability. Based on publicly available information. The document that guides this system was not made publicly available. While Toyota has a compliance hotline for internal stakeholders to report issues of non-compliance. The company should also consider allowing external stakeholders to lodge complaints through the compliance hotline. Evidence in the 2003 Environmental and Social Report suggests that training is provided to relevant staff on how to implement the environmental management system. while their transparency capabilities are the least. Based on publicly available information. it was difficult to identify if Toyota commits to good practice principles on complaints handling. Toyota has an Environmental Committee chaired by the President that oversees environmental issues. while a secretariat within Toyota deals directly with complaints sent by the independent attorney. the policy that guides how these complaints are handled is not disclosed publicly. no evidence was found to suggest that relevant staff members are trained on how to handle and respond to complaints. . and being open about how stakeholders’ inputs affect decision-making. and drafts environmental action plans and annual company-wide environmental policies. so it was not possible to identify whether it met any good practice principles. Complaint and Response Dimension With a score of 26 percent. However. Toyota ranks last among the ten assessed corporations for their complaint and response capabilities. With regard to their complaint and response capabilities. The Corporate Ethics Committee is responsible for overseeing issues of compliance.g. Lastly. such as identifying the conditions under which stakeholders can expect to be involved in corporate decision-making. The 2006 Global Accountability Report indicates that Toyota should consider undertaking a number of reforms. The company should strengthen their commitment to transparency by adopting an organisation-wide information disclosure policy that identifies what. However. when. The company is including information in the pocket edition of the Code of Conduct for Toyota employees and promoting its use with boards. staff issues etc). In this regard. Toyota makes a strong public commitment to evaluating their environmental impact and has a comprehensive environmental management system to realise this. evidence was identified in the 2005 Environment and Social Report indicating that Toyota is working to increase awareness of its compliance hotline among employees. and that mechanisms are in place to ensure the dissemination of lessons and best practices on environmental evaluations.Toyota ranks fourth among the ten assessed corporations for their capabilities for evaluating social and environmental impact scoring 52 percent. contractual confidentiality. Toyota should also strengthen their capabilities for engaging external stakeholders by making a commitment to good practice principles on stakeholder engagement. There is reference in the 2005 Environmental and Social Report to the company’s commitment to assure confidentiality of complainants and the use of an independent outside attorney to run the hotline. which manages action policies and goals. Toyota should disclose the policy that guides how complaints are handled. and how information will be made available and commits to responding to all information requests within a certain period of time. The disclosure policy should also commit the company to being transparent with all information other those included in a set of narrowly defined conditions for non-disclosure (e.

evaluation. yet how these commitments translate into practice is equally important. The presence of a policy at the global office indicates a public commitment to the dimensions of accountability and enables stakeholders to demand compliance with these policies. At the global level. The project team at the One World Trust is actively seeking innovative ways to assess accountability in practice both at the global office and field levels. The study investigated the extent to which these organisations have in place the capabilities – policies and systems – at headquarters or the global office that foster accountability to communities they affect and to the wider public. non-governmental and corporate sectors according to four key dimensions of accountability – transparency. Such assessments will help build a more comprehensive understanding of an organisation’s accountability. participation. For a full list of indicators against which each of the 30 organisations were assessed click here or for further information on the 2006 Global Accountability click here. and complaint and response mechanisms.The 2006 Global Accountability Report assessed the accountability of 30 global organisations from the intergovernmental. . organisations need to have in place enforceable policies on key dimensions of accountability in order to promote consistency in approach both at different levels throughout the organisation and in relation to their diverse stakeholder groups.

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