Toyota Motor Corp.’s plan to sell new stock aimed at long-term investors faces opposition by proxy adviser Institutional Shareholder Services, which said the shares could weaken oversight of the company’s management.
Introducing the new class of shares would disincentivize Toyota’s management from reaching out to owners of common stock, and the company has failed to give reasons why regular shareholders would benefit, ISS said in a report. Toyota spokeswoman Monika Saito declined to comment.
Toyota is aiming to align the amount of time investors hold its stock with the lengthy payoff period it faces when investing in development of new technologies that make its cars safer and more fuel efficient. Shareholders will vote June 16 on the company’s plan to eventually sell as much as 500 billion yen ($4 billion) in “Model AA” shares, which would be unlisted and restricted from trading for five years but carry voting rights.
“It is difficult to escape the impression that the company wants to increase stable and silent investors by replacing common shareholders with Class AA shareholders,” ISS said in the report.
Toyota said it plans to sell AA shares for at least a 20 percent premium over common equity, while offering a stepped-up dividend and the option to sell the shares back at the issue price or convert them into common stock.