Corporate Governance / Risk Management / Compliance

Aiming to Steadily Increase Corporate Value Over the Long Term

Toyota's top management priority is to steadily increase corporate value over the long term. In order to achieve that, Toyota builds favorable relationships with all of its stakeholders, including shareholders, customers, business partners, local communities and employees. We are convinced that providing products that fully cater to customer needs is essential to achieve stable, long-term growth. Given this situation, Toyota is seeking to strengthen its corporate governance through various policies in order to further enhance its competitiveness as a global corporation.

Toyota's Basic Approach to Corporate Governance

Specifically, Toyota has introduced a unique management system focused on prompt decision making for developing our global strategy and speeding up operations.
Furthermore, Toyota has a range of long-standing in-house committees and councils responsible for monitoring and discussing management and corporate activities from the viewpoints of various stakeholders to ensure heightened transparency and the fulfillment of social obligations.
Toyota has a unique corporate culture that places emphasis on problem solving and preventative measures. Toyota's approach is to build in quality through manufacturing processes, enhancing the quality of everyday operations and consequently strengthening corporate governance. Toyota's management team and employees conduct operations and make decisions founded on that common system of checks and balances and on high ethical standards.

Toyota's Management System - Systems for Ensuring Appropriate Management

In the current managerial system, introduced in 2003, the Chief Officers, who are directors, serve as the highest authorities of their specific operational functions across the entire company, while non-board Managing Officers implement the actual operations. The distinctive feature of this system is that based on Toyota's philosophy of emphasizing developments on the site, the Chief Officers serve as the link between management and on-site operations, instead of focusing exclusively on management.

This system enables the management to make decisions directly with on-site operations, by reflecting on-site personnel opinions on management strategy and swiftly implementing management decisions into actual operations.

In March 2011, Toyota announced the "Toyota Global Vision" and commenced "Visionary Management."
In April 2011, Toyota reduced the decision-making layers and at the general meeting of shareholders in June 2011, reduced the size of the Board of Directors, in order to swiftly communicate the views of customers and information from operations on-ground to management and facilitate rapid management decision making.
In April 2013, Toyota made organizational changes with the aim of further increasing the speed of decision-making by clarifying responsibilities for operations and earnings. The automotive business was divided into four units and an Executive Vice President was put in charge of the operations of each unit in order to realize organizational change that supports operations and earnings responsibility.
Additionally, in June 2013, three Outside Directors were appointed in order to further reflect the opinions of those from outside the company in management's decision-making process. Toyota believes that the Outside Directors will advise the company in the management decision-making process based on their broad experiences and insight in their respective fields of expertise.
Toyota has adopted an auditor system to monitor management. Four of Toyota's seven corporate auditors are external auditors employed to increase transparency of corporate activities. Since 1996, Toyota has convened periodic meetings of its International Advisory Board (IAB). The IAB consists of approximately 10 distinguished advisors from overseas with backgrounds in a wide range of fields, including politics and economics. Since 2011, Toyota has also convened Regional Advisory Committees as needed in major regions. such as North America, Europe and Asia.and receives advice on diverse business issues from a global perspective.

Under the basic policies established in May 2006, Toyota implements an internal control system while conducting necessary enhancements. Responding specifically to a series of quality issues that caused anxiety for Toyota customers, it established the "Toyota Special Committee for Global Quality" in March 2010, and the "Risk Management Committee" in June 2010.

Toyota's Corporate Governance

Working to ensure fair and transparent corporate governance by emphasizing frontline operations and multidirectional monitoring.

Toyota's Corporate Governance

Basic Approach to Internal Controls

An internal control system has been developed under the following basic policies organized in May 2006.

Basic Approach to Internal Controls
Fundamental Approach
  • Draw out the good will, enthusiasm, and autonomous decision-making abilities of the people who perform work, based on the idea of "respect for people"
  • Establish structures within the work processes carried out by people and organizations that incorporate internal controls and establish checks and balances as well as management and oversight by directors
  • Establish inter-departmental organizations to supplement internal controls
Basic Policy
  1. Legal compliance by Directors
  2. Retention and management of information relating to the execution of responsibilities by Directors
  3. Regulations and other systems related to the management of risk of losses
  4. Efficiency of execution of responsibilities by Directors
  5. Legal compliance by employees
  6. Appropriateness of the business operations of the group
  7. Employees assisting the Corporate Auditors
  8. Independence of employees described in the preceding item (7)
  9. Report to Corporate Auditors
  10. Ensure the efficient execution of audits by the Auditors

Corporate Governance Reports

The report contains a summary of the following items:

  • Capital structure, business attributes, and other basic information;
  • Organization and structure
  • Implementation of measures for shareholders and other stakeholders;
  • Basic approach to the internal control system and its development;
  • Other information.

Toyota's Basic Philosophy Regarding Risk Management

In response to the series of quality-related issues that occurred in 2009, Toyota has been reinforcing its risk management systems. A Risk Management Committee was established under the CSR Committee in June 2010, and the appointing of risk managers and other measures were taken globally to prevent and reduce all risks that may occur in business activities.

Implementation Systems

Appointment of Risk Management Personnel

Toyota appointed a Global Chief Risk Management Officer (CRO) to head global risk management and established systems under the Global CRO to monitor risks on a daily basis. This makes it possible to respond immediately in the event that a risk occurs. Regional CROs are appointed under the Global CRO to oversee individual regions, and each region has its own risk management system. In addition, Chief Officers and functional secretariats are responsible for managing risks within the company according to function, and they coordinate and support regional risk management relating to their specific functions.

Actions of the Risk Management Committee

The Risk Management Committee meets twice annually to identify all risks that may impede business activities and take action to prevent those risks. The Committee is chaired by the Global CRO, and its members include regional CROs and all Senior Managing Officers and Chief Officers. The Committee works to manage and prevent risks by reporting on major risks in each region, confirming all current risks, and reporting on the status of measures addressing immediate and serious risks.

Organization of the Risk Management Committee

Basic Approach to Internal Controls

An internal control system has been developed under the following basic policies organized in May 2006.

Basic Approach to Internal Controls
Fundamental Approach
  • Draw out the good will, enthusiasm, and autonomous decision-making abilities of the people who perform work, based on the idea of "respect for people"
  • Establish structures within the work processes carried out by people and organizations that incorporate internal controls and establish checks and balances as well as management and oversight by directors
  • Establish inter-departmental organizations to supplement internal controls
Basic Policy
  1. Legal compliance by Directors
  2. Retention and management of information relating to the execution of responsibilities by Directors
  3. Regulations and other systems related to the management of risk of losses
  4. Efficiency of execution of responsibilities by Directors
  5. Legal compliance by employees
  6. Appropriateness of the business operations of the group
  7. Employees assisting the Corporate Auditors
  8. Independence of employees described in the preceding item (7)
  9. Report to Corporate Auditors
  10. Ensure the efficient execution of audits by the Auditors

Corporate Governance Reports

The report contains a summary of the following items:

  • Capital structure, business attributes, and other basic information;
  • Organization and structure
  • Implementation of measures for shareholders and other stakeholders;
  • Basic approach to the internal control system and its development;
  • Other information.

Promoting Open and Fair Corporate Activity

Toyota's Basic Philosophy Regarding Compliance

The Guiding Principles at Toyota state that Toyota will "honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world." It is in this process that Toyota seeks to maintain compliance. In accordance with the Basic Approach to Internal Controls, Toyota is promoting initiatives centered on the construction of framework such as that for adopting and implementing the Code of Conduct and human resource development through education and other means. Toyota has also established consultation hotlines so no issues are overlooked and detailed responses can be made.

Checking Activities to Enhance Compliance

In FY2008, Toyota started checking activities to enhance its compliance structure. In FY2009, Toyota also started the checking of subsidiaries in addition to internal checking. These activities are being implemented annually, with improvements incorporated on an ongoing basis. The results of the activities were reported to the CSR Committee, and Toyota continues to push ahead with improvements based on the results.

Education and Training to Ensure Thorough Compliance

To ensure that awareness of compliance issues extends from senior managers to all other employees, Toyota conducts education and training programs for directors, newly-appointed departmental general managers and newly-recruited employees in addition to company-wide e-learning programs. Toyota also conducts seminars on business compliance regarding topics such as copyright, security control and products liability law as well as on-demand seminars on various topics conducted by lecturers who visit individual divisions as needed.

Corruption Prevention Measures

In response to the global expansion of its business and rising societal demands, Toyota adopted the Anti-Bribery Guidelines in 2012 to completely eliminate corruption. Toyota is strengthening its preventive measures and working to prevent corruption by raising awareness and spreading the anti-corruption message through internal training and education and informing business partners of its anti-corruption stance.

Major Educational Themes

  • Contract
  • Anti-Monopoly Act
  • Act against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors / Act against Unjustifiable Premiums and Misleading Representations
  • Companies Act / Regulation for Insider Trading
  • Copyright
  • Intellectual Property Rights
  • Product Liability Act
  • Personal Information Protection Law
  • Information Security Management
  • Anti-Bribery and Others

The Compliance Hotline and Other Hotlines

Toyota has established a number of hotlines for swift and appropriate resolution of issues related to compliance, gender harassment, working conditions, and mental and physical health. The Compliance Hotline in the chart below allows employees to have consultations concerning compliance-related issues and has been set up at an outside law firm (subcontractor). Upon request, the content of consultations is conveyed anonymously to a secretariat within Toyota and the details are investigated with scrupulous care to ensure that the identity of the employee having the consultation is not revealed. If the results of the investigation indicate a compliance-related issue, a response is immediately implemented.

Compliance Hotline Response Procedure

Consuitations

Toyota Code of Conduct

The Toyota Code of Conduct (adopted in 1998 as the Code of Conduct for Toyota Employees and revised in March 2006) organizes the basic attitudes necessary for people working at Toyota to put the Guiding Principles of Toyota into practice and to fulfill social responsibilities and indicates specific points to keep in mind.

It is a tool to help employees maintain proper awareness as employees of Toyota, consider independently the conduct in which they should engage and carry out that conduct. All employees carry out their everyday operations based on a shared awareness of these principles.

Guiding Principles at Toyota

The Toyota Code of Conduct