By Makiko Yamazaki and Daniel Leussink
TOKYO (Reuters) -Proxy adviser Glass Lewis has recommended that shareholders of Toyota Motor (NYSE:TM) Corp vote against the re-election of Chairman Akio Toyoda as a board director at an upcoming meeting, citing his responsibility for the lack of a sufficiently independent board.
Glass Lewis made the recommendation against the chairman of Japan's largest company by market capitalisation at a time when board independence has been under greater scrutiny from investors.
The U.S.-based proxy adviser said only three of Toyota's 10 board nominees are deemed independent according to its classification, short of the proxy adviser's requirement that at least one-third of directors be independent.
Toyota, on the other hand, regards four of its nominees as independent, including the deputy chair of Toyota's main lender, Sumitomo Mitsui (NYSE:SMFG) Banking Corp (SMBC), whom Glass Lewis considers "affiliated".
Glass Lewis' requirement is in line with Japan's corporate governance code, which calls for one-third board independence at firms listed in the Tokyo market's main section.
"In our view, the board does not have a sufficient number of independent directors, which raises serious concerns about its objectivity, independence and ability to perform proper oversight," Glass Lewis said in a report dated May 25.
"In this case, we recommend that shareholders voice their concerns about this issue by voting against nominee Akio Toyoda, chair of the board, who we believe should be held accountable for allowing insufficient independent representation," it said.
Toyota disputed Glass Lewis' report. Although SMBC is a business partner, the size of transactions with the bank is not material and the appointment of its executive "won't conflict with the interests of general shareholders", it said.
Glass Lewis also recommended investors vote against the election of some statutory auditor nominees at the annual meeting on June 14, due also to insufficient independence.
The proxy adviser did not back a shareholder resolution by a trio of European asset managers urging Toyota to improve disclosure of its lobbying on climate change. The company has already shown "significant responsiveness" to shareholders, it said.