Voting at shareholder meetings in Japan may become more consequential if the decision by Japanese megabanks to divest their strategic holdings in Toyota Motor triggers a broader unwinding of cross-held shares among the country¡¯s biggest companies.

Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group will start selling ?1.32 trillion ($8.5 billion) of stock in the world¡¯s No. 1 carmaker, people with knowledge of the matter said. Insurance firms, which have already indicated that they plan to cut their holdings to zero, may also follow suit.

The potential exit of key stakeholders may lead to less stability and predictability for boards and management of listed companies across Japan, and inject more drama into mostly procedural annual meetings. The government has been pushing for a broader unwinding of cross shareholdings that cemented business relationships for decades in order to improve corporate governance and bring more dynamism into the corporate sector.

Although the banks will take advantage of Toyota¡¯s plan to buy back its own shares, the divestments will happen over time in order to minimize the impact on the company¡¯s stock price, said the people, who asked not to be identified because the information isn¡¯t public. Given their plan to sell in stages, any ripple effect from divestments probably won¡¯t appear until next year¡¯s general meeting, at the earliest.

Toyota¡¯s shareholders will meet later this month, on June 18. Three proposals have been submitted ahead of the meeting at its headquarters in Toyota City, Aichi Prefecture, where 10 board members, including Chairman Akio Toyoda, face reappointment.

In May, proxy advisers Institutional Shareholder Services and Glass Lewis & Co. urged shareholders to vote against Toyoda, citing recent issues with safety certification at a pair of subsidiaries as well as the lack of independence on the board.

A representative for Toyota wasn¡¯t immediately available to comment.

Toyoda, grandson of the company¡¯s founder, stepped aside as chief executive officer to become chairman last year. During his 14-year tenure, he was closely involved in new product development, and helped Toyota overcome the 2011 Great East Japan earthquake and the COVID-19 pandemic. Record vehicle sales of 11.2 million units in 2023 has helped keep Toyota ahead of Volkswagen as the world¡¯s top carmaker for four straight years.

Shareholder votes for Toyoda¡¯s reappointment stood at 98.3% in 2020, but that ratio has since dipped. It was 84.6% last year, the lowest among board members. The decline in support stems from criticism that Toyota is dragging its feet in the shift to battery electric vehicles, according to Julie Boote, an analyst at London-based research firm Pelham Smithers Associates.

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