Corporate Governance in Toyota Motor Corporation - Case Study Example

TOPIC: CORPORATE LEADERSHIP IN TOYOTA [University’s name] [Author’s name] Introduction Toyota Motor Corporation is a Japanese corporation involved in the production of automobiles (Liker & Convis, New York). The plant is located in Aichi Japan in a total area of 918.32square kilometers. Toyota is ranked 12th largest company in the world regarding revenue. Also, research in 2012, Toyota was ranked as the most major automobile manufacturer ahead of a huge company such as Volkswagen group, General Motors and Ford (Liker & Convis, New York). The same year company reported a production of the 200millionth vehicle. The Company' plants are also capable of producing more than 10million vehicles per year. Due to the production of cars, Toyota is recognized as the largest company in Japan. The Corporation was founded in 1937 by Kiichiro Toyoda.Toyota Motor Corporation produces vehicles under five brand that is Hino, Lexus, Ranz, and Scion. Additionally, the company holds 51.2% shares of Daihatsu and some others likes of Isuzu, Telsa, and some others. Corporate governance in Toyota Basic perspective Toyota has positioned itself as a group of values that are stable and long-term (Bowen: Shannon A.a, 2015). These values are the long-term priority in the management issue. The corporation has maintained this values towards the other stakeholders, employees, partner as well as the customer. The management has ensured the consumers has the best of the quality products, and fully satisfaction. This is also provided by maintaining society trust by sincerely fulfilling it's with accordance to underlying company philosophy. Toyota has typically strived to improve its corporate governance based on the doctrine that preserving and nurturing management efficacy equality and fairness of its corporate activities (Bowen: Shannon A.a, 2015). Toyota Management Board of Directors A board of directors manages Toyota Industries. (McCahery, 2013). This board of trustees' members convenes every month to resolves the important management matters of decision making, enhanced connections with Toyota groups of companies and appointments. Again, the board of directors also has a role to give oversight to the directors in the company who has various duties to perform. Regarding appointment, the corporation board can appoint directors even from outside Japan (McCahery, 2013). This is to ensure that the knowledgeable people globally drain their knowledge in the corporation. However, the appointment of directors from outside was not in practice, until soon when the company decided to be appointing from outside. With this ,supervisory function of the corporate is diversified as many outside directors are willing to build reputation (McCahery, 2013).Decisions, as well as directors' performances are supervised and grade by the C.E.O using the modern technology soft wares. Moreover, the company management decision making is a subject of to board discussions. The management committee includes the following: directors who are above the vice president level, senior managing officers, audits and supervisory board members (McCahery, 2010). This management plays a very critical role in the corporation it deliberates on the assortment of issues concerning important matters such as corporate vision, mission, objectives of attaining every years goal as well as significant investments. At the same time, the discussed agendas are to be signed by the CEO with a help of the chairman since Toyota is a large corporation and decision making needs a large consulting as two heads are better than one (Moodie, 2010). To ensure management is efficient, Toyota Industries have a regional system. The systems were developed by the Board of Directors, and the division systems are subrogated to each business division (McCahery, 2013). For crucial matters in the regional system, the board has set up established Business Procedure Committees, to ensure the President of Toyota meets with the leaders of each business division frequently. The prime purpose is to monitor the status of their business performance (Moodie, 2010). Additionally, the audit, fraud department as well as supervisory board convene at the meetings of Management Council directors, they are to submit monthly status of the business procedures as well as the operations and the shares trending. Also, discussions at the board of directors meetings includes management and procurement as well as contractors performances (McCahery, 2013). The issue pertaining the payment of employees , market investigation ,opening new branches quality production, and technologies are discussed in the meeting. For more sensitive matters and new issues, specifics committees are created by the board to tackle the problem. Audit and Supervisory Board The company has two fulltime sectors of audits and super visionary board (Moodie, 2010). Also, three outside audits and supervisory that also sit in the meeting of board of directors. This audits and super visionary bodies monitors and gives oversight to the directors regarding funds misuse as well as monitor duties too (Moodie, 2010). At the same time, meetings of audits and supervisory board is scheduled to take place annually. The purpose of this meetings is decision making on significant matters relating to auditing since the Corporation has a very wide market worldwide that gives a lot of income. The mode of operation of the fulltime audit and supervisory board members is by carrying out auditing by attending all the meetings and again receiving the ledgers from the company’s directly from the directors (Moodie, 2010). Additionally, the audit sector in Toyota appointment is very selective. To venture to such board Individuals must have earned a lot of trust from the Board of Directors. The personnel's of the board are dedicated personnel as they lias with independent outside auditors to monitor legality and efficiency of funds management .Again, the audit and super visionary board also conduct and overall audit every year to show expenses losses, profits and all information concerning finances (Moodie, 2010).Toyota always tries to ensure equality and clearness of management with Securities Listing Regulations in Japan the corporate has taken a stride to in accountability this is by appointing two outside audit and supervisory board. They are assumed to be more neutral and have no conflict of interests with stockholders (Moodie, 2010). Reliable systems and procedures Since Toyota founding in the 1930s, the company has been surprisingly one of the most successful companies. Toyota has been characterized by their urge to please their customer. Moreover, they have been successful as they are the world leading producer of automobiles. Again, they have been very careful about what they are giving the consumer. They have been able to give the latest cars with the latest technology like the automatic gears. Also, the company has heavily invested in engineering so as to get the best of the results (McCahery, 2013). Toyota Production System Toyota has been the leading in automobiles because of the Toyota Production System (TPS) (Chiarini, 2012).The unorthodox engineering system enables the Japanese biggest plant to produce spheres best vehicle at the lowest cost as well as developing new products quickly. The system is comprised of an integrated socio-technical, management viewpoint and rehearses. The TPS handles organizing manufacturing and logistics for the company. Originally the system was known as just-in-time –production. Other companies like the Chrysler, Ford, General Motors has developed the system due to its efficiency. However, the idea originality is from Toyota. The system has made Toyota what it is today than any other aspect. Industrial engineering is long behind the development of the scheme. Designing out, overburdening, and consistency and to eliminate waste are the main strong points of this system. The value delivery is achieved as the system can deliver the mandatory results smoothly; by designing out which is very necessary to make sure the process is as flexible as required which is referred to as inconsistency. The system also ensures the automobiles making process is as flexible as possible without necessarily stressing which is known as overburdening. Additionally, this flexibility will produce waste that is tactically removed or at times converted to valuable products. In other words, many initiatives are generated by inconsistency or over-run which takes out waste without a specific way to reduce it (Hamada, 2010) Toyota Shareholders activism Below are the major shareholders of the corporation. However, the mentioned below are the major shareholders. Company Name Numbers of shares in thousands Percentage Toyota Motor Corporation 76,372 21 Toyota Industries Corporation 39,312 11.19 Japan trustee services bank, 14,178 4.08 The Bank of Tokyo 8,090 2.3 Mitsui Sumitomo 6000 1.70 Aioi Insurance co.ltd 4,090 1.16 Tokio marine &Nichido Fire insurance 4041 1.15 Automotive Crisis that affected of Toyota In 2008 -2010 the automotive industry was tremendously affected by the global fiscal crisis. European and Asians were manufacturers were significantly though it was primarily felt in America. Also, the recession affected Canada by the basis of the automotive product trade agreement he signed. The industry was further destabilized by the prices of motorized fuels. Additionally, the crisis is were connected previous 5years energy crisis that discouraged the buying of sport efficacy vehicles and pickup trucks which have little fuel consumption. The attractiveness and quite extraordinary profit margins of these vehicles had made the American big three automakers General Motors, Fords, and Chrysler to make them their major focus. The fact that here were few fuel-efficient models to offer to customers, sales began to drop.By 2008 the situation was worse and was felt by the Asians car companies. Car companies from Asia Europe and North America implemented creative strategies to attract unwilling customers as a most proficient high percentage drop in sale as a remedy to the crisis (Hamada, 2010). Major manufacturers like Toyota including the big three were forced to offer wholesale promotions across globe. Nevertheless, Americans companies faced criticism as they were seen to be the cause of the rising fuel prices. Consequently, the North America consumers turned to efficient imports from Japan and Europe that were affordable and user friendly. In other words, after the crisis that made Toyota sales decreased and the company incurred a loss for the first time since the founding. The losses were due to fewer sales in Tundra pickup of as the company as well as scarcities of high demand vehicles such as Corolla, Prius, and Yaris. The loss amounted to $1.7 billion as well as sales drop 32.9 percent and Honda Motor by 29.6 percent (Hamada, 2010). Toyota and Taylorism Other than the Toyota Production system the company believes that the system cannot work Alone. The Company has fully practiced Taylorism. In other words, no company has exercised Taylorism than Toyota (Lee, 2010). That is the company views employees not as tools of work or pair of hand but as knowledgeable asserts who accumulate the wisdom of experience (Lee, 2010). Being steered by Taylorism has therefore invested heavily in people that are its engineers and employees. Again, the Toyota has also invested in organizational capabilities and gets ideas from everyone and everywhere shops, floor, office and the field. At the same time, there has been unfathomable research on human cognition (Lee, 2010). After the research the company came up with that when different aspects of an issue and find practical solutions (Lee, 2010). They were able put into practice, and the company deliberately fosters contradictory viewpoints within the organization and challenges its personnel's to look for elucidations by outdoing differences instead resorting to compromises (Lee, 2010). That culture has been fully incorporated into the company and as a result , the company generates the innovative ideas. Toyota implements the ideas to pull ahead of their competitors completely (Bowen: Shannon A.a, 2015). How to sustain success Success is maintained by the high level of innovation as well as developing systems like the TPS, which is unique and offer great efficiency to the user (Sehested & Sonnenberg, 2011). Additionally, the presence of a well-distributed board that serves the purpose of all and not helping any side. The company should invest in the school of engineering so as to be more innovative. At the same time, though the company is known to have good relation with its employees the rapport should be maintained and if possible, should be able to increase it by far (Sehested & Sonnenberg, 2011.). Again, they should also follow Henri Fayol model of the scientific application in work. With this, the company will be able to sustain itself as the leading producer of the automobiles in the world (Sehested & Sonnenberg, 2011.). Aspects making corporate governance in Toyota less successful In Japan, there is a culture of a dysfunctional internal control system and lack of information. (Monden & al, 2013.) It has played a greater role in recent corporate governance scandals. It wins away the investors' confidence, and they reduced severely. Japan has been using the traditional method called the binary mode where directors and supervisors are elected by the stakeholders. With these process Toyota being a company in Japan, it became a victim (Monden & al, 2013.). There were no outsiders who would be appointed as directors. Again, the stakeholders elected leaders who they were familiar. It led to scandals which resulted in internal control failure. However, Financial Supervisory Commission in Japan announced that companies including Toyota should have independent directors by 2017 (Monden & al, 2013.).Audit committee should be put in place. Again, supervisors are in charge of monitoring managers' job performance as well as corporate operations. Nevertheless, supervisors don't have powers to dismiss directors or administrators’. Therefore, it becomes tough to for them to perform their duties as required (Monden & al, 2013.). E.g. in 2010 Toyota had to recall six million cars in the US and totally 8 million globally. What followed after this was growth stagnation, continued recalls, and lowered corporation credit ratings (Liker & Convis, New York). There has been stiff competition between Toyota and other companies manufacturing automobiles (Liker & Ogden, Toyota under fire, 2011). Though Toyota has been the biggest producer of automobiles in the world, there has been a competition from companies like General Motors, Chrysler and other car making vehicles. Companies like General Motors were big business and had already established roots before Toyota. The companies have already produced the Chevrolet, which is very famous. At the same time, Chevrolet Impala has been used to in international car racing as well the introduction of Chevrolet Volt, a plug-in electric vehicle (Liker & Ogden, 2011).It has made Toyota to on toes to produce more competitive brands. Again, many customers opting to buy the electric since it's fast and efficient (Liker & Ogden,2011). Recommendations To tackle this challenge of dysfunctions and information problem the company should take in place the suggested measure by financial regulatory commission (Rajasekera, 2013). The company should ensure that the appointment of the directors does not only come from stakeholders. It has made it impossible to elect people from outside. Consequently, the company losing in the sector of oversight of the funds and internal control. This has led to scandal like one mentioned above in 2010.This hit the company with an enormous magnitude which almost resulted in the collapse of the enterprise. Again Toyota should make sure its public image is clean, control of internal and external operations (Bowen: Shannon A.a, 2015). On the other hand, the company has faced stiff competition from the other companies (Cusumano, 2011). This has led to the customers of the vehicle to be in other brands of car. General Motors had been a significant competitor especially when they introduced the Chevrolet Volt, which uses a plug-in car. Toyota should make sure they are at par with the competitors by producing vehicles which are more competitive in the market (Cusumano, 2011). Toyota should, first of all, give priority the consumer issue relation (Taneja, 2012). The most significance thing in a corporation is the consumer. To start with consumer satisfaction is paramount for any company that wants to venture into the market. Therefore, it's worth noting the significance of customers in the corporation. The company should be able to make consumers happy by giving promotions and discounts on purchase of their items. On the other hand, the company should ensure that much of the profit is impelled on Research (Taneja S., 2012). When research is empowered my invention, and countless types of the automobile will be discovered in the process. Again, having young minds in the industry is also vital as they are young energetic and ready to work (Taneja S., 2012). Conclusion After the research, it can be concluded that Toyota corporate governance is relatively developed and worth copying. The board of directors is the backbone of the management in the corporation. At the same time, it can be observed that Toyota is much interested in consumers' satisfaction which is vital to company success. Additionally, the auditing process is well developed so as to eliminate vices like corruption. References Bowen:Shannon A.a. (2015). Auto recall crisis, framing, and ethical response:. Toyota's missteps, 41(1):40-49. Chiarini, A. ( 2012). Lean Organization : From the Tools of the Toyota Production System to Lean Office. Milano: Springer,. Cusumano, M. A. (2011). Toyota corporation. Technology Strategy and Management Reflections on the Toyota Debacle., Vol. 54 Issue 1, p33-35. Hamada, K. (2010). Business group management in Japan. Singapore: Hackensakd, N.J. . Lee, B.-H. (2010). The mutation of the Toyota Production System:. adapting the TPS at Hyundai Motor Company., Vol. 45 Issue 16, p3665-3679. 15p. Liker, J. K., & Convis, G. L. (New York ). The Toyota way to lean leadership : achieving and sustaining excellence through leadership development. 2011: McGraw-Hill. Liker, J. K., & Ogden, T. N. (2011). Toyota under fire. New York: McGraw-Hill. McCahery, J. A. (2013). The Present and Future of Corporate Governance:. The Present and Future of Corporate Governance:, Vol. 10 Issue 2, p117-163. 47p. Monden, Y., & al, e. (2013.). Management of service businesses in Japan. Hackensack: NJ : World Scientific, . Moodie, A.-M. (2010). Applied Corporate Governance:. Walking the Talk - CSR and Toyota., Vol. 62, No. 5. Rajasekera, J. j. (2013). CHALLENGES TO TOYOTA CAUSED BY RECALL PROBLEMS, SOCIAL NETWORKS AND DIGITISATION. Toyota challenges, Vol. 18 Issue 1, p1-17. . Sehested, C., & Sonnenberg, H. (2011.). Lean innovation : a fast path from knowledge to value. New York : Springer-Verlag. Taneja, S. (2012). TOYOTA RECALLS: . A STRATEGIC LEADERSHIP PERSPECTIVE., Vol. 9 Issue 2, p125-140. 16p. Taneja, S. (2013). TOYOTA RECALLS. A STRATEGIC LEADERSHIP PERSPECTIVE., Vol. 9 Issue 2, p125-140. 16p. Read More