Page 58 - Toyota Under Fire

THE OIL CRISIS AND THE GREA T RECESSION

succeed Katsuake Watanabe as president and CEO; Watanabe
would become vice chairman of the board. Since this came in the
midst of the collapse of sales and profitability as the recession hit
full force, it was easy to infer that Watanabe was being “fired,”
and that Akio Toyoda was being brought in to “fix” the company.
For example, consider this headline from CNN on January 20,
2009: “Japanese Automaker Reshuffles Ranks after Posting Drop
in 2008 Sales.”
That interpretation, which was not uncommon in the press,
rests on a misunderstanding of Toyota’s governance structure.
Toyota is one of a small number of major Japanese companies
that maintain the tradition of having an internal board of di-
rectors. Whereas the gold standard of corporate governance in
American and European companies is a board made up primarily
of independent outsiders, Toyota’s board is almost entirely com-
posed of lifetime Toyota executives. So, for instance, as the reces-
sion hit, Shoichiro Toyoda, Hiroshi Okuda, and Fujio Cho, the
three presidents who preceded Katsuake Watanabe, were on
the board. Other board members are primarily executive vice
presidents who currently run or recently ran large portions of the
company’s operations.
If it weren’t for Toyota’s remarkable history of success, its gov-
ernance structure would be highly suspect—it violates many of
the taken-for-granted principles of good corporate governance
today, which assumes that impartial outside eyes are essential to
help companies make tough business decisions and remain in-
novative and competitive. Why does Toyota cling to this model?
It’s tied to the primacy of the Toyota Way and TPS at Toyota.
The company, with good reason after more than 50 years, feels
that outsiders who do not know TPS, have not lived the Toy-
ota Way, and have not spent years refining their problem-solving

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