CalSTRS Votes Against Toyota Proposal to Create Dual-Class Shares
Japan-only dual-class share voting structure benefits select shareholders

News release Ricardo Duran

WEST SACRAMENTO, Calif. – The California State Teachers’ Retirement System (CalSTRS) announced today its decision to vote 4.3 million shares against a proposal at the June 16, 2015, Toyota Motor Corporation annual shareholder meeting that would create a dual-class share voting structure.

CalSTRS does not believe that the creation of a dual class of common stock aligns with the “one-share one-vote” principle that CalSTRS supports. It is not in the best interests of all existing Toyota common stock shareowners – particularly foreign shareowners, such as CalSTRS. 

“Toyota’s Model AA Class Shares would be unlisted and offered only in Japan, thus hindering investors outside of Japan from participating in the share offering,” said CalSTRS Director of Corporate Governance Anne Sheehan. “Additionally, the new share class proposed by Toyota would be structured as debt instruments, with guaranteed and defined dividend payments. Yet, these shares would also have voting rights equal to those of common stock that don’t enjoy this equity risk exposure shield.” 

Toyota’s proposed Model AA Shares would also be convertible into common stock in five years at a conversion rate that has yet to be determined and will ultimately be decided upon by the Toyota board of directors. This raises concerns about potential value dilution to existing common stockowners if a high conversion rate is set.

CalSTRS believes that a single class of common stock represents the best practice in governance. A structure that sustains “one-share one-vote” equally aligns shareowners’ economic interests. 

The California State Teachers’ Retirement System, with a portfolio valued at $193.1 billion as of April 30, 2015, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California’s 879,000 public school educators and their families from the state’s 1,700 school districts, county offices of education and community college districts. 

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