Working Toward the Mobility Society of the Future

Message from the President The Source of Our Value Creation: What Makes Us Toyota Value Creation Story: Working toward the Mobility Society of the Future Business Foundations for Value Creation Corporate Data >Message from the CSO >Roundtable Discussion with the Outside Directors > Dialogue with Institutional Investors on Corporate Governance > Corporate Governance Message from the CFO > Capital Strategy >The Environment > Vehicle Safety > Quality and Information Security > Intellectual Property and Privacy Value Chain Collaboration >Human Rights Diversity and Inclusion >Human Resource Development >Health and Safety and Social Contribution Activities Risk Management and Compliance Roundtable Discussion with the Outside Directors What Does Toyota Need for the Future? This roundtable discussion with the Outside Directors took place on September 15, 2022. How have your perspectives on Toyota changed since you took office as Outside Directors? Sugawara We are now in our fifth year as Outside Directors. Compared with when we took office in 2018, the Board of Directors' discussions have significantly more substance. I think this is because the Board has secured more time for strategic discussions by raising the bar for items that need to be decided by the Board, fully dele- gating routine items to the executives, and, when such matters do go to the Board, processing them as paperwork to avoid taking up meeting time. Because of the COVID-19 pandemic, we don't all meet in person as often as we used to, but the increased substance of our discussions more than makes up the difference. On the other hand, there is still considerable room to improve the effectiveness of the Board of Directors. Also, while President Toyoda is leading Toyota's electrification strategy going forward, I think that there are aspects that the Board of Directors should take the lead in discussing with regard to Company-wide areas to reinforce. Craven I knew little about Toyota, really, when I joined as an Outside Director. In fact, I was most surprised when Akio offered me the position. So, I had a lot to learn, and, as Mr. Sugawara explained, I have seen several positive changes, which I've observed with great pleasure. The Board of Directors' discussions are very open, and there is a good division of roles and bal- ance between the executives and the Outside Directors. As one example of this openness, I've been very pleased with receiving the notes from the regional CEOs weekly meeting with the executive vice presidents, president and banto. I think that it has really shown more of the inside workings of the Company to the Outside Directors. In the notes from one of those meetings, the president stated very clearly that he needs to know the facts, and he can only operate on the facts. Indeed, ensuring that the facts are received and then passed on accurately and wholly is important to enable the president and executive vice presidents to make the best decisions possible. This kind of concrete initiative has, I think, improved the balance between the executives and Outside Directors. Kudo When I came onboard with Toyota, I found that the culture was much stronger than I had imagined. Toyota has developed and honed itself over decades, valuing Toyoda Principles and the wisdom and techniques of the Toyota Production System (TPS), and its strong culture is backed by shared, cherished values. I think that the focus on easing burdens and producing happiness for all resonates with all of us Outside Directors. At the same time, however, a strong culture can be a hindrance to change. 2018, when we took office as Outside Directors, was right around the time many changes at Toyota were beginning, and I sensed significant discord internally. Toyota has a long history, and it was performing strongly, so management had to take great pains to convey to employees the meaning of transforming into a mobility company. By overcoming that hur- dle, management and employees were able to align their efforts to act with determination and urgency to deepen Toyota's operational excel- lence, building on the TPS while transforming Toyota into a new mobility company brimming with creativity without changing its culture. As these efforts advanced, I sought to fulfill my role as Outside Director by bridging the gap between the Company and outside stakeholders in order to contribute to Toyota's medium- to long-term cor- porate value enhancement. Do you feel that the perception of Toyota among the public differs from the reality inside the Company? Craven I'm not sure that I see a big gap between the opinion of Toyota among the public at large and that from within. For example, I fully support the president's view of having a far wider set of options moving for- ward, beyond just battery electric vehicles (BEVS). Recently, Toyota has been criticized by certain environmental organizations and investors, and I think Toyota needs to respond to such opinions more proactively. I'm a great believer in communi- cation. You don't always get your message across the first, or even the second time. You have to keep at it. Without strong communication, Toyota's reputation could slip. This would be unfortunate, because it's not fair. Toyota must communicate effectively to stakeholders on such topics as ESG and carbon neutrality. More senior executives have to take up that mantle to help put those messages out. In saying all this about what Toyota should improve, I don't mean to sound negative. I'm so proud to be part of this great company. But, we can get the message out there in a better, more consistent manner, and get out in front of issues, rather than waiting for criticism. It will take time, but we can do it. Kudo I have three points to add. First, while Toyota in some ways represents Japan in world, I think that it is not at all sitting on its laurels, but always working to protect stake- holders and acting with an appropriate sense of urgency. I don't see this changing going forward. Next, as Sir Craven mentioned, some are say- ing that Toyota is not fully committed to carbon neutrality and delaying the shift toward BEVS to protect its existing businesses. Toyota, however, is working very seriously to provide equality of mobility globally, including in countries that do not have access to green energy. As an Outside Director, I try to dispassionately examine Toyota's initiatives, alongside those of its competitors, and offer my opinion accordingly. Finally, I often hear questions about whether participants in Board of Directors meetings feel free to speak their minds, and whether the opin- ions of Outside Directors are really listened to. As Sir Craven and Mr. Sugawara mentioned, Toyota's executives offer information openly, and meetings are conducted with care in a way that makes it easy to speak up. The Board of Directors is indeed a forum for discussion among both the internal and outside participants. The participation expected of us requires that we learn about the topics at hand. I think that there is sometimes a perception that Outside Directors, especially when they are women, are just for show, but I take my TOYOTA MOTOR CORPORATION 32 INTEGRATED REPORT