Railpen has updated its global voting approach for 2025, strengthening its engagement and voting commitments on issues such as shareholder protections and audit quality.

The voting policy outlines Railpen’s engagement and voting priorities and how it will make voting decisions in the best interest of the members of the railway pension schemes across the UK and international AGMs in 2025.

The policy sets out Railpen’s corporate governance themes of corporate culture and focus, board composition and effectiveness, remuneration and alignment of incentives, and shareholder rights, risks and disclosures.

Railpen confirmed that it will be looking to strengthen its approach to corporate governance issues, introducing new lines that toughen its stance on defending shareholder protections in the wake of moves to weaken shareholder rights in the UK and elsewhere.

Indeed, Railpen said that it will urge portfolio companies to resist the broader “race to the governance bottom” after the 2024 changes to the UK listing rules and the adoption of the European Union Listing Act, which it suggested could weaken investor protections and may lead to worse outcomes for everyday savers.

Given this, Railpen’s 2025 policy underscored its commitment that shareholders should be allowed a formal opportunity to make their views known and felt on transactions and strategic decisions that are fundamental to shareholder value.

As part of this, the group has strengthened three specific engagement and voting commitments in 2025.

In particular, Railpen said it will consider a vote against the board chair where companies in any jurisdiction choose to go ahead with a significant related party transaction or a significant transaction without a shareholder vote in advance.

In addition to this, it will vote against any move by a company to re-incorporate in a domicile that it considers to have significantly fewer protections for shareholders unless a compelling rationale is provided and may also vote against the board chair.

It will also oppose resolutions that seek to expand exculpation to company officers, in recognition that the right to hold company executives to account for negligence and breaches of their fiduciary duty of care is an important shareholder right.

In addition to this, Railpen has committed to strengthening its voting and engagement activities to encourage high-quality audits at portfolio companies in 2025, following the release of its report Acting on Audit: an investor stewardship perspective.

In particular, Railpen clarified that it would vote against proposals to indemnify external auditors and that it would likely not support proposals that limit auditors’ liability.

Additionally, Railpen will encourage portfolio companies to request graduated findings from auditors and vote against companies that do not appropriately explain how they have addressed previously identified weaknesses.

Railpen has also clarified its position on environmental, social and governance (ESG) issues such as anti-microbial resistance and plastics, alongside its existing policies and engagement on material ESG issues.

It said that it expects portfolio companies to act on AI proportionate to risk exposure, business model, and potential impacts, while focusing on board accountability, risk management, and transparency.

Railpen said where these expectations are not met, it would consider a vote against the director deemed responsible for oversight.

It also said it would consider a vote for related shareholder resolutions, including reporting around AI use and principles, board oversight, human rights risks, misinformation and disinformation risks, and workforce implications.

Railpen has also encouraged companies to align their businesses, including supply chains, with the World Health Organization guidance on antibiotic use and consider voting in favour of shareholder proposals that call for companies to do so.

Railpen director of investment risk and sustainable ownership, Michael Marshall, commented: “Our global voting policy ensures we undertake such engagement in a consistent way that is comprehensible to portfolio companies, external managers, and our beneficiaries.

“Updates to our 2025 voting policy reflect our continued commitment to high corporate governance standards and shareholder protections.

“We will continue to advocate for standards that ensure we can best represent members’ interests in 2025 and support our objective of protecting and enhancing long-term investment returns for members.”

Adding to this, Railpen senior investment manager, sustainable ownership, Caroline Escott, said Railpen relies on portfolio companies’ financial accounts to represent a “true and fair” view of their financial health, as an active investor, therefore it explained this was why it set higher expectations for the audit profession and Audit Committees in 2025.

“This complements our ongoing stewardship work to protect high corporate governance standards: both are underpinned by our motivation to create sustainable financial value for members,” Escott said.

“In 2025, on audit, shareholder protections, and elsewhere, we will encourage companies to resist the ‘race to the bottom’ on corporate governance, exercising our vote accordingly.”

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