Railpen strengthens its global Voting Policy for 2025

The policy sets out Railpen’s four corporate governance themes: corporate culture and focus, board composition and effectiveness, remuneration and alignment of incentives, and shareholder rights, risks, and disclosures, in an accessible format for Railpen’s portfolio companies, external managers and members.

This year, Railpen maintains its commitment to strong corporate governance protections, 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. Following the release of its report Acting on Audit: an investor stewardship perspective, Railpen will also in 2025 strengthen its voting and engagement activities to encourage high-quality audits at portfolio companies. Elsewhere, Railpen has clarified its position on ESG issues such as anti-microbial resistance and plastics.

Resisting the “race to the bottom” on corporate governance

Good corporate governance is central to the creation of sustainable financial value. In 2025, Railpen will continue to 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 EU Listing Act, both of which weaken investor protections [and may lead to worse outcomes for everyday savers].

Railpen’s 2025 voting policy therefore underlines its commitment to the principle that a company’s 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 a result, Railpen has strengthened three specific engagement and voting commitments in 2025: 

Railpen will consider a vote against the Chair of the Board where companies in any jurisdiction choose to go ahead with a significant related party transaction (RPT) or a significant transaction without a shareholder vote in advance.
Railpen will vote against any move by a company to re-incorporate in a domicile which it considers to have significantly fewer protections for shareholders, unless a compelling rationale is provided. It may also vote against the Board Chair.
Railpen will oppose resolutions which 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.

Reporting and audit

Following the publication of Railpen’s Acting on Audit: an investor stewardship perspective report with Governance Perspectives earlier this year, the team will expand its voting and engagement activities for the topic in 2025. More specifically, Railpen clarifies that it will vote against proposals to indemnify external auditors and that it will likely not support proposals that limit auditors’ liability. Additionally, Railpen will encourage portfolio companies to request graduated findings from auditors, and will vote against companies that do not appropriately explain how they have addressed previously identified weaknesses.

Emerging ESG risks

Alongside its existing policies and engagement on material ESG issues, Railpen has for 2025 expanded its views on Artificial Intelligence (AI), and formally articulated its perspective on anti-microbial resistance (AMR) and plastics use at portfolio companies.

On AI, Railpen expects portfolio companies to act on AI proportionate to risk exposure, business model, and potential impacts, whilst focusing on the key pillars of board accountability, risk management and transparency. Where these expectations are not met, Railpen will consider a vote against the director deemed responsible for oversight. Additionally, Railpen will consider a vote for related shareholder resolutions, including on reporting around AI use and principles, board oversight, human rights risks, misinformation and disinformation risks and workforce implications.

Railpen recognises the systemic risks posed by anti-microbial resistance (AMR), which not only jeopardises the health and wellbeing of millions but poses a risk to investors’ long-term returns. It is encouraging companies to align their businesses, including supply chains, with the World Health Organization (WHO’s) guidance on antibiotic use, and will consider voting in favour of shareholder proposals that call for companies to do so. 

Michael Marshall, Director of Investment Risk and Sustainable Ownership, comments: “Thoughtful voting coupled with constructive engagement with our portfolio companies supports our objective of delivering long-term returns for members. 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.”

Caroline Escott, Senior Investment Manager, Sustainable Ownership, adds: “As an active investor, we rely on portfolio companies’ financial accounts to represent a true and fair view of their financial health, which is why we are setting 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. 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.”