Railpen, the £34bn UK pension fund, says it could vote against board chairs who push through significant transactions without a shareholder vote, a move that continues opposition to listing reforms backed by the chancellor Rachel Reeves.

The news from Railpen comes in an update on the fund’s global voting policy, which takes as its theme “resisting the ‘race to the bottom’ on corporate governance”.

Railpen’s revised voting policy includes a strong line on voting against attempts to weaken external auditor liability. The fund also declares it will oppose companies attempting to reincorporate in jurisdictions considered to have “significantly fewer protections for shareholders”.

There is also a warning for executives: Railpen will oppose efforts to “expand exculpation”—proposals to protect executives from being held accountable for mistakes or failures.

Direction of travel

In a statement signed off by senior staff, Railpen says: “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 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.”

In July, the Financial Conduct Authority (FCA) signed off on reforms that would do away with the need for a shareholder vote on related-party or significant transactions and lifted the need for a sunset clause on dual class shares.

The reforms were opposed by investment managers, and in particular by the International Corporate Governance Network (ICGN). At the time, ICGN chief executive Jen Sisson said: “The risks to shareholders are clear, the benefits of these reforms are not.”

Chancellor Rachel Reeves, backed the FCA saying the changes were a “significant first step towards reinvigorating our capital markets”.

‘Graduated’ audit reports

Railpen’s stance on audit comes through commissioning a review of the sector. New guidelines say Railpen will vote against efforts to “indemnify” external auditors and will not support efforts to limit their liability. Railpen’s review found there were “low levels” of investor engagement in audit issues and suggested audit information should be improved. The guidelines say the fund will “encourage’ companies to publish more detailed “graduated” audit reports.

The fund is emphatic. “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.’

Efforts to adjust UK corporate governance follow growing concerns about the declining number of companies listed in London and the trend for new listings to choose elsewhere, mostly the US, rather than the LSE.

In recent weeks, speculation has grown that mining giant Rio Tinto will withdraw from London, while Nik Storonsky, the chief executive of fintech company Revolut, has declared that listing in London is “not rational”, based on the liquidity available in the US.

Recently, however, news emerged that French media player Canal+ is aiming to list in the City, prompting the Financial Times to ask: “Is this the beginning of London’s stock market revival?”

Concern about London also prompted one City lobby group, the Capital Markets Industry Taskforce (CMIT), chaired by London Stock Exchange chief executive Julia Hoggett, to call for a “reset” of UK governance standards, arguing that meeting requirements has become a burden.

The group was successful in persuading the then Conservative government to U-turn on planned reporting requirements that would have seen companies publish new resilience, audit and assurance and fraud prevention reports.

There is an ongoing debate about the state of the UK’s corporate governance. Is it being dumbed down to chase investment, or are companies overburdened by demands from watchdogs and regulators? Railpen has decided it needs to hold a line.