UK pension funds, Railpen and USS, create shareholder voting alliance

Schemes pool governance expertise and voting resources.

Two of the UK’s largest pension funds, Railpen and the Universities Superannuation Scheme (USS), have formed an alliance to coordinate their share voting at company meetings, with a view to creating a global voting resource to be used by other pension funds.
“As two large asset owners with a clear commitment to, and experience in, engagement and long term active ownership, Railways Pension Trustee Ltd. (Railpen) and Universities Superannuation Scheme Ltd. (USS) have pooled governance expertise and resources to convene a voting alliance,” the schemes said. The pact will initially cover companies in the FTSE All Share index.
The two funds, respectively worth £15 billion (€16.5bn) and £21bn (€23bn), are two of the most prominent shareholder activists in the UK. Despite the common policy on governance, each will cast their vote on an individual basis. The alliance will not provide voting advice and will write to investee companies as a follow up to voting where necessary.The funds said: “It is hoped the alliance will provide an infrastructure for engaged voting for other pension funds – domestic and overseas – in due course.” Railpen and USS said they may also start working together to influence the governance agenda of UK plc. by providing a “pension fund perspective as an alternative to the messages conveyed by large money managers and investor representative bodies”.
The two pension funds stress that each is committed to voting their shares beyond the scope of the alliance, both domestically and internationally. Neither will be under any obligation to vote in accordance with the policy or that of another alliance member.
The policy is intended to deal with issues not covered by the UK’s Combined Code on Corporate Governance, or which require greater emphasis or are specifically left open for shareholders to resolve with company boards. Both schemes say they discourage “passive box ticking” by company management and aim to take an informed and pragmatic approach to voting.