PIRC Voting Guidelines 2025 move closer to market

PIRC (Pensions & Investment Research Consultants), the independent shareholder advisory body, has updated its Shareholder Voting Guidelines. These are available for subscribers only. The 2025 edition shows a marked move towards more mainstream positions than espoused by PIRC in the past, in particular, when it comes to shareholder pre-emption rights, share buybacks and executive remuneration. 

Key differences between the previous and current guidance, include the following.

Disapplication of pre-emption rights authorities

The 2025 Guidelines now reflect the limits permitted by the Pre-Emption Group's current Statement of Principles. Whilst the 2024 Guidelines still referenced a 5% limit for disapplying pre-emption rights, the 2025 Guidelines permit a general disapplication of pre-emption rights of up to 10% of issued share capital, with an additional 10% for acquisitions or specified capital investment.

This change has been slow in coming but brings the Guidelines into line with generally-accepted market standards and expectations designed to give companies greater flexibility to raise capital efficiently while still protecting shareholder interests.

Share buybacks and capital stewardship

The language on share buybacks is noticeably softer in the 2025 Guidelines and more supportive of share buybacks being carried out as long as they benefit shareholders. Boards should make a clear, cogent, and compelling case for how the authority benefits long-term shareholders and that directors are not conflicted. The Guidelines set explicit thresholds: authority must not exceed 10% of issued share capital, buybacks should not be conducted at more than a 5% premium to market price, and the authority must expire within 18 months or at the next AGM.

In addition, the 2025 Guidelines emphasise the risk of “creeping control", where ownership stakes of significant shareholders are increased, as well as requiring disclosure of previous buyback programmes and their impact on executive remuneration.

Shareholder rights and general meeting formats

PIRC supports shareholders' rights to attend meetings in person as “it is crucial to maintain direct shareholder participation in meetings". Hybrid meetings are acceptable where they provide additional virtual communication for those unable to attend physically. Virtual-only meetings and amendments to company articles which permit virtual-only meetings, will be opposed.

Where this shareowner right is deemed to have been removed, PIRC will consider withdrawing support for the election of the chair of the board, and other directors, if they are noted as having been involved in taking the decision to remove the ability for shareowners to attend meetings in person.

Further, PIRC will recommend oppose votes on the election of the chair if a meeting is virtual-only “without sufficient justification", even if a hybrid format is proposed in the Articles of Association. Holding a meeting in this way will be treated as an undue restriction of shareholders' rights to participate.

Audit and financial controls

The Guidelines, as before, emphasise the need for auditor independence, regular rotation, and disclosure of non-audit fees. However, more controversial language alleging that directors are confused by "faulty accounting standards" has been removed, as has the statement automatically recommending against certain audit firms for allegedly failing to respond to calls from PIRC to justify the way in which they conduct audits. 

Directors' remuneration

The remuneration section has been significantly re-written and a number of unconventional ideas abandoned (such as abolishing long-term incentive plans or LTIPs). 

However, PIRC remains firmly against excess pay and continues to diverge from generally accepted market practice in several areas.

Board composition and diversity

The gender diversity expectation has been raised to at least 40% for FTSE All-Share companies (previously 33%). This is unsuprising as it aligns the PIRC Guidelines with the targets set out in the UK Listing Rules and the recommendations of the FTSE Women Leaders Review 2024.

The 2025 Guidelines also clarify that PIRC will recommend an oppose vote on the election of the nomination committee chair in FTSE 100 companies which fail to meet Parker Review targets, and an abstention in FTSE 350 companies where there is a lack of disclosure.

Committee chairs

A new paragraph drawing attention to the responsibilities of the chairs of board committees has been included in the latest Guidelines. PIRC expects the chairs of the audit, nomination, and remuneration committees to take full accountability for the decisions and governance of their respective committees. If the chair of a relevant committee is not up for election and significant concerns have been identified, PIRC will recommend opposing the most senior member of the board who serves on the relevant committee. If no such senior member is available, PIRC will recommend opposing the member of the committee with the longest tenure on the board.

Where there is no specific committee (e.g. to deal with sustainability issues), PIRC will hold the chair of the company accountable for governance shortcomings.

Controlling shareholders

Although UK Listing Rules no longer require shareholders with over 30% stakes to enter into relationship agreements, the PIRC Guidelines have retained a recommendation for formal relationship agreements with disclosed terms.