By Yashoda Fezah, General Manager, CASS (Compliance Administration and Support Services Limited)
In this dynamic environment, we believe that the top 5 corporate governance trends for directors in 2025 will be as follows:
#1: Adopt a proactive approach to economic conditions and geopolitical developments
According to the US-based National Association of Corporate Directors’ (NACD’s) 2025 Trends and Priorities Survey, shifting economic conditions were the most selected trend among this year’s respondents, largely driven by persistent uncertainty stemming from geopolitical volatility. President Donald Trump’s second term is seeing the US pursue protectionist economic policies and creating a shift in US relations with allies and adversaries alike.
Many boards have adopted more comprehensive enterprise risk management strategies to cope with economic volatility and geopolitical uncertainty. At the same time, it is equally important to be proactive rather than reactive, with directors being advised to consider how their decisions will foster long-term growth in 2025 regardless of the political climate.
#2: Nurture young talent and adapt to new work models
Thirty-seven percent of respondents to the NACD survey highlighted competition for talent as a key trend, making it the fourth most selected factor. Indeed, the workplace will transform over the coming years as 58% of the workforce will be millennials or younger by 2030. Since many of them were hired during the pandemic and have primarily worked remotely, talent, risk and culture have dominated the board agenda. Meanwhile, C-suite succession may become challenging with experienced management staff nearing retirement without qualified younger talent to replace them. According to a recent Russell Reynolds report, the number of CEO departures in the S&P 500 increased by 21% in 2024 compared to the prior year, and 22% of all CEO departures in 2024 were the result of a planned succession process.
Such a planned succession process becomes easier as companies concertedly nurture young talent by considering which tools and structures can facilitate innovation and mentoring. Fortunately, many organisations are thinking ahead and renaming board committees to highlight “talent” and “culture.” According to a 2023 Korn Ferry study, between 2016 and 2022, over 40% of S&P 500 compensation committee names were changed to include terms around human capital. As boards evolve to focus judiciously on talent for the whole company rather than a narrow focus on C-suite compensation, companies have added terms like “people”, “talent” and “culture” to compensation committee names. Boards are strongly advised to consider whether hybrid work models that appeal to young talent can bolster the productivity that their organisations need in an increasingly remote working environment.
#3: Enhance diversity of board members and increase reporting tools at their command
Boards have onerous responsibilities, which require a nuanced understanding of the challenges facing the company. Yet, in many cases, lack of diversity in the board makes it difficult to access the skillset needed to make key decisions. Indeed, the range of issues that boards are expected to oversee has multiplied mani-fold to include complex, technical topics such as cybersecurity risk, impact of AI, geopolitical scenario planning, and ESG reporting. Thus, the need for board members with diverse areas of expertise and perspectives has never been greater.
In addition to board diversity, having complete oversight on business activities is key. Hence, many boards are now embracing a shared trend in corporate governance: better reporting mechanisms. It is clear that board members need fast access to data to enhance decision making, and investing in the right tools to ensure completeness and accuracy of data is a key consideration for boards today. Here, proactive boards are increasingly recognising the value of leveraging the right dashboards consistently to centralise risk data, monitor threats, and mitigate them. With technology evolving fast, ESG pressures rising rapidly, and cybersecurity threats looming large, boards are advised to look for ways to streamline and centralise reporting.
#4: Keep pace with AI developments and oversee cybersecurity threats
The Harvard Law School Forum on Corporate Governance emphasises that the past two years have seen a dramatic increase in AI applications. A recent survey indicated that 72% of companies have adopted AI in some form, which has had cascading effects on adjacent industries such as energy, semiconductors and data centers. Accordingly, cybersecurity threats are also a top-ranked trend in the NACD survey, where they were selected as a key board priority by 41 percent of respondents. “Companies must leverage novel AI technologies, while simultaneously earning customer trust and shoring up cyber defenses against growing threats” notes one survey respondent.
This year, more than any other before it, Generative AI is poised to transform the boardroom and, more broadly, corporate operations as well. While opportunities abound, the challenges are no less pressing. Generative AI has made organisations more susceptible to attacks by an estimated 67%, while the cost of breaches is projected to rise from US$9.22 trillion in 2024 to US$13.82 trillion by 2028. Even as unprepared organisations could face potentially high damage from cybercriminals, more than two-thirds of organisations are delaying AI investment decisions. This delay is due to an expected regulatory development as the EU AI Act applies its first provisions from February 2025 onwards. Boards are advised to keenly follow the ongoing implementation of Europe’s EU AI Act which sheds light on many regulators’ priorities: ethics and transparency.
#5: Build a corporate culture that promotes transparency and enhances oversight
Thus, in 2025, the greatest challenge will be building a corporate culture that roots out bad actors and effectively promotes transparency. Boards are strongly advised to take a closer look at legal and regulatory compliance practices as a cornerstone of corporate culture. A deep understanding of the organisation’s compliance and cultural challenges not only enhances oversight but also gives a more human face to the organisation.
Here, for the board to collaborate with senior leaders might be a win-win solution. While boards have typically maintained arm’s length relations with senior leaders, integrating leadership with board directors can advance best practices, due processes, and corporate talents that compliance depends on.
Ultimately, cultivating an ethical and transparent culture also has tangible benefits for the bottom line. Research shows that organisations with strong ethics outperform others by up to 40% across key metrics.
Ladder up in Corporate Governance: Boards to work hand in hand with management
Overall, year 2025 requires boards to be adept and open-minded to navigate complexity, volatility and uncertainty, while striving to achieve corporate efficiencies through digital transformation.
Here, working with management to explore synergies between the board and the C-suite might help directors to ladder up and arrive at business strategies that go beyond traditional work models and run-of-the-mill corporate operations to truly achieve exceptional results.
