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Back to Global Corporate Governance Trends for 2025
Ongoing focus on UK competitiveness
The UK will see continued focus on balancing its robust governance environment with a drive for economic competitiveness in 2025.
The Financial Reporting Council (FRC) will deliver its updated UK Stewardship Code in the first half of 2025, with a commitment to ensuring the Code continues to drive better stewardship outcomes while supporting UK capital markets and reducing reporting burdens. Key proposed changes include a streamlining of principles intended to reduce the reporting burden and a revised definition of stewardship, which clarifies the primary purpose of stewardship as supporting the delivery of financial returns for clients and beneficiaries, removing the assumption that good stewardship must create value for the environment and society.
The FCA released the biggest changes to the UK listing regime in over three decades—removing the need for votes on significant or related party transactions, and offering flexibility around enhanced voting rights. These shifts are expected to drive capital markets activity in 2025, although skepticism remains over their anticipated effectiveness and the potential for lower quality admissions.
Senior executive remuneration will also continue to be reviewed through the lens of UK competitiveness. Some restrictions are loosening, including bonus caps and deferrals for bankers, as well as a willingness from some remuneration committees to pursue bespoke structures that may attract international talent or reflect particular business situations. Nevertheless, a wholesale change in remuneration philosophy is unlikely.
Continued expansion of board agenda
Demands on boards and board composition continue to grow, with board chairs needing to balance between directors with newer, topical areas of expertise (particularly in AI, cybersecurity, and climate transition) and those with the experience and battle scars won through navigating economic cycles and geopolitical shifts. Diversity will remain important; however, with the 40% target largely reached at the board level in the FTSE 100, FTSE 250, and FTSE 350, and the Parker Review target largely reached in the FTSE 100, the focus will extend to management teams and senior talent development.
The inclusion of the long-awaited Audit Reform and Corporate Governance Bill in the new government’s legislative agenda sets a path for the evolution of the FRC into a new body – the Audit, Reporting and Governance Authority (ARGA) – with clearer statutory standing and fundraising powers. We expect continued debate around the implications of proposed legislation, which gives this body the power to hold individual directors accountable for failures of reporting under the Companies Act. This was previously limited to directors who were qualified accountants. The proposed Bill will also amend the definition of a Public Interest Entity to include large private companies, bringing them closer to the governance requirements for listed companies.
Solid ESG foundations in an era of heightened uncertainty
In an era of continued macroeconomic and geopolitical instability, the UK’s long-established and well-embedded governance model and culture of responsible stewardship provide boards with a solid platform on which to operate, potentially mitigating the impact of external forces. Changes to the Stewardship Code notwithstanding, commitments to principles of sustainable leadership, diversity and inclusion, and broad stakeholder and social consideration appear well-embedded within companies and less likely to be influenced by geopolitical change. While there are examples of policy row-back in sustainability efforts, these shifts are anticipated to be less significant than in other markets. The UK is expected to adopt the ISSB reporting standards for sustainability, and the board agenda will shift from policy setting to reporting, with a focus on materiality and transparency.