Emerging challenges and risks for corporate governance in 2025

In recent years, since the pandemic, there has been a profound shift in the types of risks that companies must face. This has transformed many companies' management models. Additionally, some recent events in the new geostrategic and technological context have emerged forcefully, requiring a review of business strategies. This analysis covers critical decisions: where to invest or divest, in which countries to best sell our products, which markets to source from, how to attract key talent, and how to build competitive advantages by incorporating new technologies such as artificial intelligence (AI) without jeopardizing operations. 

Today, it is no longer a debate whether risks such as worker safety and health, sustainability and climate change, talent shortages, supply chain disruptions, cybersecurity, or social and political instability should be on the board of directors' agenda. The key question is whether these risks should influence the very structure of the board. 

The board skills matrix

Ensuring effective oversight of risk management, mitigation measures, and ultimately their impact on corporate strategy leads to a clear consequence: a review of our governance. The so-called board skills matrix—the skills that must be adequately represented among its members—will take center stage in 2025. There is no single answer for all companies, and institutional investors and their proxy advisors understand this, but this debate is unavoidable at every board level. It must be explicitly addressed in discussions with shareholders and investors and, if necessary, reflected in the skills matrix and the new profiles incorporated into the board.  

A key focus will be whether each board has sufficient expertise to oversee critical areas such as sustainability, artificial intelligence, and cybersecurity, as well as whether other specialties, such as talent management or a solid understanding of current geopolitical dynamics, need to be incorporated. 

Gender equality and sustainability

Another inescapable aspect in 2025 will be gender equality. Publicly traded companies that fail to meet the legally required parity levels may face penalties in shareholder meeting votes, particularly in the renewal of directors linked to nomination and compensation committees. Proxy advisors refer to this as "assuming responsibility." The inclusion of new female board members is not only a legal requirement but also an opportunity to enrich diversity and talent within boards. 

Next year, we will see the first sustainability reports from publicly traded companies in compliance with the requirements of the European Sustainability Reporting Directive (CSRD). This will attract increased scrutiny from regulators, who are expected to be more vigilant, leading to greater investor and shareholder oversight in upcoming meetings. While this is not a new area, the level of scrutiny will significantly increase. Specifically, according to the priorities set by the European Securities and Markets Authority (ESMA) for national regulators—in the Spanish case, the CNMV—ensuring coherence between financial and non-financial reporting is crucial. This consistency can help many investors gauge companies’ real commitment by seeing how material sustainability issues are reflected in financial statements. 

Compensation and independence of the board

As in previous years, executive director compensation will remain a key point of interest in shareholder meetings. Companies have much at stake in terms of reputation with their shareholders and investors, and this area is becoming increasingly complex and heavily scrutinized.

Key issues will include: higher transparency requirements, the inclusion of sustainability goals in both short- and long-term variable compensation plans, reduced discretion in compensation decisions, a review of the criteria used to benchmark against comparable companies, stricter alignment between pay levels and company performance (pay for performance), and an assessment of the consistency between executive pay increases and the remuneration of shareholders and the company’s workforce. For independent directors, we will once again see companies adopting the practice of requiring them to purchase a percentage of their compensation in company shares.

Once again, markets will review the level of board independence, its consistency with the company’s control structure, and whether the proportion of non-executive chairs is increasing. This is a fundamental aspect of good governance that each organization must Saddress according to its specific needs.

Dialogue with shareholders and investors 

Finally, we cannot ignore the growing importance of dialogue with shareholders and institutional investors. Understanding them well—sharing their views on our governance, their concerns, their criteria, and corporate governance standards—allows us to anticipate their positions in shareholder meetings.

The next shareholder meeting season began preparation right after the 2024 meetings ended, analyzing the issues that generated the most dissent and building a strong governance narrative. There is increasingly less time to prepare, but expectations continue to rise. Companies that can anticipate these demands will have a clear advantage in this environment.