Five areas to watch

Trends shaping corporate governance in 2025

  • January 06, 2025
Ray  Garcia

Ray Garcia

Leader, Governance Insights Center, PwC US

Looking back on 2024 — and ahead to 2025

In 2024, economies around the world completed a long recovery after the disruptions of the COVID-19 pandemic; the US accelerated ahead of the pack, with stock prices at new highs and unemployment low. Yet lingering popular discontent, exacerbated by unceasing conflict in Ukraine and the Middle East, saw global electorates broadly reject incumbents, in an election-heavy year. 

Over the past year, boards found themselves working to upskill as companies ramped up investment in technologies, as AI-driven capabilities and opportunities multiplied. Leaders are seeing real business value for companies across industries and are moving to invest further in this transformative technology. 

With new governing administrations in the US and elsewhere pledging to disrupt the status quo, the 2025 global business environment promises to be more dynamic than ever before. In stormy weather, boards and companies will need to exhibit agility to navigate the complexities of regulatory changes, technological advancements and shifting stakeholder expectations. A board’s ability to remain flexible and responsive under rapidly changing conditions will be crucial for sustaining long-term success and resilience. 

The five trends I’m watching in 2025

1. A new political environment 

With Republicans taking control of the White House and both houses of Congress, corporate decision-makers face a period of uncertainty and unpredictability, adjusting to what could be major changes in tax policy, immigration, international trade, industrial policy, regulation and more. Before the election, 71% of surveyed executives said post-election trade and tax policies will hurt US competitiveness no matter who's president. But of course, it’s impossible to predict exactly what impact changes in Washington will have on supply chains, M&A opportunities, risk management or access to capital markets.

The new leadership in Washington opens the door to a reversal of the Biden administration agenda, which will require C-suite discussion and potential pivoting of strategies and operations. With C-suite and boardroom agendas in flux across corporate America, boards will need to stay agile. The key challenge: responding to the business impacts of a dynamic political environment   

Takeaways for the board:  

  • Boards should work to understand how management plans to assess political developments and how they might affect supply chains, workforce strategy, capital investment, communication, compliance and more.  

  • Boards should aim to develop insight on management’s risk assessment process to identify, evaluate and proactively act on the potential economic and operational impacts of the evolving regulatory environment.

More information:  

2. Using AI to drive the business strategy while balancing risks 

We see AI, including generative AI, continuing to expand, with ever more applications, driven by continual advancements and capabilities. Companies are using AI to remove costs, create value, make customer service more responsive, and support new business models. Executives are prioritizing strategic AI opportunities based on how quickly they can deliver value and be scaled across the organization; nearly half say that differentiating their organizations, products and services is one of their top three objectives for investing in responsible AI practices. 

Risks, too, continue to rise. There are new and changing risks that companies must understand and manage when it comes to AI, including model, data, systems and infrastructure, legal and compliance, use, and process risks. With many vendors and service providers using AI in products and services, companies need to focus on third-party risks as well.

The challenge is how to find and maintain an effective innovation/risk balance, minimizing the chances of things going wrong while taking advantage of opportunities. A board perspective can be invaluable in striking a strategic posture and developing plans to responsibly integrate the technology into growth plans.

Takeaways for the board:

  • Board leaders should have a defined process for keeping abreast of the company’s AI strategic adoption and look to continue to upskill themselves on this technology.

  • Boards should engage with management on the company’s strategic assessment and priorities for AI adoption and how they will manage key risks as they shift. The focus should be on strengthening governance frameworks.

More information: 

3. The evolution of ESG 

Political backlash has made the acronym “ESG” a target for controversy, facing continued pressure for companies to downplay or even eliminate it from program names and proxy statements. But that doesn’t mean companies are necessarily shifting away from effective strategies aligned with long-term sustainable growth. In fact, avoiding politically charged terms may generate more nuanced discussions about how climate risk is linked to financial outcomes. And certain companies continue to face reporting obligations from the California climate disclosure laws and the EU sustainability reporting standards.

Indeed, sustainability is ever more central, with many companies focused on preparing for and mitigating climate change’s impacts on business operations. We expect to see increased investment in green technologies and sustainable business practices, as many companies see these investments as ways to enhance long-term viability and profitability by reducing environmental impact and operational costs. Indeed, 78% of CEOs globally say their companies have innovated new, climate-friendly products, services or technologies or have plans to do so soon. 

 Takeaways for the board:  

  • Boards should work to understand how management aligns investment in green technologies with the company’s strategy and how evolving regulatory requirements and consumer preferences affect these investments.

  • Boards should look to keep up with sustainability regulatory reporting requirements in states, nationally and from overseas regulators, ensuring that management strategy not only stays in compliance but moves the company toward sustainability goals. 

More information:  

4. The new future of work 

We expect workforce issues to once again be front and center as companies tackle several new and ongoing issues. First, many leaders are rethinking return-to-office expectations. Pandemic-era work arrangements, making hybrid and remote work broadly available, remain popular among workers, but employers are evaluating whether such provisions still make sense for managerial oversight, worker productivity and office availability.

Workforce tech literacy will take on new importance as leaders invest further in GenAI; without employee fluency, companies will struggle to take advantage of the growth opportunities that emerging technologies make available. Leaders should have an ongoing strategy to upskill and reskill employees to meet the demands of a digital economy. 

Takeaways for the board: 

  • The board should work to understand management’s approach to hybrid and remote work arrangements and that policies in place serve company goals while giving employees the resources and flexibility they need to maintain productivity and well-being.

  • The board should assess management’s investment in upskilling and reskilling programs for employees to meet the demands of a digital economy, emerging technologies and the imperative of fostering a positive corporate culture. 

 More information:  

5. Stronger focus on board composition and effectiveness

Companies’ necessarily rapid response to political, economic and regulatory developments in the coming months, alongside the fast-changing technologies reshaping business models and strategies, highlight the importance of boards being capable of providing valuable perspectives and oversight. Right now, C-suites are skeptical: Only 28% of executives feel their boards are armed with the right combination of skills and expertise for today’s business environment.

We expect more boards to evolve and upskill. Many will move to bring in directors with skills to match emerging strategies and oversight responsibilities as well as people with diverse backgrounds aligned with broader and more international customer and partner bases. Beyond refreshment, all directors need to understand how management is prepared for unexpected crises and how they aim to provide business continuity in the event of disruption.

Takeaways for the board: 

  • Boards should take a fresh look at director skills, identify gaps, and work to fill those gaps through an upskilling program that includes continuous education on industry trends, technological advancements and risk management.

  • Boards should identify and adopt advanced technological tools to enhance boardroom efficiency and decision-making processes. This includes utilizing digital platforms for real-time data analysis, virtual meetings, and collaborative decision-making. 

More information:  

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