As we look forward to 2025, compensation committees are faced with a unique set of considerations that will significantly impact their decision-making processes in the year ahead. 

To help make sense of it all, we called on the expert insights of 

Jon Szabo, Partner at Meridian Compensation Partners

), who helped us unpack some of the key areas that compensation committees must be aware of as they navigate the key governance issue of executive pay.

Supplemental discretionary clawback policies

One trend that has gained significant traction over the past year is the implementation of supplemental discretionary clawback policies. In response to the need for accountability and deterrence of potential misconduct, companies are increasingly adopting these policies to enable the recovery of compensation in specific instances.

This trend is expected to continue, with smaller companies expected to follow the lead of larger corporations in adopting such measures. By embracing supplemental discretionary clawback policies, organizations can strengthen their ability to mitigate risks and protect shareholder interests.

Navigating uncertainty in performance goal setting

In the midst of today’s economic uncertainty, compensation committees are tasked with setting performance goals and incentive plans for 2025. To help navigate this challenge, carefully consider threshold and maximum performance ranges, particularly in times of uncertainty.

Additionally, be prepared to adjust incentive plan performance goals throughout the year. Establishing guiding principles for evaluating potential adjustments is critical to ensure they are in the best interests of shareholders and the company.

Reevaluating compensation committee charters

In recent years, some compensation committees have taken on human capital management responsibilities. Now, organizations are reevaluating the effectiveness of these responsibilities.

This reassessment includes evaluating whether certain responsibilities, such as succession planning and CEO performance evaluations, should remain with the compensation committee or be moved to other board committees. By conducting a thorough evaluation, organizations can ensure that their compensation committees are structured optimally to fulfill their essential roles.

Growing focus on below C-Suite pay and compensation equity

Compensation committees are showing a heightened interest in comprehending the impact of incentive designs across the organizational hierarchy, from top executives to the workforce's base.

This emphasis on equity in compensation and pay below the C-suite is a testament to the commitment to fairness, transparency, and alignment. The goal is to mitigate substantial disparities in pay growth between executives and the workforce, fostering a culture of equity across all organizational tiers.

Scrutinizing retirement provisions for fairness and alignment

Proxy advisors are now focusing their scrutiny on exit pay for voluntary terminations and equity treatment for retirement. This increased attention poses a challenge for companies as they strive to structure compensation and equity in a manner that attracts late-career talent while ensuring fairness and alignment with employee contributions.

Organizations must carefully navigate this complex landscape to ensure compliance with evolving standards and maintain a competitive position in the talent market.

Four key considerations for compensation committees in 2025 

In light of the emerging trends and challenges in executive compensation for 2025, here are our key recommendations for compensation committees ahead of the new year.

Strong governance encompasses much more than executive compensation. While aligning executive pay with performance is vital, it’s just one piece of the puzzle. A high-performing board is critical for providing strategic oversight, fostering accountability, and driving leadership excellence. 

' to unlock the full potential of your board members, committees, and CEO. 

Executive compensation in 2025: Key trends, challenges and takeaways 

The re-election of Donald Trump as US president has signaled a bold appetite for change among American voters, ushering in a new era of uncertainty — and potential opportunity — for businesses worldwide.

Amid the many outstanding questions brought by the reality of a second Trump administration, boards of directors and executive leadership across the United States (and further afield) have been left asking since Election Day: What does this mean for corporate governance?

In this piece, we explore lessons learned from Trump’s first term and examine the latest commentary and analysis offering insights into what may lie ahead for 2025 and beyond.

Deregulation and the temptation to decrease oversight

Will compliance pressures ease under the new administration? The short answer is most likely yes. The longer answer gets a bit more complicated. 

 pointed out that deregulation would be a key theme of the second Trump presidency, affecting sectors from energy to finance. This might spur short-term economic growth by reducing compliance costs for businesses.

This continues an overarching mission of stimulating economic activity. Trump’s 

 dramatically lowered the corporate tax rate and included several other business incentives. Plans 

 include even more tax cuts along with reduced regulation in sectors from energy to housing.

 conducted by Diligent Institute, the majority of corporate directors are optimistic about the future, with 54% expecting conditions to improve over the next 12 months — up from just 42% in Q3. Many directors see the easing of regulatory requirements and the potential for tax cuts as key drivers for their optimistic outlook. However, they also acknowledge that rising tariffs and trade uncertainties could offset these benefits.

Greater operational freedom brings great opportunity — and responsibility. Amid strong corporate growth, robust governance is more important than ever, regardless of regulatory mandates and reporting obligations.

“When companies grow rapidly, it is not unusual for compliance and other foundational services to lag while the company realigns its core support structures,” Linnea Deeds of 

 noted, offering a cautionary tale. She cites the example of a freight and logistics firm which grew aggressively through acquisitions — nearly 600 companies in all. Yet compliance programs and oversight didn’t keep pace. Illegal shipments to sanctioned countries slipped through the cracks, resulting in penalties totaling in the hundreds of millions.

Watch for diverging mandates and rising expectations in ESG 

As for ESG, the complexities businesses face today are likely to intensify in the coming years. Let’s start with the environment. Trump is expected to roll back climate-related disclosure rules and undermine the ability of federal agencies to regulate, according to Morningstar Indexes’ 

, Tom Kuh. Meanwhile, global regulatory bodies are imposing stricter mandates, as seen in developments related to the 

Corporate Sustainability Reporting Directive (CSRD)

 and other frameworks. This diverging regulatory landscape between the U.S. and global markets, especially the EU’s increased emphasis on ESG and sustainability standards, will likely create a heightened level of complexity and pressure for U.S.-based multinationals.

As for social issues, organizations are already facing legal action targeting DEI activities. In October, the Equal Protection Project (EPP) filed a civil rights complaint alleging that 

 Black Corporate Board Readiness Program violates federal law by only accepting Black applicants. 

Look for continued rollbacks in the months ahead. “Trump’s allies have reportedly prepared an executive order for the president to sign on day one, which would ‘eliminate programs that promote diversity, equity, and inclusion [DEI],’” 

As policymakers reverse focus on ESG’s E and S, expectations are rising for the G, governance, on two other fronts: employees/labor movements and shareholder activists.

“Recent years have seen an uptick in labor activity, including high-profile corporate organizing campaigns and significant strikes,” noted 

 magazine. “Whether their workforces are unionized or not, public company boards must understand the current labor movement.”

Looking at activist investors, many had highly profitable years during the last Trump presidency. Global law firm 

 pointed out that Trump’s deregulation intentions for 2025, plus plans for government efficiency commission, are a “prospect that excites many shareholder activists.”

While both these groups are widely different in terms of motivations and goals, they share one commonality: they’ll both be keeping a close eye on corporate governance and will have little tolerance for lowered or lapsed standards.

, 79% of directors expect the incoming administration to bolster equity markets, though many anticipate that gains will be limited in the short term. Despite mixed predictions, 82% of board members expect company revenue to rise in 2025, with 45% planning to increase capital expenditures. However, challenges like inflation and tariffs still loom large in their projections.

Boards and other corporate leaders need to be ready for a further surge in complexity if Trump carries out his plan to impose 

 on Chinese imports — some sources predict tariffs as high as 60% – 100%. Companies across industries are already 

, with Trump’s 2018 tariffs still fresh in their memories.

“The proposed tariffs would have a significant and detrimental impact on the costs of a wide range of consumer products sold in the United States, particularly on products where China is the major supplier,” the 

“Despite rapid and recent progress in U.S. onshoring, China currently controls over 80 percent of certain segments of the EV battery supply chain, particularly upstream nodes such as critical minerals mining, processing, and refining,” 

For companies who depend on Chinese suppliers, tariffs and other trade policies will demand constant, rigorous oversight, followed by swift, effective adaptation across the organization.

Due diligence for suppliers, mergers and acquisitions will rise to the fore. Another area, entity management, is already a notably complicated business, with many organizations overseeing hundreds of subsidiaries, offices and divisions worldwide andnew requirements like 

 upping the ante for continuous monitoring, reporting and disclosure.

The bottom line: Best-practice governance is more important than ever

In short, corporations will have a lot to manage under the new U.S. presidential administration: ESG complexities, growth opportunities, rising activism, supply chain adjustments, and more.

 report indicates that U.S. public company directors are prioritizing growth strategy as a key focus for 2025. Robust governance is essential to support this strategic direction, helping organizations manage risk, adapt to change, remain resilient, and meet investor expectations.

A comprehensive governance platform can enable boards to navigate these challenges effectively, putting best practices at their fingertips with:

 that deliver an end-to-end view of risks and opportunities

 that help boards work faster and make sharper, more agile decisions

 that align organizational strategy with the evolving policy landscape

delivers all of this and more, equipping boards and executives with the tools needed to align governance practices with organizational growth strategies. 

Diligent

Blog

Executive compensation in 2025: Key trends, challenges and takeaways

Trump 2.0: Navigating a new crossroads of risk and governance

Solutions

Resources

Company

Your Data Matters

Diligent

Blog

Executive compensation in 2025: Key trends, challenges and takeaways

Trump 2.0: Navigating a new crossroads of risk and governance

SolutionsSolutions

ResourcesResources

CompanyCompany

Your Data Matters

Solutions

Resources

Company