What’s Topping Compensation Committee Agendas in 2025?

While each new year offers opportunity and a fresh start, concerns from prior years inevitably influence how organizations approach those opportunities. The same is true for their compensation committees.

The pandemic has fallen further into memory and global economies are moving toward stabilization. However, a new White House administration adds uncertainty from a regulatory and macroeconomic standpoint. These factors are driving compensation committees’ focus and, naturally, their agendas for 2025.

This article shares a few thoughts on what likely ranks high with these committees.

Risk Mitigation

Boards and management should prepare for a discussion in their January and February board meetings around risk mitigation, particularly with last year’s UnitedHealth tragedy to consider.

Executive security certainly will be a focus, with discussions around investments for personal security, home security systems, personal use of company aircraft and cars, and so on. However, some broader considerations should not be overlooked:

Full security-risk assessments. In addition to personal/physical risks, executives — as well as their families — are increasingly being targeted online. The dark web and artificial intelligence present unique challenges related to stolen data and amplifying the potential for harm. This makes proactive intelligence gathering an important part of security. Additionally, in the aftermath of the murder of UnitedHealth’s CEO, some companies issued work-from-home instructions while others switched to virtual investor days. Plenty of other organizations are bolstering security for certain board meetings and events.
Health. To curtail risks associated with unexpected health events, and to give boards visibility to potential issues, some organizations offer executive physicals, which are comprehensive examinations intended to catch potential health issues early. These exams go beyond regular well-being checks to include advanced lab testing, advanced imaging and screenings, as well as specialty consultations that can identify risks.
Emergency succession. While it’s a best and common practice to review succession planning annually, not all boards are focused on emergency succession planning candidates, internal and media communication procedures, and other logistical considerations. It’s not enough to just have the emergency executive identified; boards need a detailed 72-hour response plan at the ready. And, of course, organizations also should have a plan for setting interim compensation plans.

By addressing risk mitigation at a more strategic and philosophical level, organizations will be better prepared to find and retain these key contributors while ensuring business continuity in the event of the unexpected.

Executive Retention and Engagement

Whether the organization has weathered a market downturn or if performance is strong, as organizations head into their pay decisions to close 2024 and set pay for 2025, retention is yet another topic to consider. Compensation committees and management need to proactively consider retention and engagement from a compensation lens. This goes beyond understanding market competitiveness and includes:

A holding-power analysis to help inform upcoming pay levels (i.e., base salary increases, bonus targets, long-term incentive grants);
Thoughtfully designed incentive plans with appropriate goals that strike the right balance between aspirational and motivational; and,
Taking a step back and evaluating if pay outcomes and decisions are both commensurate with performance and take the entirety of an organization’s circumstances into account.

Company-specific circumstances to consider include corporate performance (past, present and future), individual performance, executive leadership transitions and succession planning, shareholder feedback, and so on. Thoughtfully regarding these facts and circumstances is important for ensuring pay decisions have a strong rationale and represent the “right thing” for the organization. This is particularly true when retention pay practices are under close external scrutiny.

While compensation is a key driver of executive retention and engagement, it certainly is not the only driver. In addition to thoughtful pay planning, it is important that compensation committees understand and consider the myriad qualitative factors at play, such as the organization’s mission, purpose and culture; development and growth opportunities; and clearly articulating and communicating the value an executive brings to the organization. Combining these factors with strategic compensation planning will go a long way to enhance executive retention and engagement.

Expect the Unexpected

Calamity happens, and everyone in business knows it. Boards are increasingly expecting management teams to weather the storm and address unique unforeseen issues seamlessly, which can be a punishing but expected task.

Along with traditional, annual challenges, boards and executives should be prepared in 2025 to address unexpected outcomes. For example, as of this article’s publication, President Donald Trump will have just been inaugurated, and organizations need to be prepared for a new-but-familiar administration’s regulatory and legislative changes, which are expected to be more business-friendly toward executive compensation and corporate governance disclosures. Additionally, under the new administration, organizations may face headwinds from potential tariffs and immigration policies, which will require consideration of the labor and productivity constraints that are at risk.

Ultimately, volatility, headwinds, tailwinds and everything in between are simply the business of business. For executives to be equipped to go into the boardroom with solutions, it will be critical to stay abreast of the latest insights and ensure they have the resources in place to monitor and combat challenges as well as provide guidance on how to move forward.

Additionally, compensation committees, compensation professionals and management will want to remember the importance of considering the key tenets of incentive design and goal setting. By focusing on their incentive design principles, as well as their compensation philosophy and business environment, decisions that are made in the year’s first quarter will help set the organization up for success in an ever-changing business environment.

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