6 Themes for PLC Directors for 2025

14 January 2025

At an uncertain time for the world, what should be front of mind for PLC Boards as 2025 kicks off?

2025 looks like being a roller coaster of a year with Trump in the White House, Musk pulling an alarming number of strings and Europe in a state of disarray.

I wondered whether there might be some inspiration in the well-known Zager & Evans song “In the year 2525”. It felt vaguely on-point. But sadly the lyrics are gibberish.

So, at an uncertain time for the world, when PLC Boards gather for their first meeting of 2025 what are the themes that should be front of their minds?

I hazard 6 topics.

Macro-economics and the Trump effect

The UK economy has had a bumpy start to the year and this will be distracting for Boards, particularly at retailers. It is, for example, bracing to hear that Tesco, Britain’s largest private sector employer, will pay an extra £250m per annum in national insurance following the Budget.

More broadly, and taxation aside, the high cost of UK Government borrowing, and its likely impact on interest rates, inflation and sterling, is evidently very concerning for business.

And then there is the Trump effect.

Whilst Boards will be asking themselves what the new Trump term may mean for the world and UK headquartered businesses, the reality is that it is really hard to predict what might happen. It is risky to take action, for example in expectation of a runaway dollar, which may turn out to be either unnecessary or wrong.

The threat of blanket 10-20% tariffs seems to have subsided with the suggestion reported in the Washington Post that tariffs might be focussed on certain sectors deemed critical to national or economic security. That news was greeted with relief, but how much faith can properly be invested in a press report?

There are, I dare to suggest, only four things that can be predicted with any confidence:

  1. US growth, expected to be 2.5% in 2025, will be materially stronger than UK (see above) and Continental European growth and even moderated tariffs will be unhelpful to European exporters;
  2. a “laissez-faire approach to economics, tax cuts and deregulation”, coupled with US tech dominance, are likely to mean (per a Bank of America strategist) that the S&P 500, up 23.3% in 2024 will continue to power ahead. This will surely fuel the continuing attraction of US markets to UK listed corporates and UK based investors, to the disadvantage of UK markets;
  3. this US economic buoyancy and policy liberalisation is likely to lead to more M&A activity. Goldman Sachs are projecting a 20% increase in activity in 2025; and
  4. as the Chief Economist of PwC is quoted as saying in the FT:

“The Trump administration will be an ‘unpredictability machine’ which will dissuade business and households from taking long-term decisions with ease. This will inevitably have an economic cost”.

Digital and AI

This is a familiar theme of course but, for PLC Directors, there are two key questions:

  1. Do we actually understand what AI is and means for our business?
  2. How do we responsibly and creatively bring oversight and constructive challenge to its deployment in our business?

In relation to the first question, it is helpful to quote from an EY paper from last summer (https://www.ey.com/en_us/board-matters/how-boards-can-oversee-ai-with-curiosity-and-care):

“Preparing leaders for an AI-accelerated future is about embracing emerging technology with purpose - as a director, it’s important to touch it, feel it and experiment with its applications in different domains”.

So, for Boards who have not done this, it may be time to organise a hands-on workshop with the Chief Technology Officer so that Directors can go through some real-life examples of how AI is used (touching it and feeling it) in, for example, product design, supply chain management and maximising customer opportunities.

In relation to the second question, the debate is often “Do we need a “Tech NED” or are we better served by a “Technology Advisory Group”?

Much will of course depend on the nature and scope of the business but an optimal combination may be a younger tech-savvy NED and a small advisory group of external advisers (two or three individuals) who interact regularly with the CTO and ExCo but also spend time with the Board, say, twice per year.

This mix, with the NED sitting on the Audit and Risk Committee, would combine ongoing Board familiarity with challenges and opportunities and external sense checking in a fast-moving tech environment.

Activism

Many commentators are predicting that PLCs will continue to be the subject of activist interest in 2025 (there were 59 UK campaigns in 2024).

A number of factors are at play -

  1. US investors identifying more accessible value upside in the UK and Continental Europe, given relative multiples;
  2. a more buoyant M&A world; and
  3. depressed Sterling.

And whilst we are seeing a degree of audacity - for example, Saba’s attack on 7 investment trusts and Standard’s punchy correspondence with Johnson Matthey - Alvarez & Marsal’s data in their interesting Activism Alert (https://www.alvarezandmarsal.com/sites/default/files/2025-01/A%26M%20Activist%20Alert%20%28AAA%29%202025%20Report_0.pdf) suggests a trend towards private discussions rather than public campaigns.

Clearly many PLC Boards will be very alive to the issue, but it is worth recapping on a few “to do’s”:

  • monitoring trading, share borrowing and unusual website activity (too many visits from certain sources);
  • staying close to shareholder views around, for example, performance, calibre of management and (whisper it) the Board, capital allocation and shape of portfolio;
  • regular Board workshops on potential vulnerabilities, and responses, facilitated by a knowledgeable trusted adviser; and
  • ensuring a clear and consistent narrative around strategy and prospects.

Executive and Non-Executive Remuneration

In a rather nerdy way I found myself very taken with the debate around senior remuneration last year.

There are two key topics:

  1. The pull factor of the USA for talented executives and corporate listings is strong. The CEO of Smiths Group doubled his salary by going to a US company half the size and Flutter, which moved its primary listing to the NYSE in May, has seen its share price rise by 28% in six months.

    So I believe that PLC Boards need in 2025 to (a) consult energetically with shareholders and proxy advisers and push the envelope on CEO and senior executive pay, as London Stock Exchange Group and AstraZeneca did in 2024, and (b) think carefully about Hybrid Share Schemes which are popular in the USA and combine restricted share awards with performance share awards - mixing certainty with an incentive to stretch. Hybrid schemes are not loved by investors in PLCs (Smith & Nephew got theirs through with a slim majority last year) but they can be an interesting retention and recruitment tool.

  2. PLC Non-executive Directors are massively under-paid. According to the most recent Spencer Stuart Board Index the average annual fee for a FTSE 150 NED is £78,271, with modest increments for Committee chairs. This compares to $327,000 for the NEDs at S&P 500 companies.

    A significant portion of US NED pay comes in the form of stock - why could we not do that in the UK? It would not be part of a performance share plan (precluded by the UK Code) and I don’t believe it would meaningfully affect the independence of NEDS who, in any event, are expected to purchase shares. So I encourage PLC Boards to take the plunge here in 2025.

Regulatory Changes and Compliance

The regulatory landscape is poised for significant changes and PLC Boards will need to be focussed on the implications.

I comment on three elements:

  1. The EU’s Corporate Sustainability Reporting Directive (“CSRD”) mandates, for affected entities, reporting of sustainability information under a framework provided by the European Sustainability Reporting Standards (“ESRS”).

    The first set of ESRS includes a broad range of ESG topics, from climate change, to worker issues, to business conduct. The ESRS moreover use the concept of “double materiality”. A matter is disclosable if it has a material impact on people or the environment or material financial effects of the entity

    CSRD will apply to (a) UK or other non-EU entities with equity or certain debt securities listed on EU-regulated markets and (b) various EU entities within groups headed by UK or other non-EU entities. The effective date for compliance will vary over the coming years as between type of entity but, for the first wave, the effective date was 1 January 2024 (for reports issued in 2025).

    Senior management at affected PLCs will be all over CSRD as it is very complicated and will require extensive disclosure. They will also need to watch for other, potentially inconsistent, requirements in different jurisdictions.

  2. The Digital Markets, Competition and Consumers Act (“DMCC”) received Royal Assent in May 2024 and the new digital markets competition regime came into force on 1 January 2025. It is big news.

    Under the pre-DMCC regime the UK Competition and Markets Authority (“CMA”) did not have direct powers to sanction businesses in its own right for a breach of UK consumer law. At the core of the DMCC reforms is that firms designated to have “strategic market status” in respect of digital activity will be subject to targeted conduct requirements imposed by the CMA for the purpose of fair dealing, open choices, trust and transparency. The CMA will also be able to impose “pro-competitive interventions”.

    These and other very significant changes to consumer protection law in the DMCC will affect a wide range of consumer facing businesses and will necessarily need senior attention at PLCs.

  3. The UK Corporate Governance Code 2024 will apply to financial years beginning on or after 1 January 2025, other than Provision 29 which will apply to financial years beginning on or after 1 January 2026.

    The changes from the 2018 Code are generally not material except for Provision 29. This asks Boards to make a declaration of the effectiveness of material internal controls as at the balance sheet date. This is, of course, substantive and hence the year’s delay to allow for preparedness.

The London Stock Market

There have been raft of articles over recent weeks about the exodus from the London stock market. 88 companies left and only 18 arrived. Some have been taken over and some (like Flutter) have moved their listing venue.

The big issue for London is generally said to be liquidity - fewer buyers and sellers means outsized price reactions to relatively small events (such as a modest profits miss). And so Ashtead justified its decision to move to the US on the basis of “enhanced overall liquidity in the group’s shares given access to deeper US Capital markets”.

Given all that I mention above about the likely strength of the US economy and its markets, exacerbated by choppy waters for the UK economy, it would be surprising if PLC Boards did not find themselves discussing the condition of the London market at some stage in 2025 and it will be one of the themes which activists focus on.

Regrettably (for London) some Boards may have to think about relisting and really test the alleged liquidity benefits versus the disruption. The LSE certainly believes that there are misconceptions. Others may wish to reflect upon action that they might take to bolster the London market. Two thoughts:

  • press the Government to abolish the 0.5% stamp duty on share transactions (as frequently suggested by commentators, although it will cost £3 billion) and to push ahead with pension reform; and
  • be brave on remuneration of key talent to compete more actively with the USA.

We should all collectively, however, take care not to over-sell London as a business centre. It remains a vibrant city and a magnet for private equity houses, law firms, venture capitalists and creatives. We must not lose sight of that.

Finally

PLC Boards are likely to have a busy 2025. Although Zager & Evans were not much use, I do commend to you Cher on Desert Island Discs (https://www.bbc.co.uk/sounds/play/m00261td). She is a remarkable talent and an inspiration for coping with the ups and downs of good times and bad.

Christopher Saul


Christopher Saul provides independent trusted advice to senior executives and key stakeholders within publicly quoted and privately owned businesses and professional service firms. His areas of focus are governance, succession and the moderation of differences.

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