The corporate governance landscape in the UK continues to evolve, reflecting regulatory changes, investor expectations and an increasing emphasis on transparency, sustainability and corporate accountability. Recent developments introduce enhancements to executive remuneration frameworks, evolving ESG compliance requirements, refinements to corporate reporting obligations, and a stronger emphasis on shareholder rights and board accountability.

This Board Agenda Director Reference Guide, written with the help of White & Case LLP, provides an overview of key legal and regulatory changes as of 1 February 2025, summarising developments from the Investment Association, Financial Reporting Council, Glass Lewis, Financial Conduct Authority, and the Department for Business and Trade.

These updates affect executive pay, board diversity, risk oversight, shareholder voting policies, and corporate disclosures, offering insight into the latest governance expectations and reporting obligations.

1  Updated Principles of Remuneration

On 9 October 2024, the Investment Association (IA) published its updated Principles of Remuneration, outlining investor expectations on executive pay structures. Representing £9.1 trillion in managed assets, the IA emphasises alignment between remuneration and corporate performance while promoting transparency and accountability.

Key objectives of remuneration policies

The revised principles reinforce three core goals:
• Strategic alignment. Pay structures should support long-term value creation and corporate objectives.
• Sustainable financial health. Compensation should encourage responsible risk-taking and corporate stability.
• Performance-linked pay. Executive remuneration must be clearly linked to company performance.

Guidance for remuneration committees

The IA outlines best practices, including:
• Shareholder consultation. Companies should engage investors early on remuneration policies.
• Pay transparency. Executive salaries should be commensurate with company performance and align with workforce pay ratios.
• Pension contributions. Directors’ pensions should not exceed workforce pension levels.
• Long-term incentives. Pay structures should include vesting periods, malus and clawback provisions.
• Recruitment and exit provisions. New directors’ pay should reflect market conditions, and exit packages should avoid discretionary enhancements.

The IA encourages clear explanations for any divergence from these principles, ensuring shareholder confidence in executive pay decisions.

2  ESG regulation

The ESG regulatory landscape continues to evolve, introducing stricter reporting requirements, supply chain due diligence mandates, and environmental compliance obligations. Key ESG regulatory developments include:

Corporate Sustainability Reporting Directive (CSRD)—requires large EU firms and listed SMEs to report on sustainability impacts.

Green Claims Directive—introduces EU-wide standards to combat greenwashing and ensure accurate environmental claims.

EU Batteries Regulation (February 2024)—mandates due diligence on battery supply chains, affecting UK automotive and electronics companies.

EU Deforestation Regulation—prohibits products linked to deforestation, with UK regulations expected to follow.

Corporate Sustainability Due Diligence Directive (CSDDD)—requires companies to assess and mitigate human rights and environmental risks in supply chains by 2027-2029.

EU Forced Labour Ban (2027)—prohibits goods made using forced labour, impacting UK exporters.

Carbon Border Adjustment Mechanism (CBAM)—A carbon levy on imports starting in 2026, with the UK planning its own CBAM by 2027.

These regulations reflect a growing emphasis on corporate accountability, sustainable business practices, and transparent supply chain governance.

3  The FRC’s annual Review of UK Corporate Reporting

On 26 November 2024, the Financial Reporting Council (FRC) published its fifth annual Review of Corporate Governance Reporting, analysing 130 FTSE 350 and Small Cap companies.

Key findings

• Compliance trends. Fewer companies reported non-compliance with the UK Corporate Governance Code, but explanations for departures require more clarity.
• Risk management and internal controls. None of the sampled companies had fully adopted Provision 29, requiring annual effectiveness reviews of risk management systems.
• Stakeholder and shareholder engagement. While stakeholder engagement reporting improved, shareholder engagement reporting remained weak.
• Overboarding. Some 90% of companies disclosed directors’ external commitments, improving transparency on board workloads.
• Remuneration reporting. Reports were of high quality, linking executive pay to corporate strategy and long-term sustainability.

The review underscores the need for clearer governance disclosures, particularly regarding risk oversight and engagement with shareholders.

4  Glass Lewis’s updated UK Proxy Voting Guidelines

On 14 November 2024, Glass Lewis released its 2025 UK Proxy Voting Guidelines, applicable to AGMs from 1 January 2025.

Key updates

• Board diversity. Boards must have 40% gender diversity, and FTSE 250 boards must include at least one ethnic minority director.
• AI oversight. Boards must demonstrate effective risk management of AI-related governance concerns.
• Pension contributions. Excessive pension contributions for directors may result in shareholder votes against remuneration proposals.
• Multi-class share structures. Glass Lewis opposes unequal voting rights and requires shareholder votes on such structures.
• Proxy voting disclosure. Companies must publish detailed voting results post-AGM, with potential consequences for non-disclosure.

These updates reinforce shareholder rights, governance transparency, and accountability in corporate decision-making.

5  Department for Business and Trade: Non-Financial Reporting Reforms

On 10 December 2024, the UK government introduced the Companies (Accounts and Reports) Regulations 2024, reducing non-financial reporting burdens.

Key changes

• Company size thresholds increased by 50% for micro, small, and medium-sized businesses.
• Directors’ Report obligations reduced, eliminating low-value disclosures such as future developments, research activities, and engagement reporting.
• A broader review of non-financial reporting is planned for Spring 2025.

These reforms reflect a shift toward streamlining compliance requirements while maintaining governance transparency. An explanatory memorandum is also available.

6  FCA publishes rules on enhancing the National Storage Mechanism (NSM)

On 20 December 2024, the Financial Conduct Authority (FCA) published its policy statement on improving the National Storage Mechanism (NSM), the UK’s digital archive for regulated corporate disclosures.

Key enhancements

• Mandatory legal entity identifiers (LEIs). Issuers and individuals submitting regulated disclosures must include LEIs to improve data consistency.
• Standardised submission process. Primary information providers (PIPs) must adopt a uniform filing system, ensuring greater accuracy and efficiency.
• Implementation timeline. The new system will go live on 3 November 2025, with a testing environment available three months prior.

These changes enhance transparency, accessibility, and standardisation in financial and corporate disclosures.

What’s on the horizon?

The latest corporate governance developments reflect a growing emphasis on transparency, accountability and regulatory efficiency. As the landscape continues to evolve, further developments in non-financial reporting, shareholder engagement policies, and AI governance are expected in the coming year, reinforcing the UK’s position as a leading jurisdiction for corporate governance regulation.

The information in this general Director Reference Guide was supplied by White & Case LLP. It is not, and does not attempt to be, comprehensive in nature and should not be regarded as legal advice.

Further reading

White & Case LLP newsletter: Corporate governance: key developments