Nominating / Governance Committees: Key Focus Areas for 2025

Corporate boards face mounting pressure to evolve in response to shifting business landscapes, yet many continue to rely on outdated governance policies such as fixed retirement ages rather than proactively assessing board composition. To remain effective, boards must prioritize dynamic succession planning, ensuring they maintain a diverse and future-ready mix of skills, experience, and leadership capabilities.

A forward-thinking board fosters a culture of agility, encouraging directors to critically assess their contributions and whether their expertise aligns with the company’s evolving needs. Engaging independent advisors can provide valuable insights, identifying strengths, gaps, and opportunities to refine governance strategies.

Well-executed peer evaluations further enhance board effectiveness by offering constructive feedback, improving individual director performance, and reinforcing a culture of continuous improvement.

Research highlights a growing disconnect between executive expectations and board preparedness. A 2024 CF Leadership study found that only 30% of CEOs had strong confidence in their board’s ability to provide strategic guidance, while 24% of nominating/governance committee chairs believed at least one director lacked the necessary skills to remain effective. These findings reinforce the need for stronger oversight and intentional succession planning.

To address these challenges, nominating/governance committees must take decisive action. Based on CF Leadership’s extensive experience in board advisory, we have identified five critical areas of focus for 2025 to strengthen governance, enhance decision-making, and ensure long-term corporate success.

1. Take a Strategic Approach to Board Succession

Many boards rely too heavily on formal policies to drive turnover, delaying key conversations about board composition until directors near retirement or voluntarily step down. This reactive approach limits opportunities for leadership renewal. According to the 2024 U.S. CF Leadership Board Review, one-third of directors on boards with retirement policies exited within 1 to 2 years of reaching the age cap, and half departed within 4 years of hitting that limit.

Tenure policies should not be the primary driver of boardroom change. Instead, nominating/governance committees should integrate these guidelines into a broader, forward-looking strategy that includes:

• Creating a board culture that embraces change and prioritizes company, executive, and shareholder interests
• Conducting rigorous evaluations of board, committee, and director effectiveness
• Performing objective assessments of future boardroom needs
• Using targeted skills matrices that emphasize four to five core competencies per director, avoiding excessive overlap
• Regularly assessing whether directors’ expertise remains relevant in a rapidly evolving business environment
• Considering shareholder input on board composition and governance expectations

2. Ensure Boards Keep Pace with Evolving Business Challenges

Despite increasing complexity in the business environment, board turnover remains low among S&P 500 and S&P MidCap 400 companies, with annual rates averaging 6% to 7.5% over the past four years. In 2024, only 55.5% of S&P 500 boards appointed a new director, resulting in an overall turnover rate of just 0.78 new directors per board. Given the rapid emergence of new risks and opportunities, this slow pace of change raises concerns about board agility.

Nominating/governance committees must critically evaluate whether their board’s composition is equipped to address the company’s strategic priorities. The growing gap between executive expectations and board capabilities must be acknowledged. Committees should actively seek input from the CEO and key executives as part of their succession planning efforts. While ultimate decision-making authority remains with the board, incorporating executive perspectives can provide valuable data to refine director selection and ensure governance structures align with corporate goals.

3. Building a Board Culture That Prioritizes Performance Over Tenure

An effective board thrives on open dialogue, accountability, and a willingness to adapt to changing business needs. Yet, too often, the value placed on collegiality prevents boards from addressing underperformance among directors. Our 2024 survey of nominating and governance committee chairs found that half of the respondents admitted their boards either waited for directors to retire or took no action when faced with underperformance.

Boards must move beyond passive approaches to director tenure and performance. Governance committees should lead structured discussions each year about expectations for board service, ensuring that every director understands their role is tied to ongoing relevance and contribution, not tenure alone. Directors should also take personal responsibility for assessing their impact\ – \do their skills align with the company’s current and future needs? Are they actively contributing to board discussions in a meaningful way? If not, a culture of self-awareness should encourage them to step aside to make room for fresh expertise.

4. Making Board Evaluations a Catalyst for Growth

Routine board evaluations often fail to drive meaningful change, reducing a critical governance tool to a compliance exercise. To gain deeper insights, more boards are seeking external perspectives. According to the 2024 U.S. CF Leadership Board Review, 25.8% of S&P 500 boards engaged independent third parties for board evaluations\ – \an increase from 24% the previous year. Since most boards bring in external evaluators every few years rather than annually, the true usage is likely much higher.

Independent assessments bring objectivity and depth that internal reviews often lack. A well-structured third-party evaluation\ – \incorporating confidential interviews with directors and executives\ – \can uncover boardroom dynamics, pinpoint strengths and gaps, and provide actionable recommendations. Boards that leverage external insights on a periodic basis position themselves for continuous improvement, ensuring their composition, structure, and decision-making remain aligned with the organization’s strategic direction.

5. Strengthening Board Performance Through Peer Evaluations

High-performing boards recognize that governance isn’t just about oversight\ – \it’s about continuous improvement at both the collective and individual levels. More boards are incorporating peer evaluations into their assessment processes, using them as a tool to enhance director effectiveness and engagement. Our 2024 board research found that 18% of S&P MidCap 400 boards and 46% of S&P 500 companies publicly disclosed the use of individual director evaluations, whether through self-assessments or peer reviews. Given that many boards do not report these practices, the actual number is likely significantly higher.

Peer evaluations, when thoughtfully structured, provide directors with constructive insights into their contributions, fostering accountability and professional growth. Beyond improving individual performance, these evaluations help boards cultivate a culture of transparency and ensure they have the right skills and perspectives for the future. They are also a valuable succession planning tool, enabling boards to proactively address gaps in expertise and leadership. From our extensive work with boards and executives, we have seen that organizations that embrace candid feedback\ – \while staying true to their core values\ – \build stronger, more forward-thinking leadership teams.