Public company boards are operating in a tougher environment. Regulators expect more, investors are better organized, and activists have better tools. The old practice of checking an “independent” box once a year and recycling proxy text is no longer enough.

Rethinking independence

The SEC, NYSE and Nasdaq require that most directors be free of any material relationship that could impair independent judgment, but modern independence is not just a technical test. Boards should review and document independence at least annually, looking beyond current employment to long tenure, outside business or charitable ties, family relationships and interlocks that can raise investor questions even if they pass the literal rules.

Committee structure is another visible signal. Key committees, including audit, compensation and nominating/governance, are expected to be composed entirely of independent directors. Audit committee members generally may not receive consulting or advisory fees beyond standard board compensation, and at least one member should be a genuine financial expert in GAAP, controls and complex reporting. A concise skills and independence matrix that links director experience to strategy and committee work shows investors the board has done the work.

Diversity, ESG and Evolving Expectations

The legal landscape on board diversity has shifted. In 2024, the Fifth Circuit vacated the SEC’s approval of Nasdaq’s board diversity rules, and Nasdaq stopped enforcing them, so there is currently no federal or national-exchange diversity mandate, though some state laws and investor policies still apply.

Proxy advisors have responded differently. As of the 2025 proxy season, ISS no longer factors gender or other diversity metrics into its U.S. director voting recommendations, while Glass Lewis continues to apply policies that generally recommend against the nominating chair at many companies below roughly 30% gender diversity, flagging those recommendations for investors.

Meanwhile, surveys show that roughly three-quarters of investors remain interested in sustainable investing. The focus has shifted from slogans to measurable oversight of material ESG topics, such as human capital, climate and environmental risk where relevant, cybersecurity and culture, so boards that can explain in plain language how director skills and perspectives support long-term value are better positioned.

Investor and Activist Pressure

Shareholder activism has not gone away; it has evolved. Global campaign volume has recently approached record levels, with more first-time activists, more activity outside the U.S. and more campaigns at mid- and small-cap companies, many of which now resolve quietly through engagement or settlement.

Recent SEC changes make activism more time-sensitive. Beneficial-ownership rule amendments shortened filing deadlines for Schedules 13D and 13G and updated guidance on derivatives, “groups” and when a holder above 5% can still rely on the lighter Schedule 13G. The legal standard has not changed, but the practical risk of running a quiet, borderline campaign has increased.

Key Actions for Boards

Independent, proactive boards should:

• Conduct and document annual independence reviews that look beyond obvious financial ties to tenure and personal or business relationships.
• Maintain a concise skills and independence matrix aligned with strategy, key risks and committee responsibilities.
• Confirm that committee structures and audit-committee expertise meet current SEC and exchange expectations.
• Monitor proxy-advisor and major investor policies early in the proxy calendar and address predictable questions in the proxy and outreach.
• Treat refreshment and succession planning as risk management and prepare and occasionally rehearse an activism response plan.

Conclusion

Independence and transparency are now central to board credibility. Activism will ebb and flow with markets, but it is not going away, and boards that can show how independence, composition and oversight support long-term value, and communicate that story clearly to investors, will be in the strongest position when scrutiny comes.