2.2.2.1 Defensive behaviour in Dutch case law

The impact of court decisions (finding or not finding directors liable) on a director’s willingness to undertake risky projects is an important issue. Director propensity for risk taking was first recognised and protected in the landmark case Willemsen Beheer v. NOM. The Supreme Court decision in this case assumes that any stakeholder with an interest in the future profitability and continuity of a company would want the company to take risks.1 Stakeholders should therefore rationally accept a high level of liability protection and demand that there be governance mechanisms in place that allow directors to undertake risky projects. The Supreme Court reasoned that it would be in the best interests of a company to prevent the occurrence of defensive practices: ‘It is in the best interest of the company that company directors are prevented from undesirable defensive considerations [out of fear of directors’ liability, TP] when they discharge their obligations.’2

The defensive behaviour argument utilised in Willemsen Beheer v. NOM is arguably based on three sequentially-linked assumptions: (i) the threat of directors’ liability influences the behaviour of directors; (ii) the threat motivates directors to engage in undesirable defensive behaviour; and (iii) the undesirable defensive behaviour has negative effects.3