Conflicts of interest in the boardroom: inevitable, not insurmountable
A director who participates in decisions on the sale of a business unit to a party in which he himself holds a personal interest. Or a supervisory board member who approves the hiring of a consultancy firm where he serves as a director. Recent court cases highlight how important it is to identify conflicts of interest in a timely manner and to handle them with care. Company secretaries play a key role in this regard. They can be the first to signal whether the interests of directors or supervisory board members clash with the interests of the company. The question is: how do you act prudently in a conflict-of-interest situation? In early June, this was the focus of a masterclass organized by Management Scope, in collaboration with A&O Shearman and The Board Practice. Company secretaries from large companies attended this early-morning breakfast session at the offices of law firm A&O Shearman in Amsterdam.
Complex legal framework
When is there a conflict of interest? According to Dutch legislation and case law, in particular the Bruil/Kombex judgment from 2007, this is the case ‘if, due to the presence of a personal interest or an involvement with another interest that does not run parallel to that of the legal entity, a director cannot be deemed capable of safeguarding the interest of the company and the business connected therewith in the manner that may be expected of an honest and unbiased director.’
It is important to note that such a conflict of interest does not necessarily mean that the company does in fact get compromised.
‘Under the law, a conflict of interest arises if there is reasonable doubt as to whether the director is still guided exclusively by the company’s interests,’ clarifies Richard de Haan, lawyer and dispute partner at A&O Shearman.
A more difficult question is what action a company should take when directors or supervisory board members have a conflict of interest. The legal answer is not simple: there are three normative frameworks that overlap yet are not identical:
- The statutory abstention rule stipulates that directors and supervisory board members must abstain from deliberations and decision-making in the event of a conflict of interest. This law also provides for an escalation procedure: if all directors have a conflict of interest, authority shifts to the supervisory board, and subsequently to the general meeting of shareholders, unless the articles of association provide otherwise. If the remaining directors, who do not have a conflict of interest, cannot obtain a majority, the decision is not taken - in that case, escalation is not permitted. Joyce Leemrijse, partner and notary at A&O Shearman, emphasizes that the escalation procedure must be clearly defined in the articles of association. ‘In practice, we often see that this is not properly regulated.’
- In addition, the Chamber of Commerce developed the enhanced standard of care in its case law. According to this standard, a director or supervisory board member must act transparently in the event of a conflict of interest and put safeguards in place to manage the risks.
‘The scope is crucial,’ says De Haan. ‘The enhanced standard of care is not limited to the formal decision-making itself, but also applies to the preparation and implementation phases. Anyone who thinks, in the event of a conflict of interest, ‘we will exclude the conflicted director from the formal vote and that will be the end of it,’ is mistaken.
In the event of a conflict of interest, the board must in any case provide as much transparency as possible and ensure that the distinct interests are carefully separated from one another. Boards are free to determine for themselves what other measures it takes to create further safeguards and ensure transparency. De Haan: ‘You can engage an independent third party, have a fairness opinion prepared, or seek approval from the shareholders meeting.’ - And then there is the Corporate Governance Code which stipulates, quite strictly, that a company must strive to avoid conflicts of interest. Best-practice provisions prescribe how this should be done: by not accepting gifts, by formulating regulations, and by seeking approval from the supervisory board for material transactions. The sanction for non-compliance seems mild. ‘But the usual comply or explain principle under the rules of good governance is risky in this case,’ warns De Haan. ‘While possible to explain why the board is acting in violation of the code, it may still be an action in violation of the law.’
Controversial ruling at OCI
That (alleged) conflicts of interest can lead to serious problems is evident from the legal case involving OCI. The listed chemical company decided to sell a business unit to Orascom, a company owned by the executive director and major shareholder of OCI. Because the board was aware of the conflict of interest, various measures were taken: it established a transaction committee with non-conflicted members, engaged an additional law firm, requested a fairness opinion from Rothschild & Co, and had the transaction approved at a shareholders meeting.
The procedure appeared correct. Nevertheless, the Chamber of Commerce blocked the transaction, largely because the Chamber found that it had not been sufficiently demonstrated that a thorough decision-making process had been followed. This was partly because alternatives to the transaction had already failed before the establishment of the transaction committee, which the transaction committee itself subsequently did not examine or document. The Chamber of Commerce also took issue with the fact that the transaction committee allowed the conflicted CEO to handle the negotiations, notwithstanding the fact that the transaction committee set narrow ranges for the possible outcome of those negotiations.
Despite the controversial ruling, the lesson from this case is clear: ‘In the event of a conflict of interest, an enhanced duty of care applies. This must be reflected in a decision-making process that is even more thorough than normal. Moreover, the board must be able to explain afterwards that the decision-making process was conducted with sufficient thoroughness, and that the interests of all stakeholders were sufficiently identified and weighed. Not only in the formal decision-making process but also in the preparation and the execution. That is a significant responsibility,’ says De Haan.
Active disclosure obligation for directors
Should a director who suspects a conflict of interest actively disclose this to his fellow directors? For a long time, this was a legal grey area. But in April 2026, the Supreme Court provided clarity on this matter, explains Gerard van Solinge, professor of corporate law at Radboud University Nijmegen and attorney at A&O Shearman. Getir, the meal delivery company that has since ceased operations in the Netherlands, was at the center of this ruling. The executive directors had agreed to a transaction in which the company's founders were not involved, because they allegedly had a conflict of interest. The founders disagreed with this and took the case to the Chamber of Commerce. Ultimately, the Supreme Court formulated three rules: 1. the director concerned has an active duty to disclose; 2. it is not the director concerned but the fellow directors who assess whether a conflict of interest exists; 3. the fellow directors must ensure that the conflicted director actually remains excluded from deliberations and decision-making.
According to Van Solinge, directors are held to a ‘more rigorous standard’ with this active duty to disclose. ‘Fellow directors who dismiss this are taking a risk themselves.’ Yet, he believes the ruling does not solve everything: ‘What if different directors mutually claim that others have a conflict of interest? Or what if someone wears two hats, for example as a director of one party and as a supervisory director of the other party in the transaction? The Supreme Court does not rule on that.’
Dangerous power games
Conflicting interests may not always be easy to recognize, says Victor Prozesky, founder and managing partner of The Board Practice. ‘An informal power dynamic in which the interests of the company are slowly overshadowed, can emerge.’ This happens when a group of directors, or even a single dominant director, monopolizes the decision-making process through power games and reciprocal loyalty: ‘I supported your proposal last time, so I expect you to do the same for me now.’ According to Prozesky, this is a dangerous scenario because it develops gradually. ‘You only realize it when the culture of relational dependency has become deeply entrenched.’
Prozesky illustrates this with a practical example of a company in which the chairman appointed only people loyal to him to the nomination committee. ‘Anyone who had ever openly challenged the chairman did not stand a chance. This created a circle of confidants who determined who would join the board and what decisions would be made. Formally, there was nothing wrong, but the culture was disastrous. The company went through three CEOs in eighteen months.’
For company secretaries, this is a complex situation: who do you turn to when the chairman is part of the problem? Prozesky believes that a board evaluation can be a powerful tool in such cases. ‘Directors who do not speak their minds out loud during a meeting can still express their views in a peer review. If it turns out that two out of five board members do not consider a colleague to be independent, that is a signal that cannot be ignored.’ This is exactly what happened in the above example. ‘While the chairman downplayed the findings, a board member pressed the issue and said: ‘The criticism is directed at you, so you cannot be the judge of this.’ Slowly, the dynamics shifted.’
Guardian against conflicts of interest
Prozesky argues that while company secretaries may not have formal authority, they can signal conflicting interests, conflicts, or underlying tensions at an early stage. This starts with procedural discipline: ‘Before every meeting, explicitly ask if there are any conflicts of interest related to the agenda items. And guard against it becoming a tick-box exercise.’
Other recommendations include repeating the board evaluation annually and ensuring that the evaluation includes questions about independence, a safe culture, and the quality of information provided. A valuable pointer: ‘Be willing to listen, together with the executive board or the supervisory board, to what is simmering beneath the surface. Regularly ask the question: are we still working together effectively? Good boards will always take critical feedback seriously.’
Prozesky concludes that conflicts of interest are inevitable but not insurmountable. ‘As a guardian of undesirable conflicts of interest, it is important to recognize, discuss, and manage these. This can go a long way to preventing problems, mismanagement, and legal proceedings.’
This article was published in Management Scope 07 2026.