SEC injunction against Hollinger

The SEC's successful pursuit of an injunction against changes in composition or mission of the Hollinger special committee has gotten less attention than it deserves. At base, the Hollinger scandal is about allegedly unauthorized payments by Hollinger to Conrad Black and some of his cronies. This is classic corporate governance stuff - governed by Delaware General Corporation Law § 144's provisions on conflict of interest transactions. Granted, there are related federal fraud issues arising out of the nondisclosure of the challenged transactions. The federal claims, however, are essentially seconday to - even parasitic on - the state law claims. For the SEC to invoke federal authority therefore allows the tail to wag the dog. When that federal authority is used to impede core corporate governance powers - selecting the membership of a board and its committees - we have a dramatic federal preemption of state law. I think the creeping federalization of corporation law is a very bad idea. I think federalizing corporate law without even having a debate on the subject is an even worse idea.