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"Black Hole" of Federal Corporate Regulation could Swallow Businesses, Warns Delaware Chief Justice Steele
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MYRON T. STEELE, Chief Justice of the Delaware Supreme Court, may have used an astrophysics metaphor in his ILE Distinguished Jurist Lecture last March, but it didn’t take a rocket scientist to decipher his feelings about the role of the federal government in corporate law.

“The larger the federal presence, the less scope to the states’ radically different approaches and their influence in shaping corporate governance. Like black holes, the federal government’s gravitational pull inevitably swallows everything in its path,” Steele said.

Steele described how the federal government’s desire to protect shareholders in corporations has led to a “one-size-fits-all regulatory model” that is often less sensitive to a corporation’s particular situation than the corresponding state laws would be. As early as the Securities Act of 1933 and the Exchange Act of 1934, the federal regulation of corporations has been creeping further and further into the domain of individual states’ regulation.

According to Steele, the Sarbanes-Oxley Act, passed in 2002 in response to troubling corporate financial and accounting scandals early in the decade, represents the most recent — and serious — encroachment of federal policy on state law. Since 2002, corporations have spent $8 billion attempting to comply with the new restrictions.
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