On the face of it, it's a perfectly reasonable thing to do.
If you own one company that publishes RPGs, and another company that owns the rights to something that you think would do well as an RPG, then by licensing the rights both companies benefit.
Obviously, you have to declare your financial interest in the transaction to the boards of both companies, which is what happened.
It's only when the deal vastly benefitted one company at the expense of the other that it becomes an ethical issue - but still probably not a legal one.
I know nothing about US company law, but I imagine it doesn't worry too much what private companies get up to so long as there aren't any outside shareholders to get hurt. (The TSR Board might have failed in their fiduciary duty to the company's shareholders, but Lorraine Williams was hardly in a position to sue them over it.)
Boards tend to rubber-stamp whatever CEOs want to do, even when it is blatantly unethical (see the recent case of the BOD approving stock privileged buybacks at American Airlines during a period of declining revenue, the proceeds of which mostly went to executives). This is even more true when the CEO is also the supermajority owner of the company, as with the case of Williams (she had at least 80% of the shares). I can pretty much guarantee you that the BOD's attitude toward TSR was, "Eh, it's your circus, your monkeys, do what you want."
The major ethical problem in this case has to do with TSR's creditors. A corporation is a legally separate entity from its owners. If I am the sole owner and CEO of a corporation, even as the sole owner, any debt it takes on is not my
If it goes bankrupt, I can't lose my house, my car, my boat, my personal secret moon base, etc.
That's why I can't just go to the bank, have the corporation take out a $5m loan, and buy myself a yacht. The bank can't repo the yacht. That money has to be used for company purposes. I also can't just pay myself a $5m bonus, or give myself a $5m raise, just on my own decision. That's why, in theory, the board is supposed to review any company activity that could benefit me. It's not just about protecting shareholders. It's also about protecting creditors.
What was so unethical about the Buck Rogers deal, then, was that it was basically a scheme to borrow money from Random House and other creditors and simply transfer most of it directly to Lorraine Williams' bank account. The people who got screwed were the creditors. I read somewhere she got a 60% print royalty. This is insane. We've got some authors here; have any of you been offered 60% print
royalties? Not sales. Print.
The problem here is a well-known problem in American corporate law. Corporate boards have very little incentive to care too much about what a CEO does, and even less incentive when the CEO is also an owner. Remedies have been proposed, but none have been flawless or have actually passed. So, legally, what she did can't be defined as fraud, but the law defines fraud, and this is the sort of thing that the law really should cover.