precision, appeals can be made to an open-ended menu82 of purposes and it is difficult to decide when to rule out appeals on the basis that they invoke irrelevant values or aims. (Cork, it should be conceded, does offer a list, as we have seen.) Eclecticism runs the danger of seeing all arguments as valid and, as a result, guidance for practical decision-making is lacking and confusion results. If an identification of the objectives of insolvency law is desired so as to provide a framework within which judges and legislators can act, then the multi-value/eclectic, even more than the communitarian, approach is guilty of settling untrammelled discretions on such individuals and allowing them freely to choose from and combine an indeterminately long list of vaguely stated ingredients.

The nature of measuring

The above visions or approaches to insolvency emphasise different facets of corporate insolvency law’s role. What fails to emerge from the review undertaken, however, is any complete view of the appropriate measures of insolvency law. Creditor wealth maximisation was narrow in its exclusive concerns with creditors’ interests and pre-insolvency rights and in its conception of the insolvent company as a pool of assets. The broad-based contractarian approach begged questions concerning the nature of persons behind the veil of ignorance and failed to explain tradeoffs of fairness or justice versus efficiency or between different kinds of interests worthy of protection. The communitarian vision escaped the narrowness of creditor wealth maximisation but encountered problems of indeterminacy. The forum vision made much of procedural concerns but shed little light on the substantive ends to be pursued by insolvency law or processes. The ethical vision gave rise to difficulties concerning the possibility of locating agreement as to ethical content and to establishing the boundaries of relevant ethical concerns. How ethical aspects of decisions on insolvency interacted with other, say legal, principles remained in doubt. Finally, the eclectic approach, again, gave rise to problems of indeterminacy and of contradictions and tensions between different ends.

82For a view that insolvency law should offer a ‘menu of options’ and allow firms to choose the optimal rules for their own, perhaps idiosyncratic, requirements, see Rasmussen, ‘Debtor’s Choice’ and Rasmussen, ‘The Ex Ante Effects of Bankruptcy Reform on Investment Incentives’ (1994) 72 Wash. ULQ 1159.

as agents. As companies grew, though, the artificiality of a contractarian analysis became apparent. A ‘natural entity’ view of the corporation was seen by others to be more appropriate.85 This saw the company as a living organism with the managers as the brain and the shareholders as passive suppliers of capital. The natural entity view gave rise to a further way of justifying the vesting of discretionary power in managers: it was the expertise and competence of managers that legitimated their discretion. The boundaries of such expertise and appropriate deference to it were nevertheless difficult to delineate.

As for legitimation through checks on arbitrariness, the traditional legal model offered two mechanisms: accountability to shareholders through internal company controls and directorial duties to act in the best interest of shareholders. (The latter duties legitimated discretions by compelling directors to aim at profit maximisation.) Both mechanisms proved flawed and the law’s quest to legitimate the power of corporate management failed.86

In response to this failure two strategies might be advocated within the traditional approach: either managers could be made more responsible to the market or new legal steps could be taken to ensure management in the interest of shareholders. Both of these strategies would constitute tinkering. It would be better, argued Stokes, to recognise the misguided nature of attempts to control through markets or the ordering of power in the company and to adopt a new perspective on legitimating managerial power.87 This new approach would accept the separation of ownership and control and break free from the contractual conception of the company. It might build on a corporatist model of the company and see

1416; E. F. Fama, ‘Agency Problems and the Theory of the Firm’ (1980) 88(1) Journal of Political Economy 288; Symposium, ‘Contractual Freedoms in Corporate Law’ (1988) 89 Colum. L Rev. 1385; H. Butler, ‘The Contractual Theory of the Corporation’ (1989) 11 Geo. Mason UL Rev. 99.

85 See Stokes, ‘Company Law and Legal Theory’, p. 164. See also further discussion in S. W. Mayson, D. French and C. L. Ryan, Mayson, French and Ryan on Company Law

(24th edn, Oxford University Press, Oxford, 2007) ch. 5. Another problem of using a contractual conception to legitimate managerial power was that this view conflicted with the case-law theory of the company as a body distinct and separate from its shareholders.

86Notably because in large public companies the dispersion of shareholding undermined shareholder control and managers, in reality, wielded power free from either shareholder constraint or the courts, who displayed deference to managerial expertise. (Dispersed shareholding produced a lack of control over managers because of low information levels and low incentives to enforce duties against directors: see V. Finch, ‘Company Directors: Who Cares About Skill and Care?’ (1992) 55 MLR 179.)

87Stokes, ‘Company Law and Legal Theory’, pp. 173–7.