Where does equity collide?

The owners' residual claim on a firm: what is left of its assets once every liability is deducted, reported on the balance sheet as contributed capital plus accumulated earnings. The Financial Accounting Standards Board's 1985 Statement of Financial Accounting Concepts No. 6 defined equity, or net assets, as the residual interest in the assets of an entity that remains after deducting its liabilities. The referent is a measured monetary amount, an accounting balance owed to owners, not a body of law, a standard of fairness, or a worker's sense of a fair deal.[1]

Unit

The owners' residual claim on a firm, assets minus liabilities, in currency

Recovery means

Not applicable

Measured by

Read off the balance sheet as total assets minus total liabilities, or built up as contributed capital plus retained earnings

A distinct body of rules, principles, and remedies that grew up in the English Court of Chancery to temper the rigour of the common law, together with the equitable relief it still supplies, such as the trust, the injunction, and specific performance. Maitland's lectures, published as Equity: A Course of Lectures, described equity not as a self-sufficient system but as a gloss that presupposes the common law and supplements it where strict rules would work injustice. The referent is a jurisdiction and its doctrines, not a figure on a balance sheet, a principle of fair distribution, or a theory of workplace motivation.[2]

Unit

A body of rules and remedies distinct from the common law, applied by a court of conscience

Recovery means

Not applicable

Measured by

Identified by the doctrines and remedies it supplies, such as trusts, injunctions, and specific performance, set against common-law damages

Fairness in the distribution of resources or outcomes, held apart from mere equality: an equitable share is one judged just, often meaning allocation according to need rather than identical treatment. Whitehead's 1992 The concepts and principles of equity and health defined equity as concerned with differences that are not only unnecessary and avoidable but also unfair and unjust, distinguishing it from simple equality of provision. The referent is a normative standard for judging a distribution across people, not an accounting balance, a court's jurisdiction, or an individual's felt ratio of reward to effort.[3]

Unit

A judgement that a distribution across people is fair, held apart from an equal distribution

Recovery means

Not applicable

Measured by

Weighed against a standard of fairness, for example whether differences in health or resources are avoidable and unjust, not by whether shares are equal

A person's perception of whether the ratio of their own outcomes to inputs is fair when set against a referent other, and the tension that a mismatch produces. Adams's 1965 chapter Inequity in social exchange proposed that people compare their outcome-to-input ratio with that of a comparison other, and that felt inequity, whether under-reward or over-reward, is a state of tension that drives them to restore balance. The referent is a subjective, motivational judgement of exchange fairness, not a sum on a balance sheet, a body of legal doctrine, or a policy standard for distributing resources across a population.[4]

Unit

A person's perceived fairness of their outcome-to-input ratio against a referent

Recovery means

Tension from felt inequity pushes the person to restore balance, by altering their inputs, their outcomes, the referent, or the perception

Measured by

Inferred from perceived ratios of outcomes to inputs relative to a comparison other, and from responses to over-reward and under-reward