01 November 2003

I'm not much of a corporation-law scholar. I do not pretend to know the fine distinctions between Delaware corporate law as declared by its Court of Chancery and, say, Illinois corporate law (and I only know much of the latter because it was on the bar exam, and I try to keep somewhat current even without a CLE requirement). However, one thing that I did note when taking various corporation law courses was—not to put too fine a point on it—rampant myopia. Professor Bainbridge noted Henry Manne's objection to this problem (although somewhat less insultingly).

   This leads me to a wild proposition. The English language is extraordinarily difficult for a nonnative speaker to learn for a variety of reasons; probably the least-remarked-upon is the tendency to use a single word to mean contradictory things, even in the same context. Consider, for example, the term "equity." In legal usage, "equity" ordinarily refers to nonmonetary remedial schemes that might be used to enforce someone's rights. The classic example is an injunction; so is an order of specific performance (that is, requiring someone to do exactly what a contract calls for, such as sell a house on a specific date at a specific price to a specific buyer instead of to a later, better offer). "Equity" and "equitable" are also used somewhat loosely as terms for "what is fair and just." However, in corporate and securities law, equity refers specifically to an accountant's calculation of monetary capital—something that, in traditional legal usage, might be classified as "law" or "damages," and not "equity" or "chancery." And once one throws the bankruptcy usage of "equity" back in, with its inherently contradictory meanings for "shareholder's equity," one basis for Professors Manne and Bainbridge's questioning of corporate-law scholarship becomes quite clear. Perhaps it is not the basis they were thinking of; but the need to look at fundamental issues, instead of merely arguing about how many boards of directors can dance on the staple in their respective directors' E&O insurance policies, seems to be their point.

   None of this is intended to disparage the generally pretty smart judges who sit on Delaware's Court of Chancery. It is not even to disparage the intelligence or capability of corporate law scholars. It is only to suggest that perhaps, just perhaps, they need to have their depth of vision checked.