What role should corporate governance play in a world of climate risk, global supply chains, and expanding societal expectations? This is the starting point of my recent article, Redefining the Firm in the Age of Transition, which offers a theoretical framework for understanding how the firm is evolving in the face of these systemic pressures.
Much of today’s governance discourse rightly focuses on the growing responsibilities of companies toward a broader set of stakeholders. Yet what often remains underexplored is how these responsibilities relate to the economic structure of the enterprise. The article contributes to this debate by revisiting classical economic theories of the firm—especially those by Coase, Williamson, and Hart—to map where governance actually occurs in the modern enterprise and how that may inform our legal understanding of accountability.
Rather than starting from normative theories of stakeholderism or from agency models centered on shareholder primacy, the paper adopts a descriptive approach. It views the firm as a governance system for coordinating incomplete contracts, where residual control does not end at the boundary of the legal entity. Financing structures, supply chain hierarchies, and operational networks all form part of the ‘economic firm,’ and each carries governance implications.
This perspective helps clarify why certain phenomena—such as private supply chain regulation, ESG litigation, or board-level climate oversight—should be treated as integral components of corporate governance, not as separate or peripheral developments. These practices already shape how firms manage risk, define accountability, and signal reliability to investors and society.
The article stops short of prescribing new fiduciary duties. Instead, it advocates for a better mapping of where residual control is exercised and how governance is implemented across the firm’s extended architecture. In doing so, it aims to improve transparency, which is increasingly demanded by regulatory frameworks like the Corporate Sustainability Reporting Directive (CSRD) and by long-term market actors seeking reliable indicators of sustainable performance.
Ultimately, the article suggests that the ability of firms to evolve internal governance structures—aligned with their economic footprint—may offer a more resilient path than one reliant solely on external regulation. Such an approach not only complements existing governance models but also contributes to the broader effort of ensuring that the firm remains a productive and accountable actor in the transition economy.
The author’s full article is available here.
Giulio Fazio is a Partner at Lexia, former General Counsel at Enel, and a Senior Visiting Fellow at the European University Institute.
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