The notions of "firm" and "corporation" are very often confused in the literature on the theory of the firm. In this paper, the two notions are sharply distinguished: the corporation is a legal entity entitled to operate in the legal system and in particular to own assets, to enter into contracts and to incur liabilities. It is used to legally structure firms for numerous reasons, including the need to locate property rights key for the operation of the firm in the ownership of separate, "fictitious", legal persons. This avoids ex post-contracting bargaining by parties which otherwise would hold residual control rights over key assets used in the firm's operations. The assets partitioning effect of corporate legal personality has also several economizing properties reviewed in the article. The firm is the economic activity developed as a consequence of the cluster of contracts connecting the corporation owning these assets to various holders of resources required in the firm's operations. Numerous consequences deriving from this sharp distinction between corporation and firm are explained in this article, including the need to extend the circle of the beneficiaries of the firm management's fiduciary duties.

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Le concept d'entreprise n'est habituellement pas considéré comme un concept juridique. Il est pourtant possible d'élaborer une théorie juridique de l'entreprise qui la considère comme un ordre juridique en soi. Même en l'absence de reconnaissance de son existence par les ordres juridiques positifs, l'entreprise fonctionne comme un ordre juridique, et ceci crée des contraintes à une action efficace des ordres juridiques positifs sur les entreprises, et plus généralement sur l'économie. Une telle approche s'avère particulièrement nécessaire s'agissant des entreprises multinationales du fait de l'autonomie qui est la leur. Elles remettent en cause, par l'optimisation subjective de leurs investissements, les équilibres entre les divers intérêts touchés par l'activité économique, trouvés jusqu'à présent dans le cadre national. Leur action appelle une réaction des ordres juridiques positifs (États et organisations internationales) qui ne sera appropriée que si elle prend en compte le très réel partage du pouvoir de régulation de la vie économique qui existe entre entreprises et ordres juridiques positifs.

I share the view expressed by Simon Deakin, David Gindis, and Geoffrey Hodgson (‘DGH’) that social scientists need to consider the constitutive role of law in their disciplines. This is particularly the case for economists working on the theory of the firm and on institutions more generally. Their analyses are often built on assumptions about the legal system which do not correspond to reality. One major issue is the generalized confusion between the concepts of ‘corporation’ and ‘firm’. In day-to-day parlance, the two words are synonyms. But, when the constitutive role of law is considered, the word corporation corresponds to a specific legal device which should be clearly differentiated from a less-specific concept which can be called a ‘firm’ or an ‘enterprise’. The notion of firm usually corresponds to the economic organization of various resources via contracts to produce goods or services. The corporation is a legal institution with peculiar characteristics, including a potentially eternal legal personality, an asset partitioning effect, and several layers of separations of ownership and control. Corporations are often used to legally structure large firms because they are very efficient legal devices to concentrate capital. But, firms are practically and conceptually different from the corporation(s) used to structure them. DGH consider that the understanding of what a firm is should not go against general, day-to-day understanding. In their view, although not all firms are corporations, all corporations are firms. I disagree. Only by clearly explaining that corporations are not firms can lawyers help social scientists consider the constitutive role of the law of corporations in the structuring of our present-day economy.

Finally, we look at some of the tools available to address the issue of climate change in the present World Power System. We must find the way to reengineer multinational enterprises in a way that they address climate change issues in their day-to-day operations. A flawed agency theory has led to improper firm governance, the maximization of shareholder short-term interests leading to a massive production of negative externalities. We need to move to true cost accounting by integrating into the accounts of reporting entities the replacement cost of the CO2 used in their value chains. Using the notion of replacement cost prevents any attempt at pricing environmental services. Pricing would be subjective and/or artificial. The move allows to go beyond the financial sustainability of firms, which is a prerequisite but is insufficient. Firms also need to show that they are compatible with the preservation of natural resources. It is the only way to ensure the sustainability of our kind of society, with strong rights of autonomy, including property rights.