Agent & Principal & Fiduciary Duty

A few weeks ago Dean Wesley Smith mentioned on his blog a clueless tweet by an author’s agent advising authors not to “argue contract law with agents/editors”, an opinion which Dean rightfully scorned.  (Full disclosure: I’ve criticized some of Dean Wesley Smith’s positions in the past.  I stand by those particular criticisms, but general criticisms do not necessarily extend to specific issues.  While I don’t wholly agree with Dean’s stance on the subject of Author’s Agents [i.e. that authors should eschew them entirely], he does have a lot to say on the topic that authors should at least consider.)

Other sites, such as Bad Agent Sydney and Michael Stackpole on his blog and the Passive Voice picked up on the same tweet, and universally condemned the untenable position suggested by the agent in question.

Once again, my MBA-Super-Powerz kicked into action, and I saw that there was a somewhat unique perspective I could add to this discussion.  The “Agency Problem” is one that is sometimes discussed in B-Schools.  (It’s probably also discussed in a substantially more thorough manner in some Law Schools.  So, of course, I warn again that I Am Not A Lawyer.)  Basically, it boils down to this: the role of an Agent is to carry out the express will of a Principal.  The Principal?  He’s the guy (or gal) in charge.  He wants or needs something done, but lacks the necessary tools and resources to do it himself.  So the Principal hires an Agent – someone who possesses the tools and resources the Principal lacks – to act on his wishes.

The Principal?  If you’re a writer, he is You.

The Agent?  Agents have what’s called a Fiduciary Duty to the Principal.  Fiduciary Duty is one of the highest burdens of duty in terms of law.  Typically, Fiduciary Duty is interpreted as referring to a duty of care over financial matters, but it can extend to many other types of relationship.

Legally speaking, as I understand it, the relationship between Author and Agent is a Fiduciary relationship.  The problem?  Agents, in today’s market, don’t see it that way.  They don’t understand the nature of a Fiduciary responsibility.  Most Author’s Agents lack any sort of formal legal training.  There is no professional organization that can disbar or censure an Agent who is caught acting in a fiduciarily irresponsible way.  There are no professional certifications, no continuing education requirements.  There are none of these things.

And yet, Agents think themselves qualified and capable of giving Legal Advice.

Legally, there is only one qualified and capable source of Legal Advice: a Lawyer.

If you’re a writer, you should have one.  Because IP law is fraught

Unfortunately, in today’s writing world, the most secure path to publication with a large, respected publisher is to go through an Agent.  Agents have become Gatekeepers and Slush Readers.  And increasingly, Agents see themselves as beholden not to the fiduciary interests of their writers, but to the publishing houses with whom they have long-term relationships.  Writers – especially midlist writers, which is where most published writers fall – come and go.  The publishers are more constant.

I’ve complained, in the past, about another aspect of how Author’s Agents work: most typically, when a publisher tallies up all an authors sales and prepares a royalty payment, they send that payment not to the author, but to the agent.  That self-same agent who is not, as pointed out above, bonded or licensed or otherwise under any other ethical enforcement mechanism.  What troubles me about this is that Agents then take the payment and pass on a check to the author for the author’s share (typically 85%).  This flow of money, from publisher to agent to author, is fraught with ethical implications.  It is easy to see how agents don’t want this system to change.  When agents pay the authors, the agents make of the authors employees at the bottom of a long payment stream.  And it presents a severe ethical complication that is astoundingly compounded by the lack of any outside ethical oversight or enforcement agency. 

Obviously, of course, when agents take payment on behalf of authors, they are unquestionably acting in a fiduciary role.  That money… it’s not the agent’s money.  Except for that amount which has been agreed to by contract, that money is the author’s money.  (Myself? Were I a published author and one of sufficient clout, I would demand payment go to my accountant, who then would cut a check from my accounts to pay the Agent for services rendered.  Accountants?  They  have things like professional licensure and Continuing Education requirements and a specific ethical code of conduct, etc.)  The agent is an employee of the author, not the other way around, but the current system upends the proper nature of the relationship.

For the most part, of course, this system works relatively well. Most agents are above-board.  Most act ethically (or as ethically as they can reasonably be expected to act, given systemic problems that reward and normalize activity of questionable ethical provenance.)  Most do not abuse their clients funds.  But when an agent chooses to act unethically, and puts his or her interests before the clients, what recourse is there?  How would an author even know that an agent has breached their fiduciary trust?  There is no mechanism of enforcement.

And these facts are problematic.  They are troubling.  They are wrong and possibly illegal.  And they need to change.

The status quo?  It is unsustainable because it maligns the interests and positions of authors.  And it creates an environment where agents feel they can openly mock their clients and potential clients, in the way that agent Terri Wolf did in the aforementioned tweet.

Unfortunately, in today’s market, the Agents are the Gatekeepers.  With rare exception, if you want to get published, you’ll need an agent.  (I have read of several instances where an author sells a book on their own, without the services of an agent, but this does not seem to be common or particularly easy, especially when most editors openly state that they do not accept unagented submissions.)  For an unpublished author like me, were I currently seeking publication of a novel, I’d have few choices but to accept the status quo.  To reject the status quo is effectively to opt out of practically the only means of getting published.  It’s a sad pay-for-play system.

I don’t have a ready solution, unfortunately.  Obviously, Literary Agents need to be licensed by a professional organization.  They need formal training.  They need, at the very least, a formal understanding of the basics of Agent-Principal law and of their fiduciary duty in such a relationship.  And their professional organization needs to have formal disciplinary measures and formal guidelines and standards of conduct.  And the money-handling function needs to be clearly separated from the negotiation and representation function.  More authors need to involve IP lawyers in their negotiations, and more authors need to involve accountants and other such professionals in the management of their affairs.  Of course, most authors can’t afford these services independently.  Very few can.  But that’s part of the problem with the way the industry is structured.  With agents working as much in their own interests and the interests of the publishers they work with, there has been an appalling decrease in the capacity of most authors to support themselves from the work they do as writers.  I do not think this is mere coincidence.

For myself, I know that the simple act of posting this post – if it is ever read by a potential future agent – almost guarantees that I will never get published professionally.  The few agents I’ve interacted with have been very prickly about these issues, and they are shocked and offended at the merest suggestion of infidelity – no, actually, not at the suggestion of infidelity, but at the suggestion that there are systemic pressures favoring infidelity even if most agents do not bow to these systemic pressures.  When I suggested, on one forum, that there were problems with the way the current model is set-up, I was warned by an agent that this line of argument is likely to get me labeled as a “prima donna” author, who no agent will want to work with.  And I was warned that suggesting that there were systemic problems inherent in the way literary agencies operate would get me accused of not being sufficiently trusting of the agent, and that such a relationship cannot succeed if the author does not trust the agent.  To which I ought to have replied: “Of course, as an unpublished just-starting-out-author, I shouldn’t trust my new agent.  I’ve never even met said agent, I have no prior experience with said agent, and no prior relationship.  I have nothing on which to base that trust.  And the agent isn’t even bound by common ethical and professional safeguards such as other professionals are bound by.  In fact, I have no guarantee of an agent’s trustworthiness except the good word of an already-established author.  Trust, my dear agent, is earned.  It is not granted prima facie, except by fools.”

Most agents, it seems, even the ones who are acting in a mostly ethical manner, don’t want to question the status quo.  It is uncomfortable for them.  And so, by calling into question the very ethical foundation of the way this industry works, I have likely made of myself a persona non grataSigh.  Would that it were not so.  I take it as further evidence that the system as it currently exists is ethically compromised.

I don’t mean to argue here that authors should not use agents.  Everything I’ve read suggests that most authors who have agents are very happy with the work their agents do.  Most swear that their agents “earn their 15?%”.  By all accounts, there are a lot of valuable services that agents provide – not just selling manuscripts and negotiating contracts, but a great deal more.  I can’t speak directly to these facts, but the faith these authors whom I respect put in their agents is, to me, telling.  As I’ve said before in this post, most agents are acting in as ethical a manner as they can, given the constraints they work under.  But the systemic problems I’ve outlined here need to change.

If that change is to occur, it needs to start at the top.  From a game theory standpoint, you can’t expect those who are trying to break in to the industry to affect the change that needs to be made.  But for those authors who are well paid and successful, it is probably in their best interests to demand changes to the current system.  Publishers can’t live without their current crop of big-name authors, and likewise neither can the agents.  If successful, established authors collectively demanded changes to this system, it would benefit all authors – existing, aspiring, and otherwise.

I just hope the change comes before I’m actively trying to market my book…


It has come to my attention that at least one of the tenets on which this post was based is, as it turns out, not wholly true.  There is, in fact, a professional association or organization for literary agents: the Association of Author’s Representatives.  And, in fact, AAR does maintain a code of ethical standards of conduct.  And, in further fact, the by-laws of said organization do allow for the reprimand, censure, or expulsion of members who violate that code of ethics.  That said, neither the code of ethics nor the by-laws make mention of an agent’s capacity to offer legal counsel or of their expertise or lack thereof in contract law.  What’s more, the qualifications for membership consist first of having been engaged in the business of being an author’s agent for at least two years prior – and membership in the organization is obviously not required to be able to call one’s self an agent.  This stands in stark contrast to the legal profession, for instance, wherein membership in a Bar Association is a mandatory prerequisite for the practice of law, and accession to the bar is significantly more rigorous.  Additionally, neither the by-laws nor the code of ethics make mention of anything like the continuing education requirements I mention several times above.  All-in-all, the AAR has significantly less bite and enforcement mechanisms than the average Bar Association possesses.

In that sense, the thrust of the argument I make in this post remains substantially intact.  But the existence of this association does give me a somewhat better feeling about working with an agent who is a member of the AAR, as this demonstrates at least some committment on the part of said agent to operating by some ethical standards.  But their membership qualifications do leave something to be desired… Would that their membership process were more rigorous, and would that the practice of being an author’s agent were tied to membership in the organization and not the other way around…

The problem is… you still don’t need to be a member of this organization to set up shop and call yourself an Agent and to engage in the practice of being an Agent.  Sadly, it’s the other way around.  Which leaves authors seeking agents with a silly little Chicken-or-egg conundrum.  It is in the best interests of an author only to be represented by an agent who is a member of the AAR (or a similar such organization, if others also exist), because then they author will know that the agent is abiding by certain ethical standards of conduct.  But for an agent to become such, they need first to have been practicing as an agent – meaning that some authors will necessarily have to be represented by non-AAR agents… Which of those two authors would you rather be?


12 thoughts on “Agent & Principal & Fiduciary Duty

  1. I applaud your courageously speaking out, despite potential blacklisting. It’s got my mind reacting like it thinks you’re Robin Hood. …well, not quite that swoony. (;

    • Well… As cool a Robin Hood is, I can’t claim to be in the same field there, not by a long shot. Posting something like this is only brave in this way if I think there’s a reasonably good chance, otherwise, that I’d get published. As I’ve discussed before, I don’t reasonably believe that at all. And, in fact, some of the systemic problems in the literary agency system are a few of the external factors that negatively impact the likelihood of my getting published traditionally. (Perhaps the most important factor, of course, is the internal factor of my not having reached a sufficient pinnacle of skill in my story-writing.) My point here is that, my own skill and the quality of my stories aside, if agents in general are half as prickly as the few agents I’ve interacted with have been on the question of some of the systemic problem, then if some hypothetical future agent who might be inclined to consider prepresenting me, marginally, then should they get wind of this post that might tip the scales back down against me. But that presumes said hypothetical situation is at all likely in the first place. Both my skill/story quality and this post aside, I don’t see that happening any time soon.

  2. Very interesting. I’ve never thought much about agents, but it certainly does sound shady. I described this (in broad terms) to my mother, and her reaction was that with the power and the lack of oversight it sounded like lobbyists.

    As my father would have said, “Never sign anything without getting competent legal advice.”

    As Deep Throat said, “Trust no one, Agent Mulder.”

    • “True No One”, indeed. That, and “The Truth Is Out There”. 😉 But from the perspective of the agents, I realize, none of this is shady at all. They don’t realize how things look from the outside… they do things the way they do them because that’s the way they’ve always done things. That’s practically the definition of a systemic problem. None of them know or want to recognize it’s a problem because doing so would mean a dramatic change in the way they do business… and almost nobody likes such dramatic changes. Given that agents hold a lot of the cards in this game, it’s not surprising that they’re not interested in changing the game.

      • Someone I know also compared the situation to art dealers and gallery owners, who gave a similar level of power and a similar lack of licensing (I gather pretty much anybody can be an art dealer as long as they have some art to deal).

      • Hmm. Maybe like that. I’m not sure, as I don’t really know anything about the art scene. (The closest I get is wandering around the many spring arts festivals and thinking to myself “I like that, I really like that, That looks awful, etc.” and only very very very rarely ever actually buying something.)

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