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Agents and Informed Consent:
After the 2008 Financial Crisis
Editors’ Note: How can you-the-negotiator ensure that your client is really on board? Nolan-Haley argues that by paying more attention to “informed consent” not only before, but again at intervals during a negotiation, and taking care to reaffirm this as the process reaches agreement, agents will not only better serve their clients but reach better, more lasting agreements. Yet revisiting the subject, years after the 2008 financial shocks demonstrated the degree to which large institutions were ignoring these principles, she finds strong evidence that lawyers and other professionals with a duty to their clients have badly failed them. As a result, she concludes that if your attorney isn’t asking you the hard questions, it’s in your interest to ask the attorney why not. This chapter should be read in conjunction with Wade’s Bargaining in the Shadow of the Tribe.
In an earlier iteration of this chapter in 2006, I examined the concept of informed consent and its potential to address principal-agent tensions in negotiation, tensions which, if not managed properly, may present a barrier to settlement. Informed consent operates in a multitude of different settings, from participatory democracy to international treaties on hazardous chemicals. In the broad political context, the principle of informed consent holds that legitimate government depends upon the informed consent of the governed. It is a bedrock principle deeply ingrained in the moral interstices of American ethical and legal culture. As a legal doctrine, informed consent requires that individuals who give consent do so as competent individuals, based on relevant information and acting voluntarily. This means that in the agency context, principals need to understand not only the consequences of authorizing agents to negotiate for them but also the consequences of any outcomes that are reached. In representative negotiations, the principle of informed consent is not an end in itself but is a means of achieving the fundamental goal of fairness.
This goal requires that principals know what they are doing when they authorize agents to negotiate for them, that they understand the decision-making process, including their right to withdraw consent and discontinue negotiations, and that they understand the outcome reached in negotiation. In short, informed consent advances three primary goals in negotiation: it promotes human dignity, honors party self-determination and helps to achieve the fundamental goal of fairness. From a more pragmatic perspective, informed consent has a beneficial impact on the long-term durability of agreements that agents negotiate on behalf of principals.
I focused specifically on legal negotiations, and sketched a framework for informed consent based on a robust deliberative exchange between lawyers and clients whose relationship is one of agent to principal. The legal profession’s conceptual support for informed consent is grounded in its ethical rules. The ABA Model Rules of Professional Conduct describe informed consent as “the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct” (American Bar Association 1.0(e)). While the rules provide some conceptual support for the principle of informed consent, they offer little practical guidance to lawyers on how informed consent should operate. Lawyers are required to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” (ABA Rule 1.4(b))
Guidance on the regulation of client consent rights is somewhat murky. Model Rule 1.2(a), which governs the allocation of decision-making power in the attorney-client relationship, establishes an ends/means approach in which the client decides the ends of a given problem, i.e. whether to accept a particular settlement offer, and the attorney decides the means. The inherent complexity of determining what constitutes real ends and means has created challenges in integrating this distinction into practice.
Other legal and ethical norms are more straightforward in this area. As an agent, the attorney must act in accordance with her principal’s instructions and is responsible to her principal if she violates this duty, and ABA Model Rule 1.7 establishes the lawyer’s duty of loyalty towards her client (Olfe v. Gordon 1980: 577).
In a world of perfect informed consent practice, the transfer of authority from the client-principal to the lawyer-agent would be a relatively straightforward matter. Principals would understand their positions and....
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