On self-dealing


Sorry I have been absent. I handed in a book early this week, and I have been playing catch-up ever since. This blog has long been neglected, and it is only getting unneglected today because I am going to say something I shouldn’t say.

There is an unspoken rule in publishing that you should not criticize publishing professionals. I am going to criticize publishing professionals, and I am going to do it because I think that what is happening is wrong and unethical. Some of the people I am going to criticize, I will say in advance, I have heard glowing things about–marvelously awesome things–and so please keep this in mind. Even marvelously awesome people do things that cross ethical boundaries.

The Association of Author’s Representatives has a canon of ethics, which states (among many other things): “Members shall not represent both buyer and seller in the same transaction.”

The basic idea is this: If you advise someone, and you are in a position of trust, you should not compromise that position of trust by steering them towards options where what you want and what they want do not coincide. For instance, a financial adviser should not steer her clients to invest in a company owned by her brother-in-law: The clients just want to make money, but the financial adviser is emotionally involved with the company, and perhaps will not be able to emotionally separate herself from the prospect of helping her brother-in-law get his company off the ground. Even if the financial adviser believes she is operating on a perfectly rational level, and is willing to invest her own money to get the company off the ground, she can never be sure that her emotional involvement does not color her picture. The end result is that to avoid any appearance of ethical lapses–and to protect herself from emotional influences that are so subterranean that even she can’t detect them–a wise adviser avoids such issues entirely by never, ever steering clients towards investments where she, or her loved ones, will profit personally.

The same is true for agents. An agent is an author’s most zealous advocate. She fights for every aspect of her clients’ careers. A great agent monitors print run, coop, marketing. She pushes for foreign sales. When you go back to contract, she asks for more money, better royalty rates, a bigger push in marketing. An author trusts her agent explicitly–and it’s easy to do so, because an author and an agent have interests that are wholly aligned. You want to make more money as an author; your agent wants to make more money as an agent. She gets 15% of what you get. Her interest is your interest: to sell as many books to as many people as possible.

When we were deciding between publishing houses, my agent helped lay out the pros and cons for me of all my options. We talked about our biggest worries with each one, and I believed that she was pushing to get the very best offer we could from every house, so that I could make an informed decision. I knew that she wanted to get the best for me, because (a) my agent is the kind of perfectionist who would never let anything stop her, and (b) it was never in her interest to do anything else.

This stops being true if your agent is either a publisher herself, or is so intertwined with the publisher that you cannot distinguish between them. And, sadly, this is the second time this year I’ve seen agents who have morphed themselves from agents. The first is Lori Perkins, whose clients are sold to a publisher in which she holds a financial interest, Ravenous Romance. Lori Perkins has explained that she doesn’t take a commission on those sales to Ravenous from her clients–but all that this accomplishes is that now she truly has no financial interest in doing what is right for her clients. She has no interest in fighting for an extra 2% royalty rate, or a higher advance for her clients, because now she isn’t even getting paid for that.

The second is the Waxman Agency, which recently announced Diversion Books, an electronic press. Diversion Books has already published books written by Waxman Agency clients. And I have to ask: Really? If your agency owns a publishing house, do you really think you won’t be biased–just a little–in negotiating contracts with your clients? Will you really be able to tell your clients, “Yes, I think that it’s best if you publish with us, versus a more established e-publisher like Samhain?” without having the teensiest bit of bias? Can you evaluate your chances of success–logically and dispassionately, the way you would for an author choosing between publishing houses? Will you fight yourself for the best royalty rate? Will you be asking hard questions of yourself? If you produce a horrendous cover, will you call yourself up and say, “Honey, no. We have to lose the mullet,” or will you be the one to placate the author? Can you really wear both those hats?

Don’t get me wrong. I have several friends who have Holly Root of the Waxman Agency as an agent, and they universally sing her praises. I have heard nothing but good things about her. But for me, this would be an instant deal-breaker.

I don’t think these people mean to screw their clients. I honestly believe that the Waxman Agency really does think that this is, in fact, a good thing for their clients, an additional opportunity that their clients can avail themselves of. None of the people I have named are bad people. None of them are perfidious jerks, trying to do their clients wrong. But all of them have put themselves in the way of temptation. They have complicated straight-forward interests. And smart people who zealously represent their clients don’t do that. That’s the point of rules of ethics: to steer you away from temptation, even the ones that are so subterranean you might not recognize them.

I understand that publishing is changing and that the role of agent will see revamping over the next few decades. But the one thing I can say for sure is this: If the role of agent morphs into the role of publisher, the person needs to stop calling themselves an “agent.” If there is anything–anything at all–that stands in the way of an agent zealously representing her client, that person has ceased to be an agent. They may be a publisher. They may be a full-service book-packager with editorial add ons. They may still be something very valuable in the publishing world–don’t get me wrong–I understand where all of this is coming from. They may be visionaries in publishing.

But what they are not doing is zealously representing their clients’ interests. If there is any financial issue that stands as a roadblock between your client’s best interests and your own, you’re not 100% an agent any longer, and that is a problem.

So, what do I think you should do about this, if you’re looking for an agent? My best advice is to look for an agent who is a member of AAR. The Association of Author’s Representatives has a smart canon of ethics. It’s not a guarantee–there are always liars, or people who bend the rules–but look for someone who values that canon.

I know that this post is not going to make everyone happy. I’m sorry for that–but the truth of the matter is this. If you’re going to pay someone 15% of your work, you deserve full value for your money. And someone who is conflicted about that–or is willing to enter into such conflicts–in my mind is not worth the price.

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18 Responses to “On self-dealing”

  1. CT says:

    Hear, hear!

    Everything I feel about this, you just said.

    So thanks for doing the hard work for me. Hee.

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  2. Barry Eisler says:

    Courtney, great post. Let’s keep violating that unwritten rule — the industry will be better for it.

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  3. Jami G. says:

    Thanks for the information! I had no idea that this was happening in the industry. This might very well change my priority list of agents to target.

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  4. Chrissy says:

    Well, nobody needs to say another word, because you have said it.

    Perfectly.

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  5. Christina says:

    While I agree that what you are describing is a conflict of interests, I’m not sure if it has to be a problem.

    To use your financial adviser example: If the adviser is up front with her client about the conflict of interest and the client still decides to make the investment, is there really a problem?

    The author still has input in the decision making process after all. As long as all interests are declared and understood by all parties everything should be fine.

    That being said, a lot of people will feel the way you do about the practices you describe and simply steer away from the agents involved. Those who don’t, know what they are signing up for.

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  6. SonomaLass says:

    Exactly. Thanks for putting it so well.

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  7. Stacia Kane says:

    Courtney, I totally agree. This move by Waxman makes me incredibly sad.

    Great post!

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  8. Melissa Blue says:

    If the adviser is up front with her client about the conflict of interest and the client still decides to make the investment, is there really a problem?

    You asked Courtney this but it’s the same argument put forth by Lori Perkins. And still this distinction bothers me. The simple fact is no matter how much you respect your agent, in the back of your head you will be bond to ask, “Is this really in my best interest?” A question an author wouldn’t think twice about if it was with another publisher. And that’s the problem. You should never have to ask this question.

    Also what agent wants to have a client who questions their judgment or intentions?

    The bottom line is it’s a conflict of interest no matter who is okay with it. Best example, two people are getting a divorce, but they share the same attorney. Even if both parties were aware of this fact and the divorce is supposed to be amicable, is there still a potential problem?

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  9. Christina says:

    What I was trying to say is that the real problems start only when conflicts of interest are not disclosed.

    When they are disclosed you can make a informed decision. The decision might well be to get a different agent or not to submit your work to certain agents. Or you might decide to make use of their services regardless.

    When it comes to getting a agent, it is very much a buyers market. Some authors might prefer having a conflicted agent to not having an agent at all.

    Which ever decision is made by the parties involved, as long as all conflicts of interest are disclosed, there should not be a problem.

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  10. Melissa Blue says:

    What I was trying to say is that the real problems start only when conflicts of interest are not disclosed.

    I knew what you were saying. I just was disagreeing. (lol) Definitely it would be a very big problem if the information isn’t disclosed, but the very nature of COI lies in a potential bias of one party’s decision making. Agent can get huge deal with publisher A, which will both of their pockets. Or Agent can send book to own publisher and reap all the benefits. Will the author always be certain the agent chooses the one that’s in the author’s best interest? Will the agent always know the choice they made were in the author’s best interest?

    I don’t think you can say one way or the other, which is the problem for me i.e. the problem doesn’t go away with the discloser of information.

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  11. Excellent summation.

    The problem with conflict of interest is that, disclosed or not, it imposes on decisions made. We may not realize the weight it carries, but the balance shifts and colors reasoning.

    I know I don’t want this kind of blurring of boundaries coming into play with my career and will make my representation choices accordingly.

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  12. Christina,

    Thanks for the comment. I agree that sometimes ethical issues can be solved by full disclosure and consent. A few points, however.

    1. The disclosure has to be full. That is: the agent needs to do more than say “I also get money on the publishing end of things.” The agent needs to provide the client with a full disclaimer of not only the potential conflict, but the potential effects, something like: “Our interests are adverse, and while I normally will be 100% in your court, as to this transaction, I am not.”

    2. The consent needs to be real and not even slightly coerced. That is: the client must have the option to say, “I never want to talk to you about this publishing option again,” and the agent has to be okay with that.

    3. Even then, as Melissa points out, I do not think this alleviates the conflict of interest itself. All it does is make the decision an informed decision on the part of the client. But it doesn’t alleviate the temptation for the agent to engage in self-dealing–and that’s where things get problematic.

    There are some conflicts of interest that can potentially be cured with disclosure and consent. I am not sure this is one of them.

    As a note, the AAR’s statement quoted above is not quite categorical. They do have one exception to the self-dealing provision (where disclosure plus consent, which includes the ability for the client to get another agent to represent them on a transaction) is considered okay:

    The one exception is the so-called “packaging fee” paid to acquire television rights. A member may accept or participate in such a fee if the member, at the earliest possible time, completes these four steps:
    1. Fully discloses to the client who owns or controls the property the possibility that the member may be offered such a fee.
    2. Notifies the client that such a fee is in lieu of any fees from the client with respect to the transaction.
    3. Delivers to the client a copy of this Association statement on packaging and packaging fees.
    4. Offers the client the opportunity to arrange for other representation in the transaction.

    Note that this is ONE exception–the AAR has not made any other exceptions to the rule, and I suspect they did so because they didn’t think that disclosure + consent would be sufficient to cure the problem.

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  13. Courtney, I really appreciate this post. I haven’t seen it handled anywhere else yet and it’s an important issue for writers, especially the new and vulnerable (ie, me).

    I agree that ultimately the decision rests with the write. In which case, full disclosure of the conflict of interest should be sufficient to ensure it’s not a problem. But I don’t buy that, because writers pay agents to be experts. The full disclosure solution only works if the writer feels confident to make the decision totally independently of ANY of the agent’s advice. Because the advice could be inadvertently and unintentionally coloured.

    I’m with Courtney on this, I wouldn’t be very happy with it.

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  14. Great post, Courtney. I agree with you. This IS a conflict of interest for the Agency and if Waxman is a member of the AAR, I hope the AAR takes action.

    Thank you for speaking out.

    I hope the Waxman agency finds a way to separate the Agency from the Publisher — but it’s hard to see how that can happen.

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  15. veinglory says:

    Thank you for summing it up so thoroughly and dispassionately.

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  16. Ann Aguirre says:

    Amen. I was going to blog about this, but there really is no need. I’ll just point people here. This is a total conflict of interest, and I don’t understand why industry professionals don’t see that.

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  17. Ditto. I see it as a conflict of interest as well.

    I want my agent to fight like a mad dog if it comes down to it for me…and if she’s got in an interest in a company (the publisher), well…I’m always going to wonder if she’s doing that. It would be a dealbreaker for me as well.

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  18. GJ says:

    Agents act in a capacity very similar to lawyers, and in the legal world, there are (at least) two categories of conflict of interest. One category of conflicts can be waived with full disclosure to the client (although it’s considered risky). Others cannot.

    Directly representing both sides of a negotiation is an area where the conflict cannot be waived, to my knowledge, even with full disclosure. Ethics rules recognize that it’s one thing to waive a theoretical conflict (e.g., when a colleague in a law firm represented the opposing party on an unrelated case years ago, but the current attorney in the law firm had no involvement in that case and does not have access to the old files, and both parties are amenable to the representation), and quite another to waive a current, blatant conflict.

    There’s also a concept called “appearance of impropriety” that would apply here. Even if the dealings are entirely above-board in the circumstances (which I have no reason to doubt), they are so fraught with temptation that there’s an appearance of impropriety, which has to be prohibited.

    It also strikes me that some people aren’t seeing how bad this is because it’s “just epublishing.” I’m not, personally, a believer in the theory that epublishing will take over the world in the near future, but I do think a lot of people are selling it short, including, ironically, many people who are entering the epublishing business.

    It seems pretty clear to me that if a major publisher were to merge with a major literary agency, absolutely no one would consider it defensible. Why would anyone think that of course the mega-publisher/agency would send manuscripts it covets to its competition, rather than making a pitiful offer to the author?

    The underlying assumption is that epublishing is small potatoes and will never earn much money, so it can’t possibly offer enough temptation to the agent/publisher to skip sending manuscripts to better-paying places.

    That may be true today, but it creates a slippery slope — when will the money earned from ebooks become enough to create enough temptation to steer a client there instead of to a major paper publisher first? Will the conflict suddenly become serious then? So it will be okay for an agent to own a minimal-income an epublisher, but not a big-income publisher?

    It’s just wrong.

    Please note that while I am an attorney, I am not giving individual legal advice, just presenting general information

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Courtney Milan writes historical romance novels like the ones you see to the right. She still remembers bits and pieces from her old lives, where she was (variously) a scientist and a lawyer.

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