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Standing in Another’s Shoes: How Agents Make Life-and-Death Decisions for Their Principals

September 2016

From The Academy of Management Perspectives:

A growing literature addresses the poor fit of classic agency theory to management settings. For example, where classic theory considers discretion the avenue through which agents exercise self-interest at the expense of their principals, alternative perspectives identify discretion as the reason some principals enter an agency relationship in the first place—to take advantage of agent expertise and to respond to uncertain contingent events. This paper examines relationships in which agents enjoy considerable discretion and have limited, conflicting, or ambiguous guidance from their principals, characteristic of many governance and organizational settings and professional relationships. It draws on observational research in two intensive care units, where principals (patients) lack capacity to specify their objectives and cannot control, monitor, incentivize, converse with, or fire the agent charged with making life-and-death medical decisions on their behalf. Observing agents at the bedside provides a rare opportunity to understand—in real time—how agents fashion appropriate actions to take on behalf of principals with whom they cannot communicate and who rarely gave them sufficient guidance. Managers not infrequently must act for another without clear or authoritative direction. Insights from the study of medical decision-makers inform diverse literatures that feature extreme delegation to the agent.