THE AGENTS ETHICS IN THE PRINCIPAL-AGENT MODEL

This paper evaluates the current use of the Principal Agent Model (PAM ) in accounting and finance, focusing on the agent's use of private in formation. The agent's behavioral norms in the the PAM deviate from co mmonly held ethical values in society, from models of man in conventio nal economic theory, and also from behavioral foundations of related b usiness school fields like corporate strategy, business ethics, and hu man resource management. Still, it would be unwise to reject the PAM s olely because of its distasteful ethical assumptions. The model does a ppear to have predictive power, but its descriptive or normative quali ties remain unexplored. The popularity of the PAM, with its extreme mo del of man, raises fundamental questions about the impact of this mode l on business school stakeholders and society at large.