Share buyers saying getting rich not the main goal
Share buyers saying getting rich not the main goal
The motivation behind economist Gareth Morgan's decision to give away the $47 million he made from the sale of shares in his son's company Trade Me may not be that unusual.
A study of New Zealanders who buy and sell shares has discovered that only a tiny minority do so in the hope of becoming wealthy.
The majority are primarily motivated simply a desire to be comfortable or for financial security for their families.
When Mr Morgan announced he would give his investment windfall to charity, he said he did not need the money and was happy with what he already had.
Now a study
by Massey PhD student Peggy Chiu suggests kiwis who "play
the market" are not just bunch of yuppies with dollar signs
in their eyes.
Dr Chiu found that only 1.3 per cent of
shareholders were solely motivated by a desire for
prosperity or wealth maximisation.
“In fact, shareholders’ decision are driven principally by other values,” Dr Chiu says. “Almost half [are] motivated by the desire to be financially secure and content and to look after loved ones.”
She says when it comes to selecting companies to
invest in these shareholders are guided by “others-oriented”
values and fairness. They avoid companies they perceive as
exploiting the gullible or disadvantaged.
Gambling
businesses, tobacco manufacturers, fast-food companies,
bioresearch companies and pharmaceutical businesses were
cited as examples.
And a warning for the Enrons of the world: Some shareholders regarded honesty as so important that they will avoid investing in a business where they believe the honesty of a director of the board has been compromised.
The same shareholders will intentionally seek to invest in companies perceived as making a contribution to society or making the world a better place through an environmental initiative.
“An unexpected finding is that shareholders place the responsibility of corporations to be accurate and honest in financial reporting ahead of their desire for long-term growth in share price and regular dividend income,” Dr Chiu says.
“The former is at the top and the latter two are listed eight and nineteenth respectively in a hierarchy of 31 issues of shareholders’ concerns.”
Dr Chiu thinks a possible reason why honesty
and accuracy are regarded as of utmost importance is the
awareness of the magnitude of damage possible in the event
of fraudulent accounting or cover-ups because of what
happened to
Enron and WorldCom in the United States,
Parmalat in Italy or HIH Insurance in Australia.
She says the research demonstrates the range of factors contributing to shareholders’ investment decisionmaking. It also points the way to the development of tools to enable financial advisers to analyse clients personal values and that way understand their needs rather than categorising them solely according to risk values.
ENDS