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