It seems that Wall Street has convinced state and federal regulators, as well as Congress and Presidential candidates, that the regulatory bar must be lowered if we are to compete in the international securities market (or perhaps Wall Street’s donations have affected the judgment of these politicians). Yet, studies continue to show that most investors prize a company’s behavior over rich returns.
After the crash of 1929, and for over 70 years, our securities markets have been regulated by a network of federal and state securities laws. During that period, U.S. financial markets have thrived and becme the envy of the world. Conventional wisdom is that investors want to feel safe in investment waters – as shark free as possible. Yet, those on Wall Street, many of whom have proven themselves to be sharks, lobby regulators and lawmakers to attempt to win a “race to the bottom” in worldwide financial regulation.
Yet a recent study found, for example, that two-thirds of investors say they would sell their shares of a company that engages unethical but legal behavior-even if that behavior brought in higher returns. These results were found through poll research performed by Opinion Research Corp. for Pepperdine University’s Graziadio School of Business and Management.
Sixty-seven percent of the 482 investors polled said they knew about the ethical standards and practices of the companies they invest into and valued such standards even above performance. Only half of the investors said corporate boards are doing a good job of ensuring companies are managed ethically, while 42% said boards were doing fair or poorly.
“Clearly, investors are looking at more than the balance sheet and sales projections when it comes to investments,” said Linda A. Livingstone, dean of the Graziadio School of Business and Management, in a statement. “Corporate Board leadership that is centered on values and ethical behavior plays an important role in how investors evaluate options,” she added.
Similar results have been recorded regarding investment advisors, in which investors reflect that their feelings of trust, comfort and safety outweigh superior performance in their accounts.
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