In the wake of the scandals that ruined investors in Enron and WorldCom, and the options backdating fiasco, "corporate governance" became the watchwords of the new millennium, and a whole cottage industry of rating management was born.

Some evidence supports the notion that companies with stronger governance have lower risk, increased profitability, and higher valuations. That means companies with poor corporate governance could be targeted by shareholder activists, hedge funds, or short-sellers. In short, they could be ripe for a fall.

Below, we look at stocks that are marked to underperform the market by investors on Motley Fool CAPS, but sport above-average Corporate Governance Quotients (CGQs). Developed by proxy service Institutional Shareholder Services, a company's CGQ measures how well it performs in as many as 63 categories covering four broad areas. Moreover, each company is scored relative to its market index and to its industry group.

Here are five I'm highlighting today:

Company

CAPS Rating

Index CGQ

Industry CGQ

UDR (NYSE:UDR)

*

97.0%

99.0%

Foot Locker (NYSE:FL)

*

87.1%

91.2%

Choicepoint (NYSE:CPS)

*

93.1%

97.1%

Delta Air Lines (NYSE:DAL)

*

88.6%

78.6%

VeraSun Energy (NYSE:VSE)

*

51.4%

53.0%

Source: Yahoo! Finance, Motley Fool CAPS.

Investors should consider many factors before buying a stock, including how well it treats shareholders. View these rankings as a way to gauge how these businesses stack up against one another relative to their shareholder policies.

Cloudy skies
While we're all breathing a sigh of relief at the plunge oil prices have taken in recent weeks, imagine the relief the airlines have felt at their apparent second lease on life. Delta, for example, has seen its shares double in value over the past month, as oil has fallen by 20%. Is that kind of reaction warranted, though, considering the cuts the airline still has to make? It may be a welcome reprieve, but oil prices north of $100 were once seen as the death of flying.

CAPS member db371114 suggests that the deck remains stacked against the airlines:

I'm shorting the airlines AGAIN. Oil has ceased declining & may hold or rise. The airlines had a good 3 week run, but economy and oil are against them.

An ear for publicity
Corn-based ethanol producers like VeraSun Energy have been getting some rough treatment in the press lately, accused of contributing to the rising cost of food. Not long ago, companies like VeraSun and Aventine Renewable Energy (NYSE:AVR) were the toast of the town for helping to wean the American public off its taste for foreign oil. Today, the industry's so reviled that its trade group is launching a social-networking website for ethanol leaders to exchange ideas on combating that negative impression.

Yet investors aren't only focused on the bad PR corn-based ethanol has gotten. When it comes to VeraSun, CAPS member luebypopoff also suggests that the financial situation won't inspire much confidence:

Company is deep in dept (over 900 million) and has not hedged itself; corn is too expensive; ethanol is not a real answer to our energy consumption problems; U.S. may impose restrictions on corn use for ethanol because of the world food shortage; Brazil is demanding the US ease on ethanol subsidies so it can import its own cheaper ethanol. There is nothing going for this company.

A foot in the door
Even after an 82% plunge in profits in its first quarter (thanks to $18 million in one-time charges and flat revenue), Foot Locker emerged with a healthy fistful of dollars net of debt, which it's planning to use to remodel its tired stores. Although the company's been a bit slow to realize that skatewear is a hot category, it's now willing to lace up its sneakers and get in the game with its top supplier, Nike (NYSE:NKE), and other skate brands, in hopes that a turnaround will take hold.

With second-quarter earnings due out next week, some analysts believe the company may surprise Wall Street by reporting higher margins. However, CAPS member celticspirit thinks there's only one way Foot Locker will head: "At this sort of price valuation Foot Locker is destined to disappoint the market...."

A Foolish quotient
Many factors go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks make the grade.