Stocks Doing Right By Shareholders

Between shareholder-friendly stocks expected to underperform the market, and highfliers that pay little heed to their owners' interests, you'll find top-flight companies that also treat their shareholders with respect.

Institutional Shareholder Services -- the big name in corporate proxies -- measures how well a company performs in as many as 63 categories covering four broad areas. Moreover, each company is scored relative to its market index and its industry group. It assigns the stocks a rating that it calls its corporate governance quotient, or CGQ.

Some evidence supports the notion that companies with weaker governance have higher risk, decreased profitability, and lower valuations. We'll be looking at stocks that Motley Fool CAPS investors have marked to outperform the market, and which also sport above-average CGQ scores, either in their index group or among industry peers.

Source: Yahoo! Finance, Motley Fool CAPS.
*Relative placement when compared with companies in index or industry. Higher is better.

Although finding good companies and holding them for the long term is one of the greatest secrets to success in investing, there are many factors an investor should consider, and how well a company treats shareholders shouldn't be least among them. View these rankings as a way to gauge how these businesses stack up against one another relative to their shareholder policies.

Go to the head of the class
As demand for food grows unabated, farmers can increase their crop yields through the application of fertilizers and disease-resisteant, genetically modified seeds. Fertilizer producers are looking forward to increased demand this year, as farmers replenish the nutrients in their soil. However, GM seed makers like Monsanto and Dow Chemical (NYSE:DOW) face resistance from many countries, who view these companies' Franken-seeds as some sort of alien life form.

While GM corn and soybeans have been safely introduced globally, similar wheat seed has been held back because of international concerns. Even here at home, with the U.S. still the world's breadbasket, GM wheat has been delayed, because farmers are concerned that labeling laws and traceability requirements would slam the door on exports. Even though one industry reports suggests that introducing GM wheat seed could cut prices by as much as 40%, thus making it more affordable to the masses, the fear of engineered seeds has prevented their proliferation.

Investors, though, stand by Monsanto's continued ability to grow profits. They're also cheering a recent court decision preventing rival DuPont (NYSE:DD) from combining Monsanto's GM seeds with its own products, which gives the seed maker a marketable advantage. CAPS All-Star member dswinters believes the need to drive low cost crops to the largest number of people will ultimately win out:

Macro stats are just too large to ignore. Growing population has to eat. They also have to eat for cheap. Monsanto has products that have the capability of feeding lots of people for a relatively "low" cost. Calories are needed to live and they have the ability to price their products at a relative premium due to the technology. In addition, they dumped most of their "bad" assets to Solutia and are a new company.

The CAPS community remains solidly behind the seed maker. More than 96% of the members who've rated it believe it will outperform the overall market. You can plant the seed of your own opinion on the Monsanto CAPS page.

A Foolish quotient
Many factors go into whether a stock is a buy or a sell. Do corporate governance policies enter into your equation? 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.