The flip side to shareholder-friendly stocks expected to underperform the market? Highfliers that pay little heed to their owners' interests.

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, but which sport below-average CGQ scores, either in their index group or among industry peers.


CAPS Rating

(5 max)

Index CGQ Ranking*

Industry CGQ Ranking*

Clean Energy Fuels (NASDAQ:CLNE)




Immersion (NASDAQ:IMMR)




Manitowoc (NYSE:MTW)




Walgreen (NYSE:WAG)








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

Finding good companies and holding them for the long term is one of the greatest secrets to investing. There are many factors that an investor should consider when choosing a company to invest in, and how well it treats shareholders shouldn't be least among them. View these rankings as a way to gauge how these businesses stack up against one another.

Sound off
Certainly oilman T. Boone Pickens is a smart businessman, and promoting the Pickens Plan to wean us off oil would help his company, Clean Energy Fuels, which provides natural gas as an alternative source of fuel for cars. Whether that's a panacea or a just a stopgap measure remains to be seen, but the immediate impact on Clean Energy is apparent.

That's part of the reason behind CAPS member newvoice recently recommending the company to outperform the market:

Easy pickins' as long as it's got Pickens! Billionaires don't become(or stay) billionaires by throwing away their money. That's not to say they are not wrong on occasion.

The power of [Pickens'] name alone though should boost this one, at least as long as he retains a significant interest. …

But with oil prices falling, will the American consumer once again forget the need for alternative sources of energy? Or have elevated prices at the pump so engraved themselves on the public psyche that change is inevitable? Either way, falling oil prices have affected the shares of XTO Energy, cutting them by a third since mid-June.

CAPS member MarionContrarian feels that any bounce in share prices that XTO experiences won't last: "Short term bounce today will provide Longs an exit; overhead moving averages provide resistance in the $55 region. Additionally, near term options show peak calls @ the 50 strike, with a floor provided @ 45 via put interest."

As if the danger of having Wal-Mart Stores (NYSE:WMT) further intrude into its pharmacy business wasn't enough, Walgreen is also having to contend with CVS Caremark (NYSE:CVS) acquiring the Longs Drug Stores chain and flexing even larger muscles.

CAPS member kpscott thinks changing demographics will be good news for all: "This is a play on the macro trends of the next 5-15 years. As our aging population becomes more dependent on prescription drugs to maintain their standard of living, Walgreens and others in this sector will be clear beneficiaries."

A Foolish quotient
Many factors go into whether a stock is a buy or sell, but do corporate governance policies enter into your equation? Head over to CAPS today and share your thoughts with other investor-analysts on whether you think these stocks ought to make the grade.

Wal-Mart is a Motley Fool Inside Value pick. Immersion is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey owns shares of Wal-Mart but has no financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.