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

Some evidence supports the notion that those with stronger governance have lower risk, increased profitability, and higher valuations. Companies with poor corporate governance could thus 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 up to 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

Alpha Natural Resources (NYSE:ANR)

**

98.6%

96.2%

American International Group (NYSE:AIG)

**

97.9%

99.2%

Dell (NASDAQ:DELL)

**

71.1%

97.2%

Regions Financial (NYSE:RF)

**

53%

96.8%

Yahoo! (NASDAQ:YHOO)

**

68.2%

98.2%

Source: Yahoo! Finance, Motley Fool CAPS.

Although investors should consider many factors before buying a stock, how well it treats shareholders shouldn't be last on the list. Consider these rankings a way to gauge how these businesses stack up against one another relative to their shareholder policies.

Down but not out
Judging by its current valuation for Yahoo!, the market seems to think it could be too late to save the site. However, if its AdSense deal with Google (NASDAQ:GOOG) succeeds, Yahoo! may delay any such execution. Whether CEO Jerry Yang and Chairman Roy Bostock will be around to enjoy the festivities is another matter, but CAPS member tacind finds the changes that need to be taken will ultimately benefit shareholders: "The ad agreement with Google will boost their bottom line and reduce overhead, layoffs are in the future, bad for employees good for shareholders."

Like a set of dominoes, American International Group may find itself at the bottom of a cascading pile of problems. If losses continue to mount, as many suspect, its credit ratings may be affected. That could force the company to post billions in collateral, spurring a costly capital increase. One option is to split the company up, but that could prove tricky. CAPS member bammerone, despite rating it to outperform, thinks this is the best solution for the insurer:

This thing should be blown up and let the smaller, more valuable parts succeed or fail on their own. Too many problems to stay together-soft insurance market, regulators chasing them in multiple states. Short term pop could be coming. I used to see this as a too big to fail company-but we have seen some sad tales lately.

The thinking about the stability underlying Regions Financial seems to have changed. The takeover of Fannie Mae (FNM) and Freddie Mac has reassured analysts that Regions' ability to underwrite mortgages is once again improving. Meanwhile, the FDIC has apparently given Regions a boost of confidence by allowing it to assume the assets of failed Integrity Bank. CAPS member TheSmartMoney figured Regions was already a pretty good bank, and believes that the FDIC move confirms it:

[Regions Financial] got another banks deposits handed to it from FDIC. Appears FDIC is giving thumbs up to [Regions Financial]. They are a pretty good bank anyway and will come out positive once financials get on solid footing.

CAPS member SnappyDog thinks Dell's decision to move away from its direct sales business model sets a disastrous course for the computer maker:

Dell continues the slide into oblivion. Moving away from their roots as a direct sales model is going to be a complete disaster. Focus. The key to success would be for them to focus on what made them successful to begin with -- direct sales. They also need to fix their customer service as it is horrible. Their pricing is gimicky.

Dell has really become a terrible company. Remember, turnarounds rarely turn around in the words of Buffet.

New 52 week low coming soon!

A Foolish quotient
There are many factors that 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.

Dell is a Motley Fool Inside Value pick. Google is a  Rule Breakers recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.