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

Company

CAPS Rating

(5 max)

Index CGQ Ranking^

Industry CGQ Ranking^

Black & Decker (NYSE:BDK)

****

85.2%

98.6%

ON Semiconductor (NASDAQ:ONNN)

****

80.7%

72.7%

Overseas Shipholding Group (NYSE:OSG)

****

66.2%

89.6%

RTI International Metals (NYSE:RTI)

****

85.9%

85.1%

Snap-on (NYSE:SNA)

****

53.1%

90.9%

Sources: Yahoo! Finance, Motley Fool CAPS.
^ Relative placement when compared to 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 investing, there are many factors that an investor should consider. 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
While the deteriorating economy creates a number of attractively priced takeover candidates, the credit crisis raises doubts about how companies will raise money to make purchases. As a result, even previously agreed-to deals have started to come undone. ON Semiconductor apparently realized how difficult things would be -- and that the semiconductor industry was not as attractive as it once was -- when it withdrew from a joint offer last month to acquire Atmel (NASDAQ:ATML). Its partner in the bid, Microchip Technology, is still making waves by announcing its intention to nominate a slate of directors to Atmel's board.

Top-rated CAPS All-Star tenmiles acknowledged ON Semi's difficult environment last month, but suggested that patient investors would likely reap rewards:

Tough times near term for ONNN, but going to place in long-term deep value camp. Host of favorable value metrics against peer universe: p/s, ROE, forward p/e, PEG. Patient longs should make money on this one if you can afford to wait a while.

The economy is also weighing on the metals markets, with analysts predicting anemic growth in titanium demand. As a result, RTI International Metals announced a delay in a major expansion project. The company also suggested that mill shipment products would be down for the year, after initially anticipating 3% growth. It can't help matters that Boeing (NYSE:BA) continues to experience delays with its 787 Dreamliner aircraft, since RTI has several contracts with the company to provide various parts for the airliner.

CAPS member TSIF figured last month that RTI might not be the top dog in the industry, but even with delays, the airline industry should keep the titanium specialist aloft:

Beat over the head with a Titanium Golf Club, but will bounce back. Not the best Titanium company for being vertically integrated, but they understand their issues and with new factories will come out well ahead of the game. Aircraft parts alone will keep them growing.

A Foolish quotient
Many factors go into whether a stock is a buy or sell, but 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. 

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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.