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. Each company is scored relative to its market index and its industry group. It assigns the stocks a rating that it calls it 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 also sport above-average CGQ scores, either in their index group or among industry peers.


CAPS Rating

(5 max)

Index CGQ Ranking^

Industry CGQ Ranking^

El Paso (NYSE:EP)








General Electric (NYSE:GE)




Halliburton (NYSE:HAL)




Hecla Mining (NYSE:HL)




Source: 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, 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
Tight credit, lower rig counts, and falling dayrates for rigs in service have some investors concerned that oil services industry players like Baker Hughes (NYSE:BHI) and Schlumberger (NYSE:SLB) are in for tougher days ahead, particularly in the face of falling oil prices. Yet CAPS member HKindy thinks too many investors hang the baggage of its former parent around Halliburton's neck, leading to a mispricing of the stock:

There are many people posting uninformed comments in these forums about halliburton depending on infrastructure contracts such as those in Iraq. Halliburton has completely split up from … KBR to become a pure play energy services company. This has allowed them to become more focused and keeps them far from all the perfomance of contracts related to millitary logistics or reconstruction of infrastructure.

As for the general performance of the company, they have been very focused receantly and I know at least in the division I work in they have introduced some superior drilling and logging tools which are getting them huge volumes of work at premium rates. In some contracts they are making twice as much profit as orriginaly planned for. The company runs very lean which means they have very little wastage of resources and they have worked very hard to focus and improve their perfromance and improve the calliber of their people. I believe this is the right direction to be headed to further grow in the market.

On the gas side of the energy business, top-rated CAPS All-Star dexion10 identified El Paso Corp. last month as a possible bankruptcy candidate because of its heavy debt load at a time when its costs are exceedingly high:

El Paso's finding costs for gas are over $8 and it's debt load is huge. See you in Bankruptcy El Paso. And for those of you who hadn't noticed I do have a bankruptcy charm.... I've gotten a few of these right.

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.