What's the flipside to shareholder-friendly stocks expected to underperform the market? Highfliers that pay little heed to their owners' interests.

But there are also some top-flight companies out there that treat their shareholders with respect, and there are tools available to help investors find them. For example, Institutional Shareholder Services, the big name in corporate proxies, measures how well a company performs in as many as 63 categories that cover four broad areas. Moreover, each company is scored relative to its market index and its industry group. The stocks are then assigned a rating that ISS calls a 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 that also sport above-average CGQ scores, either in their index group or among industry peers.

Company

CAPS Rating (out of 5)

Index CGQ Ranking*

Industry CGQ Ranking*

Gilead Sciences (NASDAQ:GILD)

****

52.3%

96.9%

Merck (NYSE:MRK)

****

67.0%

98.3%

PPL (NYSE:PPL)

****

53.7%

69.4%

TD AMERITRADE (NASDAQ:AMTD)

****

59.5%

59.9%

Waste Management (NYSE:WMI)

*****

74.3%

97.7%

Sources: 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 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
Even when the markets are in turmoil, TD AMERITRADE has been able to cash in. As clients trade more aggressively, average daily trades have moved 15% higher over the year before. With its acquisition of thinkorswim Group (NASDAQ:SWIM), which deals heavily in options, the company can now more effectively compete against options specialist optionsXpress (NASDAQ:OXPS) in the fever pitch for trading options.

optionsXpress has around a 2% market share, and it's considered one of the largest retail option brokers. The company has said that while the options market has grown at an annual rate of 25% over the past decade, 2006 and 2007 saw average increases in the market of 38%. So the thinkorswim acquisition comes at a good time for TD AMERITRADE, which can now double its action in the options market and look for further market-share gains.

CAPS member GirlScoutDad finds TD AMERITRADE's ongoing profitability a good indicator that its acquisition will be successful: "[TD AMERITRADE] is an industry leader, still profitable even in this terrible economic climate; just made a very logical acquisition that should help the top and bottom line. What's not to love?"

Try this on for size
In the pharmaceutical world, Merck surprised Wall Street the other day with a strong fourth-quarter earnings report that beat analyst profit projections. Although revenue fell by 3.4% to $6.03 billion, with sales of Zetia and Vytorin shrinking over concerns regarding their efficacy, the profit picture improved on the strength of Merck's cost-cutting measures. The company has sliced more than 10,000 jobs over the past three years and plans to hack another 7,200 before the bloodletting is finished.

But even though these moves are shoring up the expense side of the ledger for Merck, a company can't grow by cost-cutting alone. That's why CEO Richard Clark says he'll be on the prowl for acquisitions. With more than $6 billion in the bank to spend, Merck will be a big buyer in an industry ripe for further consolidation. CAPS member AmericanExports, who says the pharma giant has a Midas touch, thinks Merck will be successful when it goes shopping: "They are oversold in comparison to the S&P which they typically outperform and have every reason to outperform as the economy improves."

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.

optionsXpress Holdings is a pick of Stock Advisor. Waste Management is an Income Investor recommendation and an Inside Value selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey owns shares of Merck 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.