5 Stocks That Won't Steal From You

Never before has the scorn of the American public been so squarely focused on the excesses of the corporate boardroom. From huge bonuses at AIG (NYSE:AIG) to former Merrill Lynch CEO John Thain's million-dollar shopping spree, loathing of the highest levels of the business world has run rampant on Main Street.

Yet I don't find that scorn terribly surprising. What I do find surprising is why greed among corporate executives wasn't stopped in its tracks years ago. Although the issue has reached the spotlight because taxpayer money is going to the bailout of financial firms, shareholders have been taken advantage of for years.

Amid all the outrage over corporate excesses, you don't have to stand for it any longer. If the companies whose stocks you own won't put the brakes on their executives' avarice, then find investments where it simply isn't an issue.

Incentives in alignment
In theory, corporate executives are supposed to respect the interests of shareholders in the actions they take. Although a company CEO is also the company's top employee and therefore represents the interests of its entire workforce, corporate boards of directors rely on the executives they hire to fulfill their own duties of loyalty to company shareholders.

Although executives routinely have compensation packages of tens or even hundreds of millions of dollars, what they typically receive doesn't give them a strong incentive to focus on the long-term well-being of the company and its shareholders. For example:

• Cash compensation may reward an executive's efforts, but many corporate officers get paid those sums regardless of how good a job they do in building and preserving shareholder value.
• Stock options at least reward executives for higher stock prices, but they often dilute shareholders' interests and make short-term performance more important than long-term sustainable success.
• Guaranteed severance packages encourage executives to take more risk, because they can't lose: A winning bet means they get to keep feeding at the corporate trough, while striking out simply forces them to cash out with their safety net.

With executives and these attitudes as your allies, who needs enemies? You can do better.

Owner-run businesses
The best way to make sure an executive will watch out for shareholders is to pick companies where executives own a big portion of the company's shares. Here are several companies that are dominantly owned by their chief executive officers:

Source: Capital IQ, a division of Standard & Poor's. Returns as of March 20.

Now obviously, although these companies have done pretty well over the past 10 years, having a company-owning CEO at the helm doesn't guarantee success. For instance, Chesapeake Energy's (NYSE:CHK) Aubrey McClendon had a huge ownership stake in his company, but had to sell it all to meet margin calls when the stock collapsed late last year. The shares have lost 60% in the past year.

Stop worrying
However, win or lose, having the CEO on the side of shareholders means that you have one less thing to worry about when you decide to invest your hard-earned money. If your executive team has millions of dollars at stake, you can be a lot more certain that it'll be looking out for you -- even if you only own 100 shares. At a time when just about everything has you worried about your investments, it's worth it to cross one concern off your list.

For more about surviving the financial crisis:

• Stocks you simply can't ignore.
• Are we headed back to Dow 10,000?
• These stocks are cheaper than they look.