The flip side to shareholder-friendly stocks expected to underperform the market? Highfliers that pay little heed to their owners' interests. 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. The firm assigns the stocks a rating that it calls its 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 members have marked to outperform the market and also sport above-average CGQ scores, either in their index group or among industry peers.


CAPS Rating (out of five)

Index CGQ Ranking*

Industry CGQ Ranking*





Isis Pharmaceuticals (NASDAQ:ISIS)








Monsanto (NYSE:MON)








Source: 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 success in 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
Maybe because the government's not underwriting any wheat-based alternative fuels, planted acreage of the grain in the U.S. is expected to be 6% less in 2009 than it was in 2008. It's different for corn, with its billion-dollar subsidies: More than 1 million more acres will be planted this year than last.

Corn has also been central to agri-giant Monsanto, whose net sales of corn seed and traits increased 26%, or $735 million, in 2008, representing more than half of all its revenues. Soybeans, cotton, and vegetables have all been an integral part of the company's business, but wheat was noticeably absent.

Yet with the purchase of privately held WestBred, a seed breeder specializing in wheat germplasm, Monsanto may move the ball on genetically modified wheat, which hasn't caught on because of resistance from consumers and farmers. Syngenta (NYSE:SYT), the world's largest agrochemical company, said this year that it wasn't pursuing transgenic wheat even if there would be benefits to it, but Dow Chemical (NYSE:DOW) said it looks to develop and commercialize advanced wheat germplasm and traits.

There's still a strong undercurrent of fear that creating a genetically modified strain of wheat will somehow leak some kind of Frankenfood into the food chain. Some investors are also wary of those who tamper with nature, and while CAPS member TRGoodvsEvil criticizes Monsanto point by point, other members like All-Star VoodooEconomist believe that developing drought-resistant crops is one of the advances science is making to feed the world.

Agriculture will […] outperform other commodities due predominately to shortages caused by drought related to climate change. Monsanto sells the science of agriculture and is one of the solutions. Without climate change, Monsanto remains a giant in agriculture and will benefit from any increase in demand for food worldwide.

A Foolish quotient
Many factors go into whether a stock is a buy or a sell, but are corporate governance policies part of 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.

Try any of our Foolish newsletter services 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. The Motley Fool's disclosure policy is a capital idea.