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 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 investors have marked to outperform the market and that also sport above-average CGQ scores, either in their index group or among industry peers.


CAPS Rating
(out of 5)

Index CGQ Ranking*

Industry CGQ Ranking*

Automatic Data Processing (NYSE:ADP)




Dynegy (NYSE:DYN)




Manitowoc (NYSE:MTW)




Mosaic (NYSE:MOS)








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
Uranium enrichment specialist USEC suffered a meltdown of cataclysmic proportions in late July when the Department of Energy (DOE) denied its loan application to build a centrifuge. It was one of only two companies applying for loans, but Energy chose French-government owned Areva to get the loan instead.

USEC warned the fallout would be widespread. A plan that was supposed to employ 400 workers has ended up costing 1,000 jobs instead. After spending $1.5 billion on the project for what was at one time seen as good as a sure thing, it quickly fell apart. Fools had been warned that USEC was relying too heavily on approval of the loans for the project to be viable, but investors might be forgiven for believing the sole U.S. applicant in the midst of a gritty recession would be favored.

Shares have recovered some of the lost ground as the DOE bowed slightly to the political pressure being placed on it. After originally suggesting USEC should revisit its application in a year or so, DOE says it will hold off on a final decision on the loan request for just six months.

CAPS member technomanslade isn't so sure the government's view will actually change so quickly, though he does see that eventually happening.

I feel that the stock is valued for less than its worth. Once the company is approved for the loan, I bet the stock will turn around as the market sees the value. I fully anticipate that the government will eventually approve it-I'm just not sure when. Until then, I'm going to watch this stock. I'm just too conservative to buy now.

Despite the impact on USEC, uranium stocks in general have been performing quite well over the past year. The 23 companies comprising the Uranium sector on CAPS have more than doubled in value in that time period. Components including Uranium Energy (NYSE:UEC) and Cameco (NYSE:CCJ) have turned in some stellar displays, with the small-cap player up more than 500% and its larger, more staid rival having risen 77% in the past year.

USEC may very well succeed with its application. Perhaps political pressure will do what the regulatory agencies wouldn't.

Agree? Feel free to share your point of view in the comments box below.

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

Automatic Data Processing is a Motley Fool Income Investor recommendation. The Fool owns shares of Cameco. 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.