Between shareholder-friendly stocks expected to underperform the market, and highfliers that pay little heed to their owners' interests, you'll find 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^

American Science & Engineering (NASDAQ:ASEI)




Hercules Offshore (NASDAQ:HERO)












W&T Offshore (NYSE:WTI)




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 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
Improving demand for jackups in the Gulf of Mexico should help Hercules Offshore pay down its rather high debt load, which has sapped its strength. It's not the dreamy stock it once was for investors, with the company saying it expects to report operating losses in the fourth quarter, but investors like CAPS All-Star rdpatton figure this year will be one for recovery: "I think we have bottomed in the drillers and 2010 will be a recovery year. At the first clear signs of a turnaround I think HERO will do well."

Things could turn around for VAALCO Energy as well, now that it gained a three-year extension on its exploration permit off the west coast of Africa. The Etame field off Gabon covers about 759,000 acres, and VAALCO, which shares ownership with Sasol (NYSE:SSL), expects it to add to its production and reserves.

Despite a stock price that is still some 40% below where it stood last year, the CAPS community stands firm in its conviction that VAALCO will outperform the market. Fully 95% of the almost 1,600 CAPS members who have rated the stock have given it the thumbs-up, with a slightly higher percentage of All-Star members agreeing. You can explore the opportunities for further growth on VAALCO Energy's CAPS page.

Another energy play that has seen its share of turmoil this year is uranium enricher USEC. Ever since the Department of Energy snubbed its application for a loan, its stock has been in a downward spiral. And last month Moody's (NYSE:MCO) downgraded its ratings, saying it expected USEC to suffer from weak credit, more competition, and greater liquidity risk.

CAPS member MikeBobulinski isn't so sure about the dire predictions. He sees alternative energy as an inevitable imperative for the country, and USEC as a leader:

Energy pick and a bit of a risky play, but alternative energy is going to be a must in the long haul. I expect this one won't go completely nuts in the way of increase, but I'll take a double and be happy for it. Expect to see it return to it's high in the next year or so.

Almost 1,400 CAPS members have rated the uranium processor, and 96% believe it's going to outperform the broad market averages. Enrich us all on the USEC CAPS page with your opinion on how you think it will perform.

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.

Moody's is a Motley Fool Inside Value selection. American Science & Engineering is a Motley Fool Rule Breakers pick. Moody's is a Motley Fool Stock Advisor recommendation. Sasol is a Motley Fool Global Gains choice and a Motley Fool Income Investor recommendation. W&T Offshore is a Motley Fool Hidden Gems recommendation. Motley Fool Options has recommended a write puts position on Moody's. 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.