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*

ADC Technologies (NASDAQ:ADCT)




E-Trade Financial (NASDAQ:ETFC)




Exelixis (NASDAQ:EXEL)




ExxonMobil (NYSE:XOM)




Western Refining (NYSE:WNR)




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
As Verizon (NYSE:VZ) rolled out its fiber-optic network, FiOS, telecom infrastructure providers like ADC Technologies enjoyed tremendous growth opportunities. But with the rollout maturing, ADC finds revenues from the telecom swiftly decelerating, with Verizon's portion falling from around 18% of the total to a little more than 12%. However, it still benefits from its relationship with AT&T (NYSE:T), which saw its slice of the total revenue pie rise to more than 23% in the last quarter.

International opportunities look like they will help offset the Verizon shortfall, and China in particular continues to look ripe as an opportunity. The country is investing heavily in fiber optics as the release of 3G licenses last year caused cable prices to soar. A Chinese investment company, for example, bought a 60% stake in Emcore's fiber optics business, and ADC reported that last quarter's falling connectivity revenues were compensated for by stronger sales made in China thanks to government stimulus spending.

Shares of ADC Technologies that fell 75% from their peak last August have rallied 20% over the past week as a better-than-expected earnings report encouraged investors to support the stock. All-Star CAPS member ken49620 forecasts that continued investments in wireless technology will help ADC achieve sustained growth as easily as A-B-C:

This Company is positioned very well for the boom in wireless technology. With sales all over the world, this company will benefit from broadband and wireless infrastructure development for years to come. If you want something that is going to explode in a couple of weeks, this one isn't for you; but by yr end 2010 this stock is going to easily outpace the S&P

The CAPS community remains solidly behind the telecom infrastructure provider, with more than 91% of the members rating it to outperform the broad market averages. You can connect with other like-minded investors on the ADC Technologies CAPS page, a fun and informative venue to share your opinion on whether the rollout will roll on, or if the company will just roll over.

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.

Exelixis is a Motley Fool Rule Breakers recommendation. The Fool owns shares of Exelixis. 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.