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. ISS then 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*

AECOM Technology (NYSE:ACM)












Smith & Wesson (NASDAQ:SWHC)




Take-Two Interactive (NASDAQ:TTWO)




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
A pile of cash in a recession could give rise to one of those feelings that Warren Buffett says comes over him whenever stocks get super-cheap: a libido on the loose and a house of ill repute in front of him. That's the condition that Activision Blizzard (NASDAQ:ATVI) is confronted with as it salivates over its $3 billion cash hoard and pristine balance sheet. And what better company to woo than Take-Two Interactive, with its blockbuster Grand Theft Auto franchise?

Sure, Take-Two threw some come-hither looks at Electronic Arts (NASDAQ:ERTS) only to scoff at the advances the game maker made. Take-Two was a high-priced looker at the time, but things are a bit different now. That was a world of recession in the past. Back then, the developer sported a market value some four times higher than it does today, and there was still credit in the market for the asking. Sure, Take-Two could still go it alone, but an offer of about $13 per share, half as much as that pitched by Electronic Arts, would seem a rich bounty these days.

That's not to say Take-Two still doesn't have its own advantages. It might not be the same showgirl of yesteryear, but Activision should expect to pay up for a game franchise that has proven its worth over time. And, with other hit games on its hands, the portfolio ought to be worth more than a lowball effort. It's also a financially strong company, a point that CAPS member papawilk made a few days ago:

They have negligible debt. Financially strong. Games are becoming easier and easier to purchase (download via xbox live). Advertising is hitting its stride in the gaming world and is better than anyone at reaching their demographic. Bioshock was game of the year and Bioshock 2 should rake in the cash. The GTA series is a juggernaut and will not be ending for quite some time.

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.

Take-Two Interactive Software is a Rule Breakers selection. Activision, Electronic Arts, and FedEx are Stock Advisor recommendations. Try any of our Foolish newsletters 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 here. The Motley Fool has a disclosure policy.