What's 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*





CVS Caremark (NYSE:CVS)




Dow Chemical (NYSE:DOW)




Energy Conversion Devices (NASDAQ:ENER)




Gilead Sciences (NASDAQ:GILD)




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
OK, has solar found the bottom, or is its outlook still cloudy? An investor could be forgiven for being confused after reading the headlines surrounding Energy Conversion Devices. It was only a month ago that the solar panel product maker's grasp for green shoots came up empty, when it reported that quarterly profit plunged more than 80% as clients delayed already-placed orders and forced an even longer production shutdown.

ECD wasn't alone with gloomy news. Soft results from SunPower and First Solar (NASDAQ:FSLR) indicated that equipment suppliers were set to splat.

But less than a month later, ECD is extending a supply agreement with EnergyPeak, which integrates ECD's solar technology with standing-seam metal roofing. EnergyPeak expects to maintain a healthy degree of growth and is committing to purchasing up to 12 megawatts of laminates from ECD through 2011. With an increase in solar-project activity and federal incentives such as tax credits and the Obama administration's stimulus program, analysts are now energized about ECD's potential.

Along those same lines, Suntech Power (NASDAQ:STP) thinks 2010 will be a huge year for solar. The problem, though, as it's been for most of the past year, is a dearth of credit. Spain has cut back on solar incentives, and financing for expansion could be a problem, not to mention the glut of supply. ECD had a competitive advantage when supplies were scarce, but with its thin-film technology being a less efficient method of producing electricity, ECD may not find the market as receptive to its PV panels anymore.

Highly rated All-Star CAPS member rpgizzle thinks that the flexibility of thin-film technology will still make for a winning argument:

They own the patent on NIMH batteries, and have a revolutionary solar film which is flexible and can be installed on any building. It replaces the bulky and inefficient solar panels. They are a growing green tech company, with an innovative spirit, and a penchant for fiscal prudence. They have lots of cash and revenue is growing steadily despite the down economy. Cost cutting measures have also had a strong impact. This stock will do very well.

Having risen by around 13%, the CAPS Solar Power tag has been one of the top 100 performing sectors over the past month. ECD itself, though, has remained essentially flat.

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.

Suntech Power is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey has no financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool's disclosure policy is capital idea.