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
(5 stars max.)

Index CGQ

Industry CGQ

WellPoint (NYSE:WLP)




Constellation Energy (NYSE:CEG)




Hercules Offshore (NASDAQ:HERO)








AECOM Technology (NYSE:ACM)




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
The paths forged by drilling industry have been anything but heroic since oil's collapse. Shares of Noble (NYSE:NE) and ENSCO International (NYSE:ESV), for example, are down more than 60% from the highs reached last June, while Hercules Offshore is off more than 95%. Even as oil's price floats back above $50 a barrel again, Hercules finds its shares in a deeper hole than one of the wells its rigs drill out.

The macroeconomic environment has undoubtedly taken its toll on the contract driller Hercules. In addition to lower energy prices, tight credit markets and a global recession are forcing Hercules to mothball a number of its rigs. Yet as cheap as Hercules stock has become, it may make it that much more attractive. Certainly insiders would seem to think so, as they were making sizeable purchases of the stock last quarter, sometimes at significantly higher prices. A combination of a top-flight small cap, a beaten-down price, and insiders purchasing shares suggests there's opportunity here.

That might help explain why the contract driller remains exceedingly popular among CAPS members: only 32 of the more than 1,300 members rating Hercules Offshore think it will continue to underperform the market.

Top-rated CAPS All-Star bluecollarbroker is one who believes that rising oil prices will lift this driller's boat.

Oil rebounds. When Obama comes to his senses and opens up offshore america. (To reduce foreign dependancy to bridge to alternatives) This stock will come roaring back with anything over 50 dollar oil. Projects will come back. [Hercules] will either be bought out by another driller or even servies co. Heck, I could see a major wanting a small drilling company to defer costs. The mgt. is also sound. if they make it thru this crunch...which I think they will. This is a major value play.

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.

Hercules Offshore is a Motley Fool Hidden Gems recommendation. WellPoint is an Inside Value selection. VMware is a Rule Breakers recommendation. 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.