The flipside 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 it 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 which also sport above-average CGQ scores, either in their index group or among industry peers.

Company

CAPS Rating (Max 5)

Index CGQ Ranking*

Industry CGQ Ranking*

Duke Energy (NYSE:DUK)

*****

82.5%

90.1%

PepsiCo (NYSE:PEP)

*****

91.3%

98.2%

United Technologies (NYSE:UTX)

****

79.4%

98.6%

UnitedHealth Group (NYSE:UNH)

*****

88.8%

99.0%

Walgreen (NYSE:WAG)

****

59.2%

75.0%

Source: Yahoo! Finance, Motley Fool CAPS.
*Relative placement when compared to 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 investing, investors should consider many other factors, too; how well a company treats shareholders shouldn't be least among them. Consider these rankings one way to gauge how these businesses stack up against one another relative to their shareholder policies.

Rx for a drugstore
In my suburban neighborhood, there are at least three Walgreens locations within a square mile of each other, a feat rivaled only by CVS Caremark (NYSE:CVS), which also has three similarly situated stores. But the discount pharmacy chain's decision to scale back new store openings, allocating more of its capital spending budget to refresh stores and inventory, is welcome, since two of the stores by me desperately need a serious upgrade.

Walgreen has a long history of assigning most of its capital budget to opening new stores, but top-rated CAPS All-Star TMFDeej noted a bit more than a month ago that the valuation it carries as a much larger company is significantly less than what it was a decade ago:

How about Walgreens (WAG). The drugstore chain's stock is currently 29% [less] than it was during the last bear market in 2002 and down 9% over the past decade. It currently trades at around 10 times its trailing and estimated forward earnings, a fraction of the multiples it carried in the past. It's hard to argue that WAG isn't a better, larger, more valueable company today than it was a decade ago.

Soda smirk
In an industry where even a few percentage points of market share can equate to hundreds of millions of dollars in revenue, the desire to bust out with a new corporate logo that captures consumers' imaginations can get the juices flowing in many marketing departments. Coca-Cola (NYSE:KO) learned a hard lesson when it tried to rejigger its classic soda formula years ago, and flopped badly. So when it designed its new can logos, it basically stayed within the comfortable confines of the cursive letters, the ribbon ... and the immediately identifiable Coke red.

I'm not so sure that PepsiCo has done itself proud with its own $1.2 billion attempt at injecting new life into what it must feel is a tired classic. The No. 2 beverage maker is reworking its famous red, white, and blue globe, transforming it into a similar emblem with a tilted white "smile." Maybe it's a smirk, yet even the company admits consumers might not recognize the Pepsi brand right away as a result. That doesn't seem like a smart move when you've spent years and billions of dollars developing mindshare.

Then again, maybe existing customers aren't the most important factor in the company's future. CAPS member KokueiOTD thinks that Pepsi's presence in emerging markets is the key ingredient to its future growth:

[PepsiCo] is a great company to own, especially at current prices. It has a lot of good things to say for it, including good management, a strong brand, great global market presence, a huge, diverse lineup of products, and an attractive balance sheet. In the short term, their large amount of cheap foodstuffs should do well during a time when many are tightening their belts. In the long term, Pepsi’s strong management and increasing penetration in emerging markets creates rosy picture of the company’s future.

A Foolish quotient
Many factors go into whether a stock is a buy or sell. 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.

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool’s own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro, and to receive a private invitation to join, simply enter your email address in the box below.

PepsiCo and Duke Energy are Motley Fool Income Investor picks. UnitedHealth and Coca-Cola are Inside Value selections. UnitedHealth is also a Stock Advisor pick and a Motley Fool holding.

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.