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. The stocks are assigned a rating called the 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 look 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 max)

Index CGQ Ranking*

Industry CGQ Ranking*

American Reprographics (NYSE:ARP)




Blue Coat Systems (NASDAQ:BCSI)




Healthways (NASDAQ:HWAY)




McMoRan Exploration (NYSE:MMR)




Stillwater Mining (NYSE:SWC)




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
When you look at Stillwater Mining's earnings release from today, you understand how the struggling auto industry reaches out into other ancillary businesses not typically associated with a car manufacturer. General Motors' (NYSE:GM) challenges understandably affect parts supplier American Axle (NYSE:AXL), but you don't expect to see a miner taking a hit. Except that Stillwater Mining produces palladium, a metal used in the auto industry.

The industry remains the biggest market for palladium because of its use in catalytic converters, so Stillwater Mining's business has faltered as global demand for cars has weakened. On a positive note, pricing for the metal has strengthened even though it's still well below the highs achieved in 2008. Some investors, such as CAPS All-Star TSIF, look for the share price to recover.

I've owned [North American Palladium] since it was under a $1 so I do watch Palladium and platinum prices. They are both up a good 20% the last few months, but the big hit they took due to auto manufacturing will probably keep them depressed for awhile longer. ... Auto demand may start snapping back under international government incentives. Stillwater Mining fell off my radar due to it's parent company, Norimet Limited, a Russian based company that holds a key lock on palladium in siberian mines. I'm adverse to international control of a US mining company, but I guess you have to take the good with the bad and Stillwater Mining makes a nice play, either short term if prices spike or long term as the economy recovers. Decent cash flow and good cash/debt. Let's see if it has the metal to excel.

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.

American Reprographics is a Motley Fool Inside Value recommendation and a Motley Fool Hidden Gems selection. Healthways is a Stock Advisor selection. 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 other stocks mentioned in this article. You can see his holdings. The Motley Fool's disclosure policy is as strong as tempered steel.