Three Former Rogues Fail 'Clean Stocks' Test

Conflicts of interest: A big danger sign: Entrenched accountants that have done the books year in and year out. Signs also include massive amounts of consulting work with the company and a lack of strong outside directors on the company's accounting, compensation and corporate governance committees.

Growth strategies: Growth by acquisition can produce a constant barrage of one-time charges and write-offs that make it impossible to judge company performance.

Corporate structure: A company with a plethora of subsidiaries and off-balance-sheet entities presents a challenge to investors trying to figure out where the cash is coming from and where it's going.

Options accounting: Companies should engage in modest use of options and use accounting that honestly tries to account for options as compensation.

Pension accounting: Companies with defined benefit pension plans that are clearly understating the size of their future pension liabilities should get the ax.

Potential return to investors: Shares of the company in question should show the potential for outperforming the market over the long term.

I'm not looking for the business world's saints. Companies that make the Clean Stocks portfolio will almost certainly have a blemish or two, but the bad marks should be limited and, ideally, should be non-material to their investment quality.

Have Three Bad Boys Gone Good?

I chose the last group of three nominees from reader suggestions for possible inclusion on the list because they present an intriguing problem for investors looking for clean companies. Each -- Boeing, Motorola and Rite Aid -- is a past corporate-governance bad boy that has brought in new management to clean house and improve performance. Have any of these companies done enough? Not yet.