How to Grade Company Management

As a value-oriented investor in the Millionaire Zone, I always look for strong business fundamentals. I want to invest my capital in good, solid businesses combining sound financials, market position and management.

It's easier said than done, though.

These days, financial facts aren't hard to find, but marketplace information is more challenging. You have to tune in to the company, its products and what its customers (and the media) are saying about it.

Management is always the toughest item on my list. How do you appraise management competence and quality, and the quality of the organization in which it works? Does the corporate structure accommodate the right kind of business thinking?

There is no way to fact check all facets of an organization or management team. But if you're willing to start with corporate governance, you can access a thorough analysis -- once the domain of institutional shareholders only -- now available to the masses, for free.

What I'm talking about is the corporate governance quotient, or CGQ, a rating system developed by Institutional Shareholder Services. CGQ covers some 8,000 companies, rating each across 65 variables. Those variables cover such items as board composition, audit practices, executive and director compensation and ownership -- it's a long list.

CGQ is now available on the Yahoo! Finance investment portal "Profile" page for major U.S. companies. I'll use Apple Computer (AAPL Quote) as my first example.

At the time of writing, Apple is better than 49.2% of S&P 500 companies. That's not too outstanding, and it's consistent with the recent concerns about options backdating.

However, ISS reports that Apple is better than 92.6% of companies in the so-called Technology & Hardware Equipment sector. That's not bad, but it doesn't say much for the sector at large.

Click here for the video version of this story from Jennifer Openshaw.