If you drop a rock into the middle of a pond, the rings of water will radiate out from the center to the shore. Similarly, if a corporation hires great people and makes them happy and productive, they will exceed customer expectations, make money for shareholders, and give back to the communities in which they operate. That's the good corporate citizen premise of Value Leadership: The 7 Principles That Drive Corporate Value in Any Economy (Wiley, 2003).

How can investors profit from this idea? A quick answer is to buy stock in Value Leaders -- companies that follow the seven principles -- like Goldman Sachs Group. Inc. (NYSE: GS) and avoid the stock of companies that have fallen away from these seven principles, like Wal-Mart Stores, Inc. (NYSE: WMT). Over the long term, however, the list of Value Leaders changes -- Wal-Mart used to be on the list. Therefore, investors need tools to sift the leaders from the losers so they can make their own decisions.

Let's face it, on the surface, principles like Experiment Frugally -- one of the seven in my book -- sound great. But if you can't measure them, you can't use them to pick stocks. That's why I studied 1,500 companies and picked eight that followed 11 criteria closely linked with the principles. I found that these companies grew 35% faster, earned 109% higher profits, and boosted their stock price at five times the rate of their peers between June 1992 and June 2002. To measure values, I developed a Value Quotient (VQ) which gauges how well companies follow the seven principles in the way they perform 24 activities and 106 specific tactics. I found that companies with higher VQs do better in the stock market.