A new study out of Stanford's law and business schools suggests that the increasingly popular corporate governance quotients provided by firms like the Corporate Library and Institutional Shareholder Services may not be so helpful. The researchers found little or no correlation between the ratings at different firms, and higher scores do not appear to correlate with strong performance. Indeed, firms that performed well based on ISS metrics were found to be more likely to face shareholder class-action lawsuits, which is mystifying.

The companies that provide governance data do, in my opinion, provide a valuable service, but investors who really want to know what's going on at their companies should go read the proxy statements themselves, straight from the SEC's Edgar database (Look for "DEF 14A"). Here are some questions to ask as you look:

• Do the executives and directors own a large amount of stock in the company? Do they sell frequently or buy stock on the open market with their own money? An important, but often overlooked, area to look at is the ownership of the directors. Directors who own a large amount of stock are likely to be more vigilant in performing their duties.
• How does executive pay change from year to year? Does it go up every year by leaps and bounds regardless of performance, or do the top guys take a hit with the shareholders?
• Does the company have a staggered board, poison pill, or other devices designed to make it more difficult for shareholders to affect change?
• Does the company disclose any significant related party transactions?

If you can come up with detailed answers to those questions, you'll have a much better idea of the company's governance strengths and weaknesses than you can get from reading any third-party report.

Aflac (NYSE: AFL), which is a major insurer, has an off-beat message – at least, according to its commercials (which involve a noisy duck).

Well, the company has made some history this week. That is, the shareholders can vote "yes" or "no" on executive compensation.

While it is non-binding, it is still important. If anything, its recognition from Aflac that its shareholders have a say on things.

Funny enough, the company really doesn't need this in terms of pacifying shareholders. After all, Aflac has been a solid performer.

However, does this mean we'll see other firms join in the trend? Perhaps some. But, when it comes to giving up a little power, you're likely to see lots of resistance in the boardroom.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

For most of our lives bankers have been represented to us as conservative creatures, dressed in pin-stripe suits, nary to part with a dollar and certainly adverse to taking any risk. This image was cast in our movies, television, and novels. Unfortunately, with events playing out as they are today, this carefully-crafted stereotype couldn't be further from the reality.

Mr. Drysdale, who managed Jed Clampett's millions in the Beverly Hillbilly's television show of the '60s is just that -- a TV character. If you look back over the last few decades it has all been a facade, and the government has participated in this fraud by loosening banking laws and allowing these institutions to wander farther and farther from rational and safe behavior in pursuit of the highest returns they could get without limit.

If you are old enough, you might remember back three decades when the banks were seeking these high returns in South America, when inflation and interest rates tempted them and they all took a big bath. Then a decade later in 1989 the commercial real estate market collapsed amid over-valuations, and many banks and thrifts collapsed along with them...right into the arms of the Federal Government, which was forced to take them over with yet another bailout. This took about five years to turn around and things were brighter by early 1995.

As Citigroup's (NYSE: C) Chuck Prince illustrates, the key to keeping the CEO job is not generating consistently superior corporate performance, it's maintaining good relationships with your board of directors. Without the board's support, Prince's string of disappointing quarters would have cost him his job long ago. Lesson: if you let the board know you're failing then you keep your job -- but if you surprise the board, you're out.

That's why corporate loner Stanley O'Neal, Merrill Lynch (NYSE: MER)'s CEO, is likely to get the boot. Because not only did he oversee a 58% increase in writing off bad investments two weeks before Merrill's latest earnings announcement, he committed the unpardonable sin -- if you want to keep the CEO title -- of initiating merger discussions with Wachovia (NYSE: WB) without board approval.

CNBC reports that O'Neal could be gone this weekend, so I won't be surprised if O'Neal is replaced -- possibly by NYSE Euronext (NYSE: NYX) CEO John Thain. Regardless of who heads Merrill, there are some big challenges ahead. Here are five things that I think Merrill's next CEO should do:

It's a well-known fact that corporate governance in general, and annual meetings in particular, are a complete joke. If you believe in shareholder democracy, then please give me the tooth fairy's email address.

But Sunrise Senior Living, Inc. (NYSE: SRZ) has taken the corporate governance parody to astounding heights. On October 16th, 17 months after its last annual meeting, and after options scandals, accounting scandals, and the firing of a CEO among other thing, shareholders will convene for the annual meeting.

The New York Times piece on this travesty sums it up: Welcome to the annual meeting. Now be quiet. Only three directors will be standing for re-election, and no other business issues will be allowed to be discussed.

And we thought the shareholders owned the company, and the board/officers were supposed to be held accountable to them. Hah!

We can only hope Sunrise's assisted-living facilities treat their residents with more respect than the company treats its shareholders.

Upper Deck has advised Topps (NASDAQ: TOPP) that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired with no request for additional information, satisfying one of the conditions of Upper Deck's tender offer for the company.

According to a press release put out by Topps:

Topps noted that it continues to negotiate with Upper Deck to see if a consensual transaction can be reached. Topps cautions, however, that there can be no assurance that a transaction will be reached with Upper Deck. The Topps Board has not withdrawn or amended its recommendation with respect to the merger agreement with The Tornante Company and Madison Dearborn Partners.

Topps is recommending that its shareholders accept the $9.75 bid from Tornante and Madison Dearborn when a $10.75 offer is on the table and the stock is currently trading at $10.14. I suppose that next we will hear that Topps is advising its shareholders to hand in their $10 bills for a five and four ones.

As I've written before on BloggingStocks, the management and board at Topps is looking more and more like a complete disgrace to corporate governance. The current management team has a deal in place allowing them to keep their jobs if Madison Dearborn and Tornante acquire the company, although most shareholders would agree that their leadership has been pathetic.

For more of my coverage of the battle for Topps, check out:

Will Eisner and Co. Collect Topps?

Upper Deck Gets Hostile in Pursuit of Topps

Can you imagine if the President had access to all the resources of the government to fund his re-election campaigns, and there was endless red-tape preventing others from challenging the incumbency?

What if, instead of voting to re-elect incumbent congressmen, we had the option of either voting "yes" or "abstaining"?

Welcome to the world of corporate governance in America. Our shareholder democracy has more in common with Saddam Hussein's government than our own political democracy.

As reported in today's New York Times, the "bitterly divided" SEC is being so gracious as to seek public comment on two proposals for corporate governance changes. While the text of the proposals is not being made public right now, one would change company bylaws to permit contested elections in some circumstances. The other would give investors less sway over the election of directors.

Without even knowing the specifics yet, I have to ask: Why shouldn't we have more shareholder democracy? It seems like nearly every prominent investor is on the side of stronger corporate governance: Warren Buffett, Carl Icahn, and...Mark Cuban. Here's a nice tidbit from an old blog post of his:

The concept that you own "your share" of the company is a joke. You are completely at the whim of the CEO and board who will dilute you on a daily basis with stock options, then try to buy back stock to cover it up and push up the price, rewarding the shareholders who get out, rather than those that continue to hold the shares.

As annoying as Cuban is, he's 100% right there. The SEC needs to play a role in changing the system, and hopefully it will.

A recent piece in the Wall Street Journal (subscription required) sums up the problem with evaluating corporate governance:

Does good corporate behavior pay off in the stock market? Companies that track corporate governance and share performance say "yes" -- and investors agree.

But it's not always easy for investors to act on that notion. There's little consensus over what "good governance" is and how it should be measured. In the resulting muddle, it's sometimes hard to know who's a "good" corporate citizen.

The piece goes on to point out two distinctly different ratings Google Inc. (NASDAQ: GOOG) has received from two organizations. In short, one says Google is one of the most ethical companies and the other says Google is on shaky ground because of accounting practices and litigation risk.

So what is an investor to do? As Supreme Court Justice Potter Stewart famously wrote: Pornography may be difficult to define, but "I know it when I see it." Investors can probably reap many of the benefits of owning companies with good governance simply by avoiding companies with really bad governance. Here are some things to look out for:

• Insiders who receive large cash compensation and stock options, but exercise options frequently and have little financial stake in the long-term future of the company.
• Scandals involving options backdating.
• A poison pill in place designed to insulate the company's management from a takeover.
• Executives who have pocketed large sums of money in spite of a declining stock price.

To learn more about what good corporate governance is, and how to identify bad governance, pick up The Essays of Warren Buffett, which has a whole section on these issues.

I would argue that Adams Golf (OTC BB: ADGO) is among the most flagrantly undervalued stocks on the market today. As a company on the cutting edge of golf technology, Adams has had tremendous success with its recent hybrid irons. Since 2002, sales have increased from $38 million all the way up to 2006's total of $76 million. For the first quarter of 2007, Adams Golf saw its sales surge 25% year over year and, in the second quarter, launched its new Idea A3 hybrid iron set, the next-generation in the hugely successful Idea line of products. The company is growing rapidly, and the brand appears to be gaining traction; it's the number-one hybrid on the three major tours combined. Adams has been profitable every year since 2003 and, excluding the recording of a deferred tax asset, it trades at around 15 times 2006's earnings.