FORTUNE -- Everything companies spend money on these days is under the microscope, from executive pay to perks -- and now we can add political spending to that list.
Just as is the case with the other expenses, it's the board members who find themselves in the bull's-eye because of spending on political causes.
Corporate political spending is getting increased scrutiny thanks to the Supreme Court's Citizens United case, a controversial ruling earlier this year that gave corporations more power to fund political causes. But it was an issue with some investors even before that case -- and a study by John Coates of the Harvard Law School, released just last month, which looked at firms during the time period 1998-2004 shows why the issue is important. The study found that firm value and political activity are strongly negatively correlated. In other words, greater political activity seems to be tied to lower firm value.
So perhaps it's not so surprising that firms both in the U.S. and abroad are beginning to take heat from some very vocal investors.
At News Corp.'s annual meeting last week, the board's audit committee chair, Sir Rod Eddington, faced "no" votes from UK asset manager F&C and the Nathan Cummings Foundation, according to The Guardian. Their issues related to the $1 million donation News Corp. (NWS, Fortune 500) made to the Republican Governors' Association and another $1 million to the US Chamber of Commerce.
"We are concerned to see the company deploy shareholder funds for activities that are best left to the individuals whose views they reflect and are not obviously a business matter for the company," said Karina Litvack, who heads governance and sustainable investment at F&C, according to the Guardian report. She went on to say that while it's reasonable for companies to engage in policy debate when it pertains to their business, a political contributions policy should be instituted.
News Corp. CEO Rupert Murdoch reportedly said that he gave the money to the Republican Governor's Association because of his friendship with John Kasich, an Ohio gubernatorial candidate and former Fox News host. Murdoch did not expect the contribution to the US Chamber to be made public, Politico reported. According to the Financial Times, Murdoch said at the shareholders meeting that the donations were "in the interests of the country and all the shareholders and prosperity that there be a fair amount of change in Washington." Eddington added that the company would consider greater disclosure of future donations.
Environmental issues at odds with energy
The growing concern by shareholders isn't just happening offshore. Also last week, investors filed shareholder resolutions with Occidental Petroleum (OXY, Fortune 500), Valero Energy (VLO, Fortune 500) and Tesoro Corporation (TSO, Fortune 500) requesting oversight of the companies' political spending.
This scrutiny stems from the financial support those firms have given to California's Proposition 23, which the investors say "aims to suspend California's landmark global warming law and, if passed, would undermine national efforts to reduce pollution causing climate change." Primary filers of those resolutions at the companies include Green Century Capital Management, The Needmor Fund, the Nathan Cummings Foundation and the Unitarian Universalist Association.
Valero and the investor group disagree on the impact of Proposition 23 on job creation according to the Los Angeles Times, which notes that the companies contributed $8 million in favor of Proposition 23. And, although those proposing the resolutions for board oversight are not large investors in the firms, their "announcement is sponsored in part by the Investor Network on Climate Risk, which represents institutional investors with $9 trillion in assets, showing the prospect of broad future support for the resolutions."
Valero spokesperson Bill Day says they will formulate a response to the shareholder resolution when and if it makes it onto the proxy next year. He believes that the company's support for Proposition 23 is beneficial to shareholders and sees the effort by activist shareholders as "part of an ongoing campaign of misinformation about Proposition 23 and demonization of Valero" which he says Valero is trying to correct.
Occidental spokesperson Richard Kline acknowledges their receipt of the resolution and said Occidental would be taking it under advisement. He notes that the company "takes shareholder recommendations very seriously."
Although a growing topic of interest here in the U.S., board oversight of political spending is not yet the norm. According to a recent study by the Sustainable Investments Institute and IRRC Institute, less than a quarter of boards in the S&P 500 have formal board oversight of political spending. And less than 2% of all firms said their boards reviewed political spending more often than annually (although one-third of those with some form of board oversight did not respond).
Despite the lack of oversight today, clearly political spending will soon become another issue boards cannot afford to ignore. Shareholders, it appears, are not going to let them.
Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance, a board advisory firm.