ROCKVILLE, Md. (HedgeWorld.com)–Institutional Shareholder Services issued its proxy analysis of the upcoming H. J. Heinz Co., annual meeting, recommending that shareholders vote in favor of three of the director nominees on the dissident slate.

Heinz has a 12-member board and, although the board isn’t staggered, only five of the seats are disputed in this proxy fight.

“[The] presence of three of the dissidents on the [Heinz] board would likely prove beneficial to long-term shareholder value,” ISS wrote. “The long-term financial and operational performance of the company and the dissidents’ skill sets and track record establish both the need for change and the dissidents’ ability to effect the change.”

The dispute is a test case of what Nelson Peltz, principal of Trian Fund Management LP, New York, has taken to calling his “operational activism.” The phrase means that he isn’t waging proxy fights merely to create short-term excitement, boost the sales price, and sell into that market. He is doing so, he and his entourage contend, in order to have a long-term impact on the operations of the company.

The ISS spoke well of Mr. Peltz and of two of the other nominees on the Trian-supported slate in particular: Greg Norman and Michael F. Weinstein. The report said that Mr. Norman, a professional golfer, has “established a potentially billion dollar brand around his name and the ‘shark’ persona.” It also said that Mr. Weinstein–formerly the chief executive of Snapple–has a reputation as a strong marketer of consumer brands.

The ISS suggests that shareholders withhold their votes from the other two nominees on the gold card: Peter W. May and Edward P. Garden. Why? Because although they have “impressive resumes” they would “be merely two more Trian votes.” The ISS appears to believe that although new voices would be healthy, three seats are adequate for that purpose.

In a statement Thursday [August 3], Heinz expressed its regret over the ISS recommendation, which it said “flies in the face of the ISS’s own earlier corporate governance ratings of the Heinz board and Nelson Peltz’ Triarc Companies Inc.” It once again expressed the desire that shareholders support all five of the company’s nominees for the contested seats: Charles Bunch, Peter Coors, Mary Choksi, John Drosdick, and Dennis Reilley, as well as the other seven uncontested members of its slate.

The day before, another influential proxy advisory firm, Proxy Governance Inc., Vienna, Va., issued a somewhat different opinion. Proxy Governance is suggesting that shareholders put only one of the members of the dissidents’ slate on the board, and that this one should be Nelson Peltz.

In that context, Heinz said that it is “ironic and contradictory” of Proxy Governance to recommend Mr. Peltz as a watchdog, since “Proxy Governance said previously that Mr. Peltz’s average three-year compensation at Triarc Companies, where he serves as chairman and chief executive, was 396% above the median paid to chief executives at peer companies.”

The meeting is scheduled for Wednesday, August 16.

CFaille@HedgeWorld.com.