In a recommendation that could shape the high-profile proxy fight between The Walt Disney Company and Nelson Peltzs Trian Partners, the influential advisory firm Institutional Shareholder Services is recommending that its clients vote to add Peltz to Disneys board of directors.

ISS ultimately recommended a vote for Peltz, but not Trians other nominee, Jay Rasulo, and to withhold a vote for current Disney board member Maria Elena Lagomasino.

ISS released a detailed report Thursday outlining Disneys performance, and evaluating the proposals from both Trian and another activist, Blackwells. ISS noted Disneys underperformance in recent years, and places particular emphasis on Disneys succession issues. And while it praised the strategic moves made since CEO Bob Igers return, the firm nonetheless argued that change is needed at the board level.

Because the company has made positive changes to its board as well as operational changes that have been well received by the market, we recognize that some shareholders may feel that the company has sufficiently course corrected. These investors have likely drawn comfort from Igers return. Nonetheless, given the major missteps and severe consequences of the failed 2020 succession, particularly for a company that already had a history of succession drama, it may be difficult for others to simply trust that the board, albeit refreshed, will get it right this time, ISS wrote in its report. These shareholders may be concerned about post-Iger DIS. Our analysis favors this latter view.

Dissident nominee Peltz, as a significant shareholder, could be additive to the succession process, providing assurance to other investors that the board is properly engaged this time around, the report continued. He could also help evaluate future capital allocation decisions. Moreover, multi-year concerns surrounding Lagomasinos role as a compensation committee member strengthen the case that Peltzs addition, on balance, would appear a net positive.

The recommendation by ISS carries substantial weight among institutional shareholders, with Iger noting himself in his 2019 memoir that the firm can influence more than a third of votes in a proxy. In fact, Iger recalls ISS recommendation 20 years ago as being critical to Roy Disneys surprise showing in that proxy battle.

I remember thinking that it was like wed entered a conventional war and now another party had launched nuclear weapons, Iger wrote of the ISS recommendation in favor or Roy Disneys campaign.

This time around, Disney has garnered far more support than it did 20 years ago. Perhaps most notably, the families of Roy and Walt Disney have all signed letters supporting Iger and the Disney board. Star Wars creator George Lucas is also backing the company, and another shareholder advisor firm, Glass Lewis, offered a recommendation in support of the Disney board.