NEW YORK, May 12 (Reuters) - Elliott Investment

Management scored a victory on Monday in its board fight at

Phillips 66 when prominent proxy advisory firm

Institutional Shareholder Services (ISS) recommended that

investors elect all four of the activist's director nominees.

Elliott, which owns a roughly $2.5 billion stake in

Phillips, has been pushing the oil refiner, valued at $48

billion, for changes that include spinning off or selling its

midstream business. Elliott wants investors to refresh the board

in order to achieve its goals.

Now with ISS's backing, on the heels of a similarly

favorable recommendation from smaller rival Glass Lewis, the

hedge fund may have won significant support, analysts and

investors said.

"Although the board has been reshaped since the

pandemic, important industry perspectives have been overlooked,

and there is strong evidence that the board is not willing to

exercise independent oversight of management," the ISS report

said. "The dissident has assembled a strong slate, which has the

experience and independence that PSX requires."

Neither Phillips 66 nor Elliott had an immediate comment

on the report.

Investors often take recommendations from proxy advisory

firms into consideration when casting votes on hot-button issues

like who sits on boards.

The Elliott and Phillips 66 battle is one of the year's most

bitter proxy fights with each side piling time and money into

trying to persuade shareholders they have the better candidates.

Investors will cast votes for four directors, out of a

14-member board.

Glass Lewis has urged investors to elect three of

Elliott's four nominees at the May 21 meeting.

Phillips 66's stock price has dropped 18% over the last 52

weeks, closing trading at $118.68 on Monday.

ISS wrote that even though returns have been positive

since Phillips 66 was spun off from ConocoPhillips ( COP ) in

2012 and since the company's CEO transition in 2022, the stock

began underperforming peers in mid-2021 and "has not been able

to close the gap."

"The data does not support the board's argument that the

integrated strategy results in superior returns over the

long-term, and it undermines assertions about the success of

turnaround efforts since the CEO transition," when Mark Lashier

took over from Greg Garland.

Elliott, which invests $70 billion, has a strong record

in the energy sector and has made successful investments at

Marathon Petroleum ( MPC ), NRG Energy ( NRG ), Suncor Energy ( SU )

and Hess All were led by John Pike, a partner

with Elliott who is also spearheading the Phillips 66 campaign

and a recent $2.5 billion investment in BP.