NEW YORK, July 15 (Reuters) - Institutional Shareholder

Services on Monday recommended that Masimo ( MASI ) shareholders elect

both director candidates proposed by activist investment firm

Politan, arguing change is needed at the medical device maker.

ISS, the proxy advisory firm whose recommendations often

influence how investors decide on proposed mergers and who

serves on boards, wrote that change is necessary even after

Politan won two board seats last year in a vote.

The board will have six members after the July 25 meeting.

Masimo's ( MASI ) stock price has fallen 27% in the last 52 weeks and

Politan has said it would immediately review strategy, costs and

plans for growth if its candidates are elected.

U.S.-based Masimo ( MASI ) "has continued to display a

dangerous lack of accountability to shareholders that will

require additional board change to rectify," the report, seen by

Reuters, said.

ISS recommended investors elect Bill Jellison and Darlene

Solomon instead of backing Masimo ( MASI ) founder and CEO Joe Kiani and

Christopher Chavez. Only two board seats will be voted on this

year.

While ISS said Kiani deserves credit for shaping the company

into a "business with an innovative and successful core product"

it wrote that the company was "operating like a private

business, and was disregarding shareholders in the process."

Politan has offered to reappoint Kiani to the board if he is

ousted and has said it is not actively seeking to replace him as

CEO.

ISS said Jellison and Solomon are both independent from

Kiani and have appropriate experience serving on public company

boards and with mergers and acquisitions and business

separations.

ISS' report came on the heels of rival proxy advisory firm

Glass Lewis' report, which also recommended voting for both

dissident candidates.