By Svea Herbst-Bayliss

NEW YORK, April 25 (Reuters) - Proxy advisory firm Institutional Shareholder Services said WEX shareholders should elect two of activist investor Impactive Capital's candidates, echoing a similar recommendation from other proxy advisory firms.

ISS, whose reports are closely watched by investors, backed the hedge fund's co-founder, Lauren Taylor Wolfe, and technology and payments executive Kurt Adams for election in what is shaping up to be one of the year's most bitter board fights.

It's recommendation, seen by Reuters on Saturday, urged investors to withhold votes from company directors Nancy Altobello and Stephen Smith at the May 5 annual meeting.

Rival proxy advisory firm Glass Lewis recommended electing Taylor Wolfe and Adams and urged shareholders to remove Stephen Smith and CEO Melissa Smith from the board.

Egan-Jones, the smallest of the proxy advisory firms, recommended investors elect all three of Impactive's director candidates.

ISS said Taylor Wolfe and Adams bring fresh independence to the board and notes Adams "has more relevant professional experience in the areas where WEX is most challenged." It also dismisses the company's criticisms against Taylor Wolfe and said she would join the board as "an informed participant by virtue of her longstanding, active investment in WEX."

Impactive, which owns just under 5% of WEX, has spent over a year preparing for this fight and is now asking investors to elect three newcomers to the nine member board.

It blames CEO Melissa Smith for the company's lagging share price, saying her pay is too high, and considers the board's governance record poor. But the hedge fund stopped short of calling for Smith's ouster as CEO.

ISS agreed with Impactive and said WEX has underperformed its self-selected peers for the majority of the CEO's tenure. It is "difficult to reconcile this track record with the board's positioning of results," ISS said.

But ISS also notes that things are "not so dire that the CEO needs to be immediately removed from the board."

WEX which offers payment processing and information management services has seen its stock price drop 34% in the last five years, cutting its market value to $5.2 billion.

WEX did not immediately respond to a request for comment on Saturday and Impactive did not have a comment.

Earlier this week WEX said the Glass Lewis recommendations "rest on thin analysis" while Impactive called the Glass Lewis report "unequivocal."