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NEW YORK, Aug 27 (Reuters) - Proxy advisory firm Glass Lewis on Friday recommended that investors in cloud storage vendor Box elect one of Starboard Value's three proposed nominees to the board, arguing change is needed after a "puzzling" capital raise and "reactive governance" changes.

Glass Lewis is backing Peter Feld, a partner at Starboard, owner of an 8.4 stake in Box (BOX.N), to join the 10-person board. "We believe there remains sufficient cause to support the election of a direct shareholder representative at this time," Glass Lewis wrote in its report, which was seen by Reuters.

The report criticizes Box's board for having supported a $500 million convertible preferred offering led by private equity firm KKR (KKR.N), calling it a "puzzling, poorly received and underutilized capital raise."

For Starboard, the KKR deal has become the centerpiece of its broader criticism that Box has a poor track record of being a public company and has failed to deliver on its commitments in spite of its strong product positioning. Starboard has also told the board that it should fire Chief Executive Aaron Levie and find a buyer for the company.

This year's campaign marks the second time in two years that Starboard, one of the industry's busiest activists with a history of winning more board seats than its rivals, has taken aim at Box.

The hedge fund reached a settlement with the company in March 2020 that allowed it to choose one director and have input in choosing a second. Both of those directors have assumed leadership roles on the board.

Starboard did not immediately respond to a request for comment. A spokesman for Box said the report ignores "that Peter Feld has been insistent on firing Boxs CEO in the absence of a sale, demonstrating his unwillingness to be open minded."

Glass Lewis and its larger rival Institutional Shareholder Services (ISS) are often instrumental in determining the outcome of boardroom battles over who sits on a board by making recommendations that many big investors like mutual funds follow.

ISS issued its report earlier this week and came to a different conclusion, recommending that investors back the company's nominees instead, not Starboard's directors. While ISS says that Starboard deserves credit for operational and governance changes made since last year's settlement, it also adds that the current board deserves more time to allow its changes to take hold.

Reporting by Svea Herbst-Bayliss; Editing by Steve Orlofsky

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Glass Lewis backs one of Starboard's three nominees in Box proxy fight - Reuters