NEW YORK, April 30 (Reuters) - Ancora Holdings scored a second victory in its battle with Norfolk Southern when prominent proxy advisory firm Institutional Shareholder Services (ISS) recommended on Tuesday that shareholders elect five of the activist hedge fund's director candidates.

ISS said the Atlanta-based railway, which has faced regulatory and legal questions after a derailment last year in Ohio, needs new directors with deeper and more balanced industry experience.

The ISS recommendation, which often guides how shareholders vote on hot-button issues such as board elections and mergers, was made one day after Glass Lewis, another proxy advisory firm, backed six of Ancora's candidates. Ancora wants shareholders to elect seven new directors.

Shareholders will vote at the company's annual meeting on May 9 unless the two sides reach a settlement beforehand.

ISS backed William Clyburn, who served on the U.S. Surface Transportation Board, railroad executive Sameh Fahmy, former Ohio governor John Kasich, former Illinois Central Railway chairman Gilbert Lamphere, and former banker Allison Landry, who ISS said could help strengthen communication with shareholders.

Ancora is trying to replace Norfolk Southern CEO Alan Shaw with Jim Barber, a former United Parcel Service executive. ISS endorsed Shaw for election while Glass Lewis endorsed Barber for election. The hedge fund did not have a comment about the report.

But ISS called Barber a credible director candidate and CEO candidate and wrote that even though the firm is not endorsing him "he appears to a be a capable candidate with experience and skills that should be transferable to the railroad industry."

In its report, ISS said there is a "clear case for change" and noted "it appears that safety had been deteriorating for several years" even before the East Palestine derailment in 2023.

Norfolk Southern has added new board members in the past year and appointed a new chief operating officer, John Orr, last month. A representative for the company did not have an immediate comment on the report.

(Reporting by Svea Herbst-Bayliss; Editing by Will Dunham)