The AOL logo is seen on the outside of the building housing the companies corporate headquarters in New York
The AOL logo is seen on the outside of the building housing the companies corporate headquarters in New York May 28, 2009.(UNITED STATES BUSINESS MEDIA) REUTERS

Shares of AOL Inc. (NYSE: AOL), the No. 7 website, traded near its 52-week high Monday after activist investors Starboard Value Management won crucial backing to win seats on the board of directors.

In Monday afternoon trading, AOL rose 2 cents to $27.13. The highest 52-week close for the New York-based news and information service which owns the Huffington Post and other services was $27.70 on May 30.

Starboard Value LP, the activist shareholders of 5.53 percent of AOL's shares seeking to oust three directors at the June 14 annual meeting, won the backing for two of them from Institutional Shareholder Services. In an investor note, ISS backed the election of Starboard chief Jeffrey C. Smith as well as Dennis Miller as directors.

These two dissident nominees appear well-equipped to drive the boardroom change the dissident believes is necessary, ISS said. The research and advisory service also commented that several recent steps initiated by AOL CEO Tim Armstrong probably wouldn't have happened without the Starboard threat.

They include sale of pioneering Internet patents to Microsoft (Nasdaq: MSFT), the world's biggest software company, for about $1 billion and a promise to largely pass that on to shareholders.

Smith has argued AOL, which reported first-quarter net income jumped 400 percent to $21.2 million, or 22 cents per share as revenue eased 4 percent to $529.4 million, is losing fortunes with its Patch local news sites and not benefiting from its various sites that offer news and information.

ISS recommended his election as well as that of Miller because of the latter's extensive background in media and venture capital.

The recommendations are crucial because so much of AOL's shares are owned by a relatively small group of institutions including Dodge & Cox, RS Investments, Capital Research and Vanguard Group, which collectively account for nearly 37 percent of the outstanding shares.

If the Starboard team wins, it still wouldn't control AOL, which has an eight-member board, although management wants to expand it by two members.

Last month, Yahoo (Nasdaq: YHOO), the No. 3 search engine, signed a standstill agreement with Third Point Capital, a New York-based fund that had acquired nearly 6 percent of its shares, after electing three of its nominees to the board.

Like Starboard, Third Point had argued the Sunnyvale, Calif.-based company wasn't maximizing the value of its media properties. As well, its research found that CEO Scott Thompson had falsely asserted holding non-existent college degrees in proxy filings with the U.S. Securities and Exchange Commission.

Thompson quit as Yahoo CEO on May 13 and was replaced by interim CEO Ross Levinsohn. Since then, Yahoo shares have lost about 1.7 percent, trading Monday at $14.93, up a penny.