What happened

Shares of EQT Corp. (EQT -0.73%) were trading more than 9% higher on Friday afternoon after an influential proxy advisory firm backed the slate of directors nominated by a group of dissident shareholders, improving the odds of a shakeup at the natural gas company.

So what

Brothers Toby and Derek Rice, who sold Rice Energy to EQT in 2017 and together own about 3% of the company's shares, have been attempting to overhaul the board and install Toby as CEO. They have nominated a slate of directors for consideration at the company's July 10 annual meeting.

Institutional Shareholder Services, a proxy advisory firm, on Friday recommended that shareholders vote for the Rice nominees, saying the brothers have "made a compelling case that substantial change at the board level is required."

A hand-drawn stock chart pointing upwards.

Image source: Getty Images.

Shares of EQT have lost more than half their value since the Rice Energy acquisition closed, despite company efforts to streamline costs and a November 2018 spinoff of its midstream assets.

ISS called the vote "a referendum as to which management team is better suited to run EQT," saying that Rice has a "thorough business plan" and concluding there is "minimal downside risk" to supporting the dissidents.

EQT in a separate statement said it disagrees with ISS's recommendation, calling the Rice-backed nominees a "friends and family slate" that are "significantly less qualified, less experienced and highly conflicted."

"Unfortunately, ISS has chosen to ignore the progress that EQT has achieved," the company said. "ISS failed to recognize that the Toby Rice Group's campaign is premised on stale arguments that are irrelevant following the significant transformation EQT has achieved."

Now what

It's now up to the shareholders to decide on EQT's direction. The Rice brothers are said to have the support of large institutional shareholders including D.E. Shaw Group and Kensico Capital Management; proxy firms like ISS can be highly influential in determining how institutional investors, particularly passive mutual funds, vote their shares.

EQT is using a universal ballot for its director election, meaning shareholders can pick and choose between management and dissident nominees. Chances are improving that the Rice group will pick up some seats at the annual meeting. Time will tell how many, and what that will mean for EQT's future.