The proxy battle between Income Investor selection H.J. Heinz (NYSE:HNZ) and the Peltz team at the Trian Fund continues to bubble over. For the most thorough and up-to-date info, I recommend visiting the SEC website and digging through all the statements for the last six weeks. Any reports, including this one, are a poor substitute for reading the filings yourself, particularly if you're a shareholder.

The stories haven't changed much since I last looked at this squabble. However, as can be expected in a proxy battle, things are turning nasty, and both parties have plenty of venom to spew at each other. Through it all, investors must weigh each side's argument and decide which plan they feel is best.

As much as I'm unimpressed with Heinz and its management's performance over the last five to 10 years, I'm equally hesitant to hand over too much power to the Trian Group, which is seeking five of Heinz's 12 board seats. I can't necessarily support this position with straightforward financial logic, since the Trian group's 5.5% ownership stake exceeds that of the other board members combined. But even with the best intentions, shareholder activists and investors are often fly-by-night entities highly focused on short-term goals, with little concern for how the company is run or positioned to succeed 10 or 20 years from now.

My largest problem with the Peltz plan is the large share repurchase it proposes. I am a huge fan of repeated share repurchases funded by free cash flow, such as the ones executed by Cisco (NASDAQ:CSCO) and Microsoft (NASDAQ:MSFT) in the last few years. Heinz does enjoy predictable cash flows, allowing the company to safely take on more leverage than others, and pursue a recapitalization by taking on debt and repurchasing shares. That said, the current proposal seems to strain the limits of what the company could sustain if it were to hit a rough patch, or if competitors ConAgra (NYSE:CAG) or Kraft (NYSE:KFT) mounted a serious attack on Heinz's sauce and condiments business.

In response to the proxy battle and the proposed increased leverage at Heinz, S&P has already cut the company's credit rating, and it has the company on watch for another credit cut. While this sounds bad on the surface, it's not terrible for Heinz; if the company is able to deliver on its own plan, its increased cash flows should cover the difference.

The biggest problem for the management team at Heinz is that its most recent program to increase shareholder value came after Trian Fund purchased its stake and announced its plans for the company. Truth be told, the Heinz plan is quite similar to the Trian Fund plan, though notably scaled down in the areas of share repurchases and cost-cutting.

If the Heinz plan is accomplished, it would be a large improvement from the company's meandering performance in the last decade. And if nothing else, the current management team at Heinz is now well aware that underperformance won't be tolerated, and that a motivated investor with deep pockets can have plenty of influence. If I were a shareholder, I'd be inclined to vote for anything that keeps the heat on management without transferring too much power to the Trian Fund nominees. Such a middle-ground proposal doesn't seem likely, but it is possible.

Kraft and Heinz are Motley Fool Income Investor picks, while Microsoft is a Motley Fool Inside Value selection. Click on either newsletter's name to try it free for 30 days.

At the time of publication, Nathan Parmelee owned shares in Microsoft. He has a small beneficial interest in Heinz shares as well, but no interest in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.