In a small victory for PeopleSoft ( PSFT), prominent proxy adviser Institutional Shareholder Services (ISS) has recommended that PeopleSoft shareholders support the company's proposed slate of directors at an upcoming annual meeting on March 25.

For nearly a year, PeopleSoft's board has consistently fended off a hostile takeover bid from Oracle ( ORCL). The board has called on its shareholders to reject the Oracle offer on the grounds that it doesn't offer a big enough payout and is likely to encounter regulatory hurdles.

A proxy analysis from ISS concluded that the regulatory concerns were on target, given that in February the U.S. Department of Justice and seven states filed an antitrust suit to stop Oracle's takeover bid.

Oracle is appealing the DOJ's ruling, but it has withdrawn the slate of directors it previously nominated for PeopleSoft's board and is no longer soliciting proxies for use at PeopleSoft's annual meeting.

Meanwhile, ISS was somewhat more critical of PeopleSoft's controversial, board-approved customer assurance program , in which customers are promised refunds of two to five times their license fees if PeopleSoft is acquired. The proxy advisory outfit says it discourages M&A possibilities beyond just Oracle and could potentially shift wealth from shareholders to PeopleSoft customers.

But though the program "stretches the boundaries on what is acceptable," ISS concluded that PeopleSoft's board ultimately acted in shareholders' best interest. "With their backs against the wall, these directors fought hard to control the exodus of their customers," said the report.

Oracle first launched an offer for PeopleSoft at a price of $16. Upon being rejected, the database software giant raised its offer twice; under current terms it is offering $26 per share for PeopleSoft in a bid that expires June 25.

In recent trading, PeopleSoft shares were up 53 cents, or 2.8%, to $19.44, while Oracle was down 16 cents, or 1.3%, to $12.09.