UPDATE 1-Proxy firm ISS advises vote against Mylan board, backing investor group

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June 12 (Reuters) - Influential proxy firm ISS on Monday advised voting against generic drugmaker Mylan NV's incumbent board of directors, saying it should be held responsible for reputational damage over drug-pricing issues and the chairman's pay package.

ISS's recommendation comes ahead of a shareholder meeting on June 22 and after a small group of high-profile investors, including the state and city of New York pension funds and the California teachers pension fund, urged other shareholders to vote against six board members and Chairman Robert Coury.

A Mylan spokeswoman was not immediately available for comment.

In a statement on May 31 following the investor group's public criticism, the company said Mylan's board had created sustained long-term value for shareholders and that Coury's compensation was aligned with their interests.

Mylan is under investigation by regulators and the Justice Department after it increased the price of its life-saving allergy treatment EpiPen to more than $600.

The government said last fall Mylan had misclassified the drug and was overcharging the Medicaid program, and Mylan has announced that a settlement over the issue was in the works.

ISS, which advises institutional shareholders on how to vote, said ousting the board members was unlikely because the company requires two-thirds of votes cast to unseat a director at a general meeting.

The proxy firm described Coury's pay package as "outsized" and noted he was receiving a $43.6 million equity award for service as non-executive chairman through 2021.

His 2016 compensation package is worth at least $97 million, according to regulatory filings.

ISS met with Mylan and the pension fund groups last week, according to the report.

The proxy firm cited an erosion in "shareholder value" as a result of the EpiPen controversy.

"Mylan's EpiPen controversy, which has seemingly still not run its full course, has laid bare a record of poor stewardship and responsiveness by the incumbent directors," it wrote.

ISS recommended that shareholders vote against ten Mylan director nominees including Chief Executive Heather Bresch, President Rajiv Malik, and Coury, as well as the compensation committee members. The proxy firm backed new director nominee Sjoerd Vollenbregt.

It also advised voting against ratifying the executive officers' compensation. (Reporting by Caroline Humer in New York and Natalie Grover in Bengaluru; Editing by Sai Sachin Ravikumar and Bernadette Baum)