By Bill Rigby
SEATTLE (Reuters) - Proxy advisory firm Glass Lewis has recommended that Microsoft Corp shareholders vote against the re-election of lead independent director John Thompson, who is in charge of the company's efforts to find a new chief executive.
In a note circulated to its clients on Monday, Glass Lewis expressed concerns about a possible conflict of interests for Thompson in his role as CEO of Virtual Instruments, a cloud-computing firm that sells licenses and devices to Microsoft.
Glass Lewis is one of two major companies which make recommendations to shareholders based on corporate governance guidelines, but its views are not necessarily heeded by large investors.
Microsoft representatives did not immediately reply to a request for comment.
Thompson, a former International Business Machines Corp executive, was appointed to Microsoft's board in February 2012 and elected by shareholders at the annual meeting later that year.
The company he runs, Virtual Instruments, was paid about $2.3 million last fiscal year by Microsoft for software licenses and hardware devices, which is less than 5 percent of Virtual Instruments' total annual revenue, according to Microsoft's annual proxy filing.
Microsoft said those purchases were negotiated "at arms-length" and at similar terms to Virtual Instruments' other customers. Despite that, Glass Lewis said Thompson's roles at both companies created a potential conflict, and classified him as an "affiliated" director as opposed to "independent", which it said makes him an inappropriate choice to lead the board.
Microsoft's next shareholder meeting is scheduled for November 19. Shareholders have three voting options, 'for', 'against' and 'abstain'. Under Microsoft's rules, a director is elected if the number of shares cast 'for' exceeds the number of votes cast 'against' a director.
Glass Lewis is recommending shareholders vote to re-elect the company's other eight directors, including CEO Steve Ballmer and Chairman and co-founder Bill Gates.
Ballmer announced in August that he will retire as CEO within the next 12 months, triggering the search for a new leader. It is not clear if Ballmer will retain his seat on the board after he retires, although he has said he intends to be an active shareholder in the company.
Some investors have suggested to the board that Gates step down from his role as chairman, saying he stands in the way of radical reform at Microsoft, which has lost ground to Apple Inc and Google Inc in mobile computing. Gates has not indicated any intention of stepping down.
(Editing by Richard Chang and Edwina Gibbs)