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Glass Lewis, a proxy advisory firm, has recommended to Microsoft shareholders that they not re-elect John Thompson to the company’s board.

Thompson, CEO of Virtual Instruments, is the lead independent director on Microsoft’s board and also chairs the committee searching for Microsoft’s next CEO.

Glass Lewis is opposing Thompson’s re-election to the board over conflict-of-interest concerns, stemming from Virtual Instruments’ sale of $2.3 million worth of software licenses and hardware devices to Microsoft in fiscal year 2013.

That amount represented less than 5 percent of Virtual Instruments’ annual gross revenue, Glass Lewis said in its note to clients, citing Microsoft’s proxy statement.

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Microsoft’s proxy statement also said that the “Virtual Instruments solution offers unique functionality which we believe will provide a better return on investment compared to other alternatives” and that the “purchases were negotiated at arms-length between the Virtual Instruments sales account team and the Microsoft business groups that sought to implement the technology.”

Microsoft also said it expects to buy more technology from Virtual Instruments in the future.

Glass Lewis’ note says:

“While we recognize that the company may benefit from the products sold to it by Virtual Instruments, the detailed information, for which we commend the company, provided regarding this business relationship suggests that the company is a significant customer for Mr. Thompson’s employer, which raises potential conflicts of interests for this director.

“Specifically, Mr. Thompson may be forced to weigh his interests and duties as a major shareholder and CEO of Virtual Instruments in relation to the interests of company shareholders when making board decisions. Given the increased likelihood that Mr. Thompson may be presented with situations in which his duties to his employer and those to the company’s shareholders are not aligned, we do not believe shareholders should consider him to be completely independent.”

Microsoft said, however, that the standard established by Nasdaq and the U.S. Securities and Exchange Commission for what constitutes independence for a board director is business dealings that represents 5 percent or less of gross revenue.

“Mr. Thompson meets that standard,” said Microsoft spokesman Mark Murray.

“We respect Glass Lewis’ right to their opinion, but their standard is far lower than the legally mandated standard, and it’s well outside the mainstream of thought about the percentage of business that constitutes independence,” Murray said.

Murray said two other prominent proxy advisory firms had recommended that Thompson be re-elected.

Glass Lewis recommended re-election of the other eight board members, including Chairman Bill Gates and CEO Steve Ballmer.

Thompson, who joined Microsoft’s board in 2012, was former chairman and CEO of Symantec and a former executive at IBM.

He is chairing the board committee — which also includes Gates and board members Chuck Noski and Steve Luczo — to find Ballmer’s successor. Ballmer said in August that he plans to retire when his successor is found, giving a time frame then of 12 months maximum.

Microsoft’s annual shareholders meeting is scheduled for Nov. 19 at Meydenbauer Center in Bellevue.

Janet I. Tu: 206-464-2272 or On Twitter @janettu.

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