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Proxy Governance is the first major shareholder advisory firm to publish its recommendations ahead of the bank's April 29 annual meeting. Large investors often rely on these recommendations when casting their corporate ballots.

The advisory firm stopped short of urging the bank's shareholders to vote against Chairman and Chief Executive Kenneth Lewis's re-election to the board. But it did throw its support behind a ballot proposal to split the chairman and CEO roles so that they are held by two different people.

Many Bank of America investors are angry over the bank's steep share drop since it announced last September it would buy Merrill Lynch. Activist shareholders have urged other bank investors to oppose re-election of several board members, including Lewis, they hold most responsible.

Proxy Governance recommended that investors oppose the re-election of two board members -- lead director O. Temple Sloan and Thomas Ryan, chairman of the corporate governance committee.

The advisory group said it was concerned about the board's judgment in not disclosing more about Merrill's financial position in December, before investors had the chance to vote on the deal. The buyout closed on January 1.

Both Sloan and Ryan "bear special responsibility for leading the board on such issues," the advisory group said. It recommended shareholders "withhold votes from these directors as a sign of their dissatisfaction."

Bank of America has said it made appropriate disclosures as required.

A bank spokesman said on Thursday that all of the directors nominees deserve to be seated.

"We have an excellent board with a great track record; and we believe the nominees should all be elected," said spokesman Scott Silvestri.

Merrill lost $15.84 billion in the fourth quarter even as it paid $3.62 billion of bonuses. Critics say Bank of America should have disclosed more about this before mid-January, when it slashed its dividend and got $20 billion of capital in a government bailout. Bank of America has taken $45 billion of federal bailout money overall.

Proxy Governance said in its report that it was not basing its recommendations on the wisdom of the Merrill deal, but on the board's disclosure obligations. Were Lewis only the board chairman of the company and not also CEO, it also would recommend investors oppose his re-election, the proxy advisor said.

But rather than opposing Lewis' re-election to the board, it said "shareholders would be better served" by supporting a separate proposal to create a new company policy that requires the chairman and CEO roles be split.

Most large U.S. banks do not divide the chairman and CEO roles, although Citigroup Inc () and Wells Fargo & Co () have done so.

Last year, as market conditions worsened, Wachovia Corp and Washington Mutual Inc () took away the chairman jobs from their respective CEOs, Ken Thompson and Kerry Killinger, and later ousted both. Wachovia was eventually acquired by Wells Fargo, while Washington Mutual failed.

(Additional reporting by Jonathan Stempel; Editing Bernard Orr)