The 70-year-old soul singer - who is best known for the 1965 classic 'Feeling Good' - will bestowed with the honour along with the 73-year-old 'Dance to the Music' hitmaker, made famous as the frontman for Sly and the Family Stone, and 'Sunday Morning' rockers, The Velvet Underground.
Stone has been honoured for playing ''a critical role in the development of soul, funk, rock, and psychedelia.''
On honouring Velvet Underground, the Recording Academy wrote: ''Despite a relatively brief lifespan and limited commercial success, the Velvet Underground are now recognised as one of the most influential rock bands of all time. Comprising Lou Reed, John Cale, Sterling Morrison, and Maureen 'Moe' Tucker, the band was, perhaps, ahead of their time, both visually and sonically. Often dubbed the quintessential proto-punk band, they've continued to be the benchmark for countless modern-rock movements over the past 50 years.''
Elsewhere, Gospel star Shirley Caesar, jazz musician Ahmad Jamal, rocker Charley Pride and country legend Jimmie Rodgers will also be the recipient of the prestigious accolade, which recognises artists who have achieved a ''timeless legacy''.
Neil Portnow, the Recording Academy President and CEO, said: ''This year's Special Merit Awards recipients comprise a prestigious group of diverse and influential creators who have crafted or contributed to some of the most distinctive recordings in music history.
''These exceptionally inspiring figures are being honored as legendary performers, creative architects, and technical visionaries. Their outstanding accomplishments and passion for their respective crafts have created a timeless legacy.''
Over the years the likes of Eric Clapton, Dolly Parton, Elvis Costello and more have been handed the Special Merit Award and they have each contributed to a new book by the Recording Academy, titled 'A Grammy Salute To Music Legends', which is slated for release on January 1.
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