I don't think that's quite right. In the Aikikai I've seen people recommend for promotion up to their own rank - or even higher.
The thing is, there's only one person in the entire Aikikai who actually grants promotions, everybody else (even the eighth dans) only recommends. So, basically speaking, it all depends on what Doshu feels like doing and will accept...
From IAF regs
Article 9 : QUALIFICATIONS FOR CONDUCTING EXAMINATIONS AND MAKING RECOMMENDATIONS 1.An Aikido organization with Hombu Recognition, when its Person in Charge is 6th dan or above, may conduct examinations from 1st dan to 4th dan. When the Person in Charge is 4th dan or 5th dan, it may conduct examinations from 1st dan to 3rd dan. In the case of a 4th dan examination, an application to Hombu must be made. and the examination will be conducted by the Hombu or a person delegated by the Hombu.
What the "rules" are how reality functions are always subject to wide interpretation. Ethical behaviour is suppsoed to narow that gap - either by altering behaviour or changing the rules.