Best Buy: Ex-CEO Showed ‘Extremely’ Poor Judgment; Given $6.6M Severance

14 May, 2012 By: Erik Gruenwedel

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Best Buy Co. May 14 said former CEO Brian Dunn demonstrated “extremely poor judgment” and a lack of “professionalism” when engaging in “close” personal relationship with a female employee, according to a statement.

The Minneapolis-based No. 1 consumer electronics retailer released the findings as part of an independent investigation by the board of director’s audit committee into the personal actions of Dunn, who resigned in April. The committee found that Dunn did not misuse company resources, including use of the company jet, during course of the alleged affair.

Nonetheless, Best Buy said Dunn’s actions negatively impacted the work environment at the corporate level.

The retailer and Dunn agreed to a $6.6 million severance package, which includes a three-year non-compete clause (upped from one-year). The severance includes a previously earned fiscal-year 2012 bonus of more than $1.1 million, previously awarded stock grants totaling more than $2.5 million, a severance payment of more than $2.8 million and compensation for unused vacation of $106,742.

Best Buy May 29 announced the intent to close 50 stores after posting a fourth-quarter (ended March 3) net loss of nearly $1.7 billion.

Interim CEO and board member G. Mike Mikan is expected to hold the position for at least six months while Best Buy conducts a nationwide executive search for Dunn’s replacement.

Meanwhile, it was determined that the chairman of the board — Best Buy founder Richard Schulze — acted inappropriately when he failed to bring the matter to the audit committee’s attention in December 2011, when the allegations surrounding Dunn were first raised with him.

Schulze agreed to step down June 21 following Best Buy’s annual shareholder meeting. Thereafter, he will hold the title of founder and chairman emeritus, an honorary position.

“In December, when the conduct of our then-CEO was brought to my attention, I confronted him with the allegations (which he denied), told him his conduct was totally unacceptable and contrary to Best Buy's policies and everything I, and the company, stand for,” Schulze said. “I understand and accept the findings of the audit committee.”

Finally, the board May 12 elected director Hatim Tyabji to succeed Schulze as chairman, effective at the conclusion of the annual meeting. Tyabji, currently chairman of the audit committee, has served as a director since 1998.

Michael Pachter, analyst with Wedbush Securities in Los Angeles, said changes would have little impact on the Best Buy’s ongoing challenges to downsize a big box retail footprint and capture ecommerce transactions.

“The ship has no captain and no rudder,” Pachter wrote in an email.

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