Best Buy CEO To Get Multi-Million Dollar Severance Package
RICHFIELD, Minn. (WCCO/AP) - Disgraced Best Buy CEO Brian Dunn will receive a $6.6 million severance package.
Dunn will receive a compensation package also includes includes a 2012 bonus of $1.1 million, stock grants of $2.5 million, a severance payment of $2.9 million and more than $100,000 for unused vacation.
With 167,000 employees under his watch, Brian Dunn wasn't only Best Buy's CEO, he was their leader.
He was the man hailed with turning the struggling electronics retailer around.
But when employees and the company's board of directors learned of his inappropriate relationship with a 29-year-old female subordinate, Dunn resigned and the board's internal investigation began.
One month after stepping aside, Best Buy's audit committee released a three-page report detailing the alleged misconduct.
It concludes that Dunn violated company policy by "engaging in an extremely close personal relationship with a female employee that negatively impacted the work environment."
The audit also says Dunn use "extremely poor judgment and a lack of professionalism," but did not misuse company resources.
Details of the internal audit also reveal Dunn's apparent obsession with the woman, calling or texting her 224 times over a nine-day span in which he traveled overseas on business trips.
The report says that the calls had no identifiable business purpose.
Dunn is also alleged to have provided the woman with tickets to at least seven sporting events and concerts, $600 of his own cash, and engaged in numerous social meetings outside the office including lunches and drinking engagements both during the week and on weekends.
St. Thomas marketing professor, David Brennan, says that restoring the confidence of customers, stockholders and employees is crucial to Best Buy.
"What this situation shows is that it clears the air of this particular situation, so that some of that uncertainty is going to be removed," said Brennan.
The committee's report further shows that the relationship created friction and disruption within the workplace and damaged employee morale.
According to the woman's supervisor, the relationship with CEO Dunn impeded efforts to supervise the female employee.
When Best Buy founder and board chairman Richard Schulze was told of the affair last December, he confronted Dunn, but apparently did nothing about it.
Not reporting the complaint of employees to the board's audit committee was a violation of company policy.
For that miscalculation, Schulze decided to step down as chairman of the board.
Schulze's resignation is effective June 21 at the company's annual meeting. He will become chairman emeritus, an honorary position, and serve out his term as director through June 2013.
He will be replaced at Best Buy by Hatim Tyabji, who is currently chairman of Best Buy's audit committee and CEO of Bytemobile Inc., a provider of video optimization and traffic management systems for mobile network operators..
"This had to be devastating for him," said Brennan. "Even more so, not following rules, regulations and policies that he helped set in place a decade ago."
Schulze created the company by opening his first store called the Sound of Music in St. Paul, Minn., in 1966. He was CEO for more than 30 years, overseeing it through decades of steady growth before relinquishing that title in 2002.
R.J. Hottovy, a Morningstar analyst that follows Best Buy, said Schulze's departure might be good for the company as it seeks a "fresh start." It also may open up the door for a takeover offer, he said, since getting Schulze to part with his shares has been a barrier for private equity companies. Schulze currently owns 20 percent of Best Buy's shares.
"Schulze has been influential in building the business from the beginning," Hottovy said. "That said, the company has struggled to keep its relevance in today's consumer electronics retail environment."
On the news of the departure, shares closed up 28 cents at $19.56 on Monday after earlier sinking to $19.02 — the lowest they've been in more than three years.
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