Best Buy chairman Richard Schulze will step down from his position after an independent investigator determined he knew former CEO Brian Dunn was having an improper relationship with an employee, but did not report it to the board.
Schulze’s resignation is effective at the conclusion of Best Buy’s annual meeting on June 21. He will be replaced as chairman by Hatim Tyabji, who is currently chairman of the audit committee, and has served as a director since 1998.
But Schulze will then take the honorary position of founder and chairman emeritus, and will serve out the remainder of his term as director through June 2013.
In a statement released by Best Buy, Schulze said “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.”
The company also announced that it reached a separation agreement with Dunn, who was asked to resign in April. Dunn was asked to sign a 3-year non-compete agreement, and will receive a severance package valued at $6.64 million in cash, bonus payments and stock.
When the audit committee was first informed of the allegations in mid-March, it hired outside law firm WilmerHale to conduct an independent investigation. According to a press release issued by Best Buy, the key findings of the investigation include:
- Dunn violated company policy by engaging in an extremely close personal relationship with a female employee that negatively impacted the work environment.
- The CEO’s relationship with the female employee demonstrated extremely poor judgment and a lack of professionalism, but the inquiry revealed no misuse of company resources. The inquiry also revealed no misuse of aircraft.
- In addition, as part of the investigation, it was determined that the Chairman of the Board of Directors acted inappropriately when he failed to bring the matter to the Audit Committee of the Board of Directors in December 2011, when the allegations were first raised with him.
The inquiry relied upon voluminous interviews, documents and other data. The inquiry included 45 interviews of 34 current or former employees; searches of e-mails and other documents on the CEO’s and the female employee’s computers; a review of relevant internal ethics complaints; a survey of personnel records; a review of the CEO’s and the female employee’s purchase records using their employee discount; an analysis of the log of products the CEO tested as product samples; and an analysis of the CEO’s and the female employee’s company phone records.
The company did not have access to the CEO’s complete personal cell phone records. In addition, the company’s internal audit staff performed an in-depth analysis of expense reports, records reflecting corporate use of aircraft, and records of the CEO’s use of a company credit card over a three-year period.