The news from Best Buy yesterday was a jolt to start the work week – Dick Schulze, founder and chairman of the chain, will step down to become chairman emeritus, an honorary position, this June and will keep his board seat through June 2013.
The reason? Schulze failed to report to the board in December that he became aware of allegations of an inappropriate relationship between former CEO Brian Dunn and a female employee.
Whatever reason Schulze had in not bringing this to the board’s attention – loyalty to a longtime employee, not wanting more bad news during a bleak fourth quarter, or any other reason you can think of – it seems to be an out-of-character stumble for a man who took a single CE store in St. Paul, Minn., and built it into an international chain of nearly 2,000 stores with annual sales of $50 billion.
For anyone who has followed the career of Schulze or worked with him over the years, it is surprising to see this happen.
As for Dunn, the internal investigation said his actions demonstrated “extremely poor judgment and a lack of professionalism,” but no misuse of company funds, so he will receive his $6.6 million separation package.
If you’re a Best Buy shareholder, you could make the case that the package is typical of all that is wrong with corporate governance in America today. The argument could be made that Dunn shouldn’t get the payout based on his performance as CEO, or the relationship with the employee, or both.
Best Buy could have said no, but my guess is that they wanted to put the incident behind them.
What we do know is Best Buy, as an institution, turns the page and moves on. That’s the good news after all the negative stories surrounding the chain in the past few months.
Hatim Tyabji, a longtime board member, takes over as chairman. And another good piece of news is that Tyabji said from now on, members of Best Buy’s board will be up for election annually.
But now the really hard work begins. Best Buy’s board has to find a new CEO – hopefully faster than the six- to nine-month target period they are anticipating.
The new CEO doesn’t necessarily have to be an e-commerce expert – sorry Wall Street. In the “multichannel” nature of CE retailing today, as Progressive Retailers Organization’s (PRO Group) Dave Workman put it last week, brick-and-mortar retailers have to be just as comfortable selling online.
The new CEO also has to be an entrepreneur and leader who will set a winning new course that will inspire employees, who will in turn select the right products and provide the services that will make consumers want return to Best Buy.
The challenges the new CEO will face are daunting. Yet the decisions announced yesterday mark a new beginning. Let’s see if Best Buy can take advantage of it.