Minneapolis - Former Best Buy CEO Brian Dunn did not misuse corporate resources in the course of an inappropriate relationship, a company investigation concluded, but founder Dick Schulze will relinquish his chairman's post next month for failing to alert the board to the allegations.
Schulze will be succeeded by director Hatim Tyabji, who was elected by the board over the weekend. Schulze will step down as chairman following Best Buy's annual meeting on June 21, to become founder and chairman emeritus, an honorary position. He will retain his board seat through June 2013.
The board's investigation into Dunn's behavior found that the former CEO violated company policy by engaging in "an extremely close personal relationship with a female employee" that negatively impacted the work environment. While he demonstrated "extremely poor judgment and a lack of professionalism," the inquiry revealed no misuse of company resources, including allegations involving the use of company aircraft, the board said.
As a result, the company reached a separation agreement with Dunn valued at $6.6 million.
But the board determined that Schulze acted inappropriately by failing to alert the appropriate parties after he was made aware of the allegations in December.
In a statement, 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. I understand and accept the findings of the audit committee."
His successor Tyabji has been chairman and CEO of Bytemobile, a global provider of video optimization and traffic management systems for mobile network operators since 2001. He is also chairman of Jasper Wireless, which provides operators with cloud-based machine-to-machine (M2M) and device management services. Tyabji currently serves on the boards of Merchant e-Solutions, Touch Networks (Australia) and the Missile Defense Advocacy Alliance.
Previously, Tyabji was chairman and CEO of Saraide, a provider of wireless Internet and data services. He was also an early board member at Ariba, a pioneer in e-commerce software for enterprises. From 1986 to 1998, he was chairman, president and CEO of VeriFone a global leader in transaction automation systems for multiple retail segments. Prior to VeriFone, Tyabji spent 13 years at mainframe manufacturer Sperry, where he rose from a project manager to president of information systems.
According to a federal filing, the board's audit committee investigation revealed that a company executive provided Schulze with a signed written statement from another employee containing specific allegations about a possible inappropriate relationship between Dunn and the female staffer. Dunn adamantly denied any inappropriate conduct or romantic relationship with the employee after Schulze confronted him with the statement, and the chairman failed to bring the information to the board, the company's attorneys, its head of human resources, or chief ethics officer.
The audit committee concluded that Dunn violated company policies with respect to inappropriate conduct, conflicts of interest, and vendor gifts, but found no evidence of misuse of company resources. His close personal relationship with a subordinate "was disruptive and reflected poorly on his judgment," it said, while Schulze failed to act in a manner consistent with the audit committee's mandate and good governance practices, and he created serious risks of employee retaliation and company liability.
Schulze founded the company in 1966 with a single Sound of Music audio shop in St. Paul, Minn., from which he built an international chain of nearly 2,000 stores with annual sales of $50 billion.