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.
