Best Buy today released the results of an independent ethics inquiry, confirming that former CEO Brian Dunn, who resigned on April 10th, had engaged in an inappropriate relationship with a female staffer. The company also named a new chairman of the board in Hatim Tayabji, chairman and CEO of Bytemobile.
According to the company's press release, "When the Audit Committee was first informed of the allegations in mid-March 2012, it hired outside law firm WilmerHale to conduct an independent investigation. In the interest of transparency and accountability, the board made a commitment to publicly release the findings."
The company is also in the midst of closing 50 of its big box U.S. stores this year.
Key findings of the inquiry include that Dunn receives a severance package of more than $6.6 million despite the investigation's report finding that:
• The CEO 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.
Best Buy's board approved Dunn's severance package including severance pay of $2.85 million, stock grants worth $2.54 million, a "previously earned" $1.14 million bonus and $106,700 in unused vacation pay. He also has a non-compete clause that's effective for three years.
"In December, 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," said Richard Schulze, the company's current chairman, who will step down on June 21st and assume the title of Founder and Chairman Emeritus, an honorary position, and will serve out the remainder of his term as director through June 2013.
The relase also states:
In light of these findings, the Audit Committee of the Board will launch an effort to review and enhance, if appropriate, Best Buy's relevant corporate policies and procedures. The goal of this review is to ensure a positive and consistent workplace environment for all employees at all levels.
In addition to electing a new chairman, the independent directors of the board have moved from a neutral position to a recommendation that the shareholders approve the shareholder proposal recommending declassification of the Board, which would require every director to stand for reelection on an annual basis.
"As a Board, we support the proposal for annual elections as an additional demonstration of our commitment to strong corporate governance practices. Each of us - with no exceptions - will be subject to approval by the shareholders on an annual basis," stated Tyabji.
The company is expected to shortly name a permanent successor to Dunn, who was replaced by interim CEO Mike Mikan.
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