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Last updated: May 14, 2012 9:21 pm
Richard Schulze, Best Buy’s founder and chairman, is to step down after an internal probe found he failed to tell other board members that the company’s former chief executive was allegedly having an inappropriate relationship with a female employee.
Mr Schulze became a casualty of former chief executive Brian Dunn’s actions on Monday when the electronics retailer said its probe found that Mr Schulze “acted inappropriately” by not telling the board’s audit committee when he first heard allegations against Mr Dunn last December.
Mr Dunn resigned suddenly last month and Mr Schulze’s decision to step down next month means Best Buy will have lost its two most important leaders as it struggles to win investor confidence and staunch a loss of sales to online rivals led by Amazon.
“This is terrible timing when they are really searching for how to reinvent and defend themselves against becoming a showroom for internet retailers,” said Stacey Widlitz of SW Retail Advisors.
Best Buy said the board’s investigation into Mr Dunn’s “personal conduct” found that he “violated company policy by engaging in an extremely close personal relationship with a female employee that negatively impacted the work environment”.
The probe’s findings included accounts from several employees who had seen Mr Dunn with the female employee in his office and alone in conference rooms. The probe report also said that during two short overseas trips last year, he had contacted her by mobile phone at least 224 times.
It said the relationship “demonstrated extremely poor judgment and a lack of professionalism,” but the investigation revealed no misuse of company resources. Mr Dunn and the female employee told investigators that the relationship was “a close friendship that was not romantic or otherwise improper”.
Mr Dunn will receive a severance package worth $6.6m.
While Mr Schulze accepted the probe’s findings, he said in a statement: “I confronted [Mr Dunn] 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 said last month it expected the search for a new chief executive to take six to nine months. Hatim Tyabji, a Best Buy director and executive chairman of Bytemobile, will succeed Mr Schulze as chairman at the retailer’s annual meeting on June 21.
Mr Schulze founded The Sound of Music, a business that went on to become Best Buy, in 1966. He was Best Buy’s chief executive until 2002.
Best Buy shares rose 1.5 per cent to $19.56 on Monday but remain 13.5 per cent below where they stood before Mr Dunn resigned.
Many on Wall Street are pessimistic about Best Buy’s future as a bricks-and-mortar business, despite its $51bn revenues last year. Gary Balter, analyst at Credit Suisse, said Mr Schulze stepping down was “a major positive move” but expressed concern about the time it would take to find a new chief executive.
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