By Brad Dorfman
(Reuters) - Best Buy Co Inc founder and Chairman Richard Schulze is stepping down after he failed to tell the board that former Chief Executive Officer Brian Dunn had violated company policy by having "an extremely close personal relationship" with a female employee, the electronics retailer said on Monday.
Best Buy said an investigation by the board had found that the relationship "negatively impacted the work environment," but involved no misuse of company resources.
Dunn, who left the company on April 10 during a probe of the allegations, will receive a severance payment of $2.85 million, the company said.
He will also get his previously earned bonus of $1.14 million for fiscal 2012 and previously awarded stock grants, valued at $2.54 million at the close of business on Friday, as part of a separation agreement reached following the investigation.
Including unused vacation time, the value of the agreement is about $6.6 million. Dunn agreed to not work for a competitor for three years, up from the standard one year that is Best Buy's policy.
Schulze will be succeeded by Hatim Tyabji, chairman of mobile network software company Bytemobile and chairman of Best Buy's audit committee. The change takes effect at the end of the company's annual meeting on June 21.
Dunn's departure and ensuing revelations about the board investigation come as the company struggles to fend off rivals like Amazon.com Inc. Best Buy is still in the midst of what it expects to be a six-nine month search to replace Dunn, with board member G. Mike Mikan acting as interim CEO.
"It's been clear that the company hasn't taken an aggressive enough measure to offset the competitive and structural pressures they face," Morningstar analyst R.J. Hottovy said. "Taking a clean slate and beginning with not only a new director, chairman but also with a new CEO is just what the company needed."
Schulze will become chairman emeritus, an honorary position, and serve out his term as director through June 2013, the company said.
"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," Schulze said in a statement released by the company. "I understand and accept the findings of the Audit Committee."
Best Buy shares were up 1.9 percent at $19.67 in morning New York Stock Exchange trading.
(Additional reporting By Martinne Geller in New York and Nivedita Bhattacharjee in Chicago; Editing by Gerald E. McCormick and Lisa Von Ahn)