Best Buy Said to Probe Dunn Relationship With Employee

Best Buy Co.’s (BBY) board investigation of former Chief Executive Officer Brian Dunn’s personal conduct centers on an inappropriate relationship with a female employee, according to a person familiar with the matter.

People close to Best Buy were concerned that Dunn’s behavior was threatening the company, said the person, who asked not to be named because the matter is private. The Star Tribune in Minneapolis reported on the nature of the investigation earlier, citing a person familiar with the situation.

Best Buy announced Dunn’s resignation earlier this week, saying that the change was part of a “mutual agreement” that new leadership was needed. The company later said that a board committee was probing Dunn’s “personal conduct, unrelated to the company’s operations or financial control.”

The investigation is continuing and Best Buy has no additional comment, Ron Hutcheson, a Best Buy spokesman who works for Hill & Knowlton Strategies in Washington, said today in an e-mailed statement.

“The board’s findings will be made public and appropriate action will be taken if warranted,” Hutcheson said.

Dunn didn’t immediately reply to a message left for him today at Richfield, Minnesota-based Best Buy’s executive offices.

Best Buy rose 1.3 percent to $22.24 at the close in New York. The shares have fallen 4.8 percent this year.

CEO Search

The retailer said today in a statement it plans to take six months to nine months on a search of internal and external CEO candidates, including Mike Mikan, the director who was named interim CEO this week after Dunn’s departure.

Director Kathy J. Higgins Victor will oversee the board’s global CEO search, the company said.

Dunn’s resignation has hurt employee morale and makes the company’s turnaround more difficult, former Best Buy CEO Brad Anderson said.

“When that happens at the top, it shakes the whole organization,” Anderson, 62, said today in a telephone interview. “To really do great work, people have to believe in what they are doing and be inspired. You’ve got to establish and sustain a trust with the people who are touching your customers. This is pretty devastating to that.”

Best Buy probably will look outside of the organization for its new CEO after the loss of sales to Amazon.com Inc. and Apple Inc. requires Best Buy to figure out how to survive, Anderson said.

Online Sales

U.S. online sales reached $202 billion last year and may climb 62 percent to $327 billion in 2016, according to Forrester Research Inc. (FORR) in Cambridge, Massachusetts. At that level, online commerce would account for 9 percent of total retail sales, up from 7 percent in 2011.

“You adapt to where the customer is going,” Anderson said. “They’ve got to find a CEO with the enthusiasm for that kind of change and vision.”

Anderson said he groomed Dunn to succeed him when he retired in 2009, making his departure a “sad story.”

“It’s incredibly painful thing for Brian and his family,” Anderson said. “This is not to diminish Brian’s ownership or the consequence or the other consequences to people in the organization, but just on a personal level this is really hard to see.”

To contact the reporters on this story: Carol Hymowitz in New York at chymowitz1@bloomberg.net; Chris Burritt in Greensboro at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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