Best Buy Awards Bonuses Worth $10M to Retain Execs

The company says the cash and stock awards are “necessary to enable a stable CEO transition and appropriate continuity of leadership”; Best Buy’s founder, meanwhile, is reportedly attempting to take the company private.

After a tumultuous several months—during which Best Buy Company, Inc., saw an exodus of several key leaders—the Richfield-based company is doling out $2 million in cash, as well as stock awards valued at roughly $8 million, to four executives.

The company disclosed in a Tuesday regulatory filing that its board’s compensation committee approved “special continuity award agreements” with James Muehlbauer, chief financial officer; Shari Ballard, president of the company’s international operations; Carol Surface, chief human resources officer; and Michael Vitelli, president of Best Buy’s U.S. operations.

Each of the four executives will receive a cash payment of $500,000—but each payment can be revoked if the recipient voluntarily leaves Best Buy during the first year after the company names a permanent CEO. (The company in April began its search and said at the time that it expects the process to take six to nine months.)

Late last week, the company also gave each of the four executives more than 100,000 shares of its stock—awards worth about $2 million each based on Best Buy’s current stock price. The stock was vested at 25 percent on the day it was awarded, and that percentage will increase at a rate of 25 percent each year for the next three years.

The company wrote in its regulatory filing that the awards are “necessary to enable a stable CEO transition and appropriate continuity of leadership.”

The move seems to defy the wishes of shareholders, though, who recently rejected Best Buy’s executive compensation program in a non-binding vote.

The payments come after Best Buy experienced a mass exodus from its leadership team. Robert Stephens, founder of The Geek Squad, in March stepped down from his role as chief technology officer. In early May, news surfaced that Chief Marketing Officer Barry Judge left the company. Then Dave Deno—who served as chief financial officer of Best Buy’s international division and president of its Asia region—departed the company.

In addition, former chief executive Brian Dunn resigned in April amid an investigation that 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 investigation also found that Richard Schulze, the company’s founder and former chairman, “acted inappropriately” when he failed to notify Best Buy’s audit committee after learning in December about allegations of such a relationship. Schulze abruptly resigned as chairman and from his director postearlier this month and simultaneously announced plans to explore options for his 20.1 percent ownership stake. (Entities that he controls collectively own another 1.1 percent.)

Some analysts predicted that Schulze would simply sell his stock, but unnamed sources close to the situation reportedly told the Star Tribune that he’d like to take Best Buy private under new owners and management, and he hired a New York attorney and investment bank Credit Suisse, which specializes in leveraged buyouts, to advise him. The newspaper also reported that Schulze would install his own management team if he regained control of the company.

The Wall Street Journal, also citing unnamed sources, reported that Schulze would like to take the company private, as he wants to preserve the value of his holding, which he fears will continue to drop unless significant changes are made at the company.

Best Buy, meanwhile, recently took a step to make a takeover more difficult: The board changed Best Buy’s bylaws to require that an investor own at least 25 percent of the company’s stock in order to call a special meeting related to a “change of control.”

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