Schulze Rejoins Best Buy, Is Paid Up to $2.1M, Plus Salary
Richard Schulze—who founded Best Buy Company, Inc., more than four decades ago, left the company last year following a scandal involving its former CEO, and recently abandoned a months-long takeover attempt—has now returned to the company as its chairman emeritus.
And under the terms of a previously announced agreement with Best Buy’s board, Schulze has nominated two new directors to join the Richfield-based company’s board: Brad Anderson, who served as Best Buy’s CEO from 2002 through 2009, and Al Lenzmeier, a longtime executive who served as Best Buy president and chief operating officer from 2002 through 2004.
The return of Schulze, Anderson, and Lenzmeier comes several weeks after a deadline passed for Schulze to make a buyout bid for Best Buy. Schulze, who owns about 20 percent of the company’s stock, making him its largest shareholder, announced in August his plans to pursue a takeover. Later that month, he struck a deal with the company’s board that gave him access to non-public financial information in order to compose an offer. The deal gave him until mid-December to make a bid, but that deadline was later pushed back to the end of February. The second deadline passed without an offer materializing.
Schulze previously indicated that he had tapped Anderson and Lenzmeier to serve in some leadership capacity, and his previous agreement with the company granted him the right to appoint two board members regardless of whether he was successful in his takeover attempt. The two men will join Best Buy’s board immediately and then stand for election at its annual shareholder meeting in June, the company said Monday.
Schulze served as Best Buy chairman until May 2012, when he resigned in the wake of a scandal involving former CEO Brian Dunn. An investigation found Dunn engaged in an inappropriate relationship with a female employee, and Schulze “acted inappropriately” when he failed to notify Best Buy's audit committee after learning about allegations of such a relationship.
Hubert Joly, the former CEO of global hospitality company Carlson, was appointed Best Buy’s chief executive in September.
Schulze’s appointment as chairman emeritus does not translate to an actual seat on the company’s board. Regarding the significance of the role, a Best Buy spokesman would say only that it represents “a natural extension of his role at the company” as its largest shareholder.
A Monday regulatory filing indicates, however, that Schulze will be compensated for the position.
“In recognition of your efforts on behalf of both the company and the shareholders over the last year, the company will compensate you in an amount not to exceed $2.125 million, in connection with your preparation and ongoing consultation over the next 12 months with regard to a business plan for the company,” says an agreement signed by Joly and filed with the U.S. Securities and Exchange Commission. Going forward, Schulze will receive an annual base salary of $150,000, the filing states.
As part of the agreement, Schulze's responsibilities include “helping to maintain and evolve the general corporate culture of Best Buy”; speaking at company functions; and, subject to the CEO’s request, mentoring up to two high-potential officers of the company, among other things. To read the full agreement, click here.
In conjunction with Schulze’s appointment, he gave his most prominent endorsement of Joly to date.
Schulze said in a Monday statement that, over the past several months, he has “come to know and respect” Joly, and he has “a high regard for the work he and his executive team are doing to revitalize Best Buy for the benefit of all stakeholders.”
“My dedication to the company that I founded and love is unwavering and, together with Hubert and the board, I determined that the best way to support Best Buy would be to return in support of the initiatives underway,” Schulze said.
Schulze is not alone in crediting Best Buy’s new leadership for helping the company exhibit early signs of a turnaround. Several analysts who recently upgraded the company’s stock have praised Joly and new Chief Financial Officer (CFO) Sharon McCollam as key players in starting to transform the business.
The turnaround plan has involved several rounds of job cuts and the closure of big-box stores, among other things. Best Buy’s most recent cuts occurred last month, when the company eliminated about 400 positions at its Richfield headquarters. Best Buy described the cuts as an “initial reduction” in a larger plan that calls for reducing costs by $725 million.
Joly’s turnaround plan also involves matching competitors’ prices and focusing on digital operations. And to focus on its key business areas, the company reportedly plans to exit the venture capital business. Over the past five years, Best Buy’s venture capital unit, Best Buy Capital, has invested millions of dollars in start-ups with the intention of selling their new technology through its stores, but it is winding down Best Buy Capital, two sources with knowledge of the situation recently told the Star Tribune.
Hatim Tyabji, who replaced Schulze as Best Buy chairman last year and retains that position, said in a statement that he and the company’s board are “pleased to welcome [Schulze] back to the company as chairman emeritus and are confident that the role he will play in support of the management team can only accelerate the progress that Best Buy has already made.”
Meanwhile, the Star Tribune pointed out that the return of Schulze and Anderson represents a reconciliation between both men and the company they helped build. For Schulze, it marks the end to a contentious period following his exit from the company’s board. Anderson, who after arguments with some directors, including Schulze, retired earlier than expected in 2009, had not spoken to Schulze until the founder recruited him to assist in the buyout effort last year, according to the Minneapolis newspaper. And the appointment reunites Anderson with Joly, who reportedly recruited him to Carlson’s board when Joly was leading that company.
Best Buy is Minnesota’s third-largest public company based on revenue, which totaled $49.62 billion for the fiscal year that ended February 2. The company’s loss narrowed from $1.32 billion to $249 million during that period. Best Buy’s stock was trading up about 2.6 percent at $23.37 mid-morning Monday.