Best Buy to Boost Its ‘Transparency’ After Dunn Fallout, Chairman Says
That Best Buy shareholders rejected by a 62 percent majority the company’s “Say on Pay” resolution at last year’s annual meeting shows how upset they were with the separation package paid to outgoing CEO Brian Dunn. So said Best Buy in its preliminary proxy statement filed at the SEC for the company’s next annual meeting June 20 at Best Buy headquarters in Richfield, Minn.
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Based on May 2012 Best Buy share prices, Best Buy estimates the separation package was worth $6.6 million in cash and stock, including severance payouts that will total $2.85 million over three years, the proxy filing said. The separation agreement was signed last May 14, about a month before Best Buy shareholders convened for their annual meeting, where they soundly defeated the company’s Say on Pay resolution, the filing said. Shareholders typically approve such resolutions by a wide margin, as they did by a 97 percent majority at the June 2011 annual meeting, it said. Through “investor outreach,” the Best Buy board took the anti-Dunn “feedback very seriously in shaping our compensation deliberations in fiscal 2013,” the filing said. “In response, we have significantly increased our transparency and discipline with regards to executive departures and also increased our pay-for-performance linkages,” it said.
Dunn, who resigned after it was disclosed he carried on an inappropriate relationship with a female employee, also got $3.7 million in total compensation for fiscal 2013, including $190,385 in base salary, plus $2.5 million in stock awards and $986,136 in other compensation, the filing said. Dunn’s successor as CEO, Hubert Joly, stands to get $19.5 million in total compensation this fiscal year, the filing said. That’s nearly twice as much as the highest compensation Dunn got in any single fiscal year 2010 through 2013, it said. Joly’s package includes $492,596 in base salary, plus bonuses and stock and other awards, it said.
"This past year was a tumultuous one for Best Buy, by any measure,” Chairman Hatim Tyabji said in a letter to shareholders. “Along the way the Board made several key decisions,” he said. “Some received shareholder support and others did not. In the latter category fell our decision to offer our former CEO, Brian Dunn, a severance package. Many felt that the Company offered Mr. Dunn more than he was entitled to and that the payments did not accurately reflect his business performance in the previous year. This feedback ultimately took the form of a shareholder vote of ‘no’ on ‘Say on Pay.’ It is fair to say that the Board and I have heard these concerns and take them into full account when determining future remuneration for senior executives."
However, another board decision “resulted in a good outcome for all parties,” Tyabji said. That was the board’s “determination to engage our founder, Richard Schulze, in good-faith discussions about his desire to buy the Company and take it private,” he said. Those talks “triggered rounds of public speculation, rumor and conjecture the likes of which are rarely seen in corporate America,” he said. But “all reasonable observers would agree that we are now able to move forward with Dick once again acting as a strong and insightful voice inside our Company, supportive of where we are going and determined to lend his experience and talent to getting us there.”