Best Buy (NYSE:BBY) is overhauling its compensation policies in the wake of a $6.6 million payout to former Best Buy CEO Brian Dunn when he left the company after a scandal erupted a year ago. The troubled chain outlined the new policies—which it says will add transparency and reduce how much execs are paid if they leave unexpectedly or under a cloud—in a proxy statement it filed with the Securities and Exchange Commission on Monday (April 22).
The payout to Dunn, which came after he was found to have had "an extremely close personal relationship" with a female subordinate, sparked a revolt among shareholders, who voted by a large margin against the chain's executive compensation practices.
The retailer also paid a total of $10 million in retention bonuses last year to four executives who left the company anyway.
Best Buy said it will now make executive compensation contingent on performance, and will also use clawbacks to recoup bonuses and other payouts to executives who quit under pressure or are fired. In the past, departing executives only lost their stock options. The chain also said all departing executives will be held to a one year noncompete period, a policy that was inconsistently applied in the past.
In some respects, Best Buy is finally shifting its corporate governance policies from those of a startup to a major company, according to the Minneapolis Star Tribune. That mindset of being a closely held company extended into other areas of company business as well. For example, until recently Best Buy leased its private jets from companies owned by Best Buy founder Richard Schultze, who was also the company's chairman until he resigned last year in the wake of the Dunn scandal. That meant the chain funneled millions of dollars for the aircraft over the past decade.
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