Just two weeks after former Best Buy (NYSE: BBY) CEO Brian Dunn announced a radical restructuring of the consumer electronics retailer’s operations, he is out. According to the company’s press release, Dunn was not fired because of any disagreements concerning corporate strategy or financial accounting. This statement helps assure investors that there isn’t some accounting time bomb ready to burst. The company’s official rationale for Dunn’s dismissal is that
it was time for new leadership to address the challenges that face the company.
This doesn’t make sense. Dunn had just announced a major restructuring that he had been intimately involved in formulating. The company’s board of directors presumably had approved of Dunn’s turnaround plan, so why distract the company now before Dunn has had a chance to implement the restructuring he helped devise?
Best Buy’s hometown newspaper – the Minneapolis Star Tribune – uncovered the real reason for Dunn’s dismissal: sex (either consummated or merely attempted) with a female employee of the company. It’s not clear yet whether the relationship was consensual or a case of harassment, but it appears that Dunn improperly spent company funds on his courtship activities. If this type of sex scandal sounds familiar, it should. Mark Hurd at Hewlett Packard (NYSE: HPQ) and Harry Stonecipher at Boeing (NYSE: BA) both were forced to resign from the CEO position for improper conduct with a female subordinate. Why do CEOs repeatedly sabotage their careers and jeopardize the companies they lead for the chance for a roll in the hay? According to business consultants, it’s due to something called “CEO disease” CEOs often get an inflated sense of self and convince themselves that they are above the law:
CEO-Diseased executives begin to feel they have the power to move beyond acceptable cultural borders (since those around them have decided not to tell them that their behavior is inappropriate), and eventually the executive gets caught — since there really are no secrets in business.
I would not have expected Brian Dunn to fall victim to this disease because his tenure as Best Buy CEO has been marked by complete and utter failure – not the type of scenario that leads one to be arrogant. Perhaps Dunn was infected with a variant of CEO disease not based on arrogance but rather based on depression. Whatever the case, the board was looking for an excuse — any excuse — to can him and this sex scandal provided the perfect pretext. Boards and investors are willing to overlook many personal transgressions if times are good, but elevate even tiny infractions to felony status if times are bad.
Best Buy’s new interim CEO is a member of the board named Mike Mikan, whose background is in healthcare. Excuse me? How does a healthcare background help you run a consumer electronics company? It doesn’t. No wonder Best Buy’s stock fell 5.9% on Tuesday when the story broke. I think the negative reaction wasn’t just about Dunn’s resignation but also disappointment in the selection of Mikan.
The company has established a search committee to find a permanent CEO. There have been only three CEOs in Best Buy’s history and all were long-time Best Buy employees prior to assuming the helm: (1) founder Richard Schulze; (2) Brad Anderson; and (3) Brian Dunn. Anderson, who retired in June 2009, has not ruled out the possibility of returning to the company as CEO if asked. But Anderson was a champion of the big-box retail format that no longer works in the Internet age of online retailers and probably isn’t the best choice.
Perhaps it’s time to get some fresh blood who can think outside the box (pun intended) and move Best Buy in a completely new direction. As Best Buy’s declining stock price attests, its current strategic direction is a road to nowhere.