The board of Best Buy has decided to collectively pay the company's four top executives $2 million in cash to cement their ties to the retailer, which remains without a permanent CEO and is bracing for a buyout offer from its recently departed founder and chairman, Richard Schulze.
The Richfield-based consumer electronics giant said it will pay $500,000 in retention bonuses each to chief financial officer James Muehlbauer, international chief Shari Ballard, chief human resources officer Carol Surface and its U.S. president, Michael Vitteli, according to documents filed with the Securities and Exchange Commission.
In addition, Best Buy granted each executive 102,669 in restricted stock valued at $1.98 million based on Tuesday's closing price of $19.37.
The cash and stock rewards were made seemingly in defiance of shareholders, who just days ago soundly rejected Best Buy's executive compensation program. The shareholder vote was non-binding.
"To ensure a strong and stable future for the company, Best Buy's board of directors has taken action to retain key senior leaders during the current period of transition," said spokesman Greg Hitt. "Compensation incentives approved by the board are intended to ensure leadership continuity at Best Buy, keeping the team in place and building for the future."
Best Buy's action provided new evidence of how seriously the retailers' board views the need to shore up its management team against what could be a tumultuous summer and fall if Schulze attempts to take the company private.
Wall Street gave new credence to the idea Tuesday, with Best Buy stock rising 5 percent on reports that Schulze is in discussions with investment bankers. Schulze was said to be talking with Credit Suisse among other firms, but it was unclear if, or when, he might make a move.
According to sources close to the situation, Schulze would install his own management team if he regained control of the company, in which he still holds a 21 percent stake.
Given the circumstances, it makes sense for Best Buy to try to retain its senior leaders, said Carol Spieckerman, president of Newmarketbuilders, a retail consulting firm.
"When this kind of instability is going on, people are throwing out their résumés ... they really risk losing their top people," she said.
Last week, the board also approved changes to its bylaws that requires an investor to own at least 25 percent of the company's stock before calling a special shareholders meeting to discuss a buyout. That vote appeared specifically aimed at thwarting Schulze.
Best Buy, which has faced increased pressure from Internet rivals like Amazon, saw CEO Brian Dunn abruptly resign earlier this year. Schulze lost his chairman title after a board committee determined that he failed to inform the full board about allegations that Dunn had been in an improper relationship with a female employee.
Schulze resigned from the board earlier this month and said he was exploring options for his ownership stake.
Best Buy has lost several key executives since the internal turmoil began, including chief technology officer and Geek Squad founder Robert Stephens, international CFO Dave Deno, and domestic CFO Ryan Robinson. Chief marketing officer Barry Judge and Susan Marcinelli, senior vice president of innovation and leadership, were among those who left when 400 jobs were eliminated at corporate headquarters.
Best Buy has said it will take six to nine months to name a CEO, an unusually long time. Board member and interim CEO G. "Mike" Mikan is a top candidate for the job.
Mikan recently told investors that the senior leadership team will unveil a long-term growth plan later this summer.
Thomas Lee 612-673-4113