Corporate governance experts say G. Mike Mikan's pay is overly generous, given his lack of retail experience.
Interim Best Buy CEO G. "Mike" Mikan may just be one candidate vying to be the company's next top leader, but the consumer electronics giant is paying him as if he already had won the job.
For the next six to nine months, Mikan, who also serves as a board member, will receive prorated cash payments based on a total annual package of $3.3 million, according to documents filed with the Securities and Exchange Commission.
That includes an annual base salary of $1.1 million, the equivalent of former CEO Brian Dunn's pay. Dunn resigned last month; a board-led investigation eventually determined that he had an inappropriate relationship with a female staffer.
In addition, Best Buy also will pay Mikan based on the annual performance bonus that Dunn could have earned last year: $2.2 million. But unlike a regular performance bonus, in which a CEO will only get paid if the company hits certain financial benchmarks, Mikan gets paid regardless of how the Richfield-based company performs.
Mikan's compensation doesn't sit well with some corporate governance experts.
"That's ridiculous," said Jeffrey Sonnenfeld, the senior associate dean for executive programs at the Yale School of Management. "[Mikan] didn't earn [the bonus]. It's a violation of good corporate governance."
Because a short-term leader won't be around long enough to prove he's worth a standard bonus, executive compensation experts say interim CEO pay presents a unique problem for boards. Normally, a board will pay a good amount of money to recruit a high-quality interim CEO based on his or her expertise and the challenges of leading a troubled company like Best Buy. In addition, the board would want to compensate that person if he or she had to give up a professional opportunity in order to take the job.
But Mikan doesn't appear to fit those criteria, Sonnenfeld said. Aside from Best Buy's board, it's not clear what Mikan has been doing since exiting UnitedHealth Group. A news release at the time said Mikan was "leaving to lead a private equity company." The firm was not named, and its identity is still unknown.
As interim CEO, Mikan already is campaigning hard for the permanent position, visiting stores and sending videos and e-mails to employees. (Best Buy said Monday that it has hired Spencer Stuart to lead a global CEO search.) Mikan says he also is working with Best Buy executives to develop a new long-term growth plan.
But most importantly, Sonnefeld said, Best Buy could have recruited a prominent retail executive as interim CEO, such as former Starbucks CEO Jim Donald or former Best Buy CEO Brad Anderson. Mikan doesn't have a retail background, Sonnefeld noted.
Anderson, in particular, would be the ideal interim CEO because he already is familiar with Best Buy and commands the respect of many employees, Sonnefeld said.
"Brad Anderson would be the best of all," Sonnefeld said.
Anderson didn't return a call seeking comment. He had previously told the Star Tribune he would consider returning if asked.
Thomas Lee • 612-673-4113