Strictly Business

Thursday, Sep 13 2012 12:00 PM

ROBIN PAGGI: The dangers of keeping silent at the wrong time

BY ROBIN PAGGI Contributing columnist

"No one has ever repented of having held his tongue." While many people would probably agree with this ancient proverb, I'm willing to bet that former Best Buy board chairman Richard Schulze isn't one of them.

Schulze, the driving force behind Best Buy for more than 46 years, was forced to resign his position in June because the board found fault with him for keeping quiet about an inappropriate relationship involving the company's former CEO and a subordinate. The story holds many valuable lessons for managers and supervisors.

According to an article by the Minneapolis Star Tribune, Schulze was given a letter from a Best Buy employee that alleged that CEO Brian Dunn was having a close personal relationship with a female staffer. Lesson No. 1: Your employees are watching you and will tell on you.

Because company policy prohibited such relationships, Schulze confronted Dunn, who denied the allegations. Schulze was quoted as saying that he told Dunn "his conduct was totally unacceptable, and contrary to Best Buy's policies and everything I and the company stand for." However, Schulze said nothing to the board of directors about the accusation or confrontation, which was a breach of corporate governance. Lesson No. 2: Just because you're at the top of the food chain doesn't mean you get to violate company policies.

The board learned about the allegations against Dunn three months later and launched an investigation. The investigation report revealed that Dunn and the employee had numerous private office meetings and exchanged hundreds of text messages and phone calls. Lesson No. 3: Technology provides an excellent record of wrongdoing for investigators and attorneys.

Dunn resigned after the report concluded that he violated company policy "by engaging in an extremely close personal relationship with a female employee that negatively impacted the work environment." Even though the investigation focused on Dunn, the report revealed that Schulze failed to alert the board about the situation, which prompted Schulze's resignation. Lesson No. 4: Your actions often hurt people other than yourself.

Jacob Frenkel, an attorney who specializes in white-collar crime in Maryland, told Star Tribune journalists that Schulze allowed his personal relationship with Dunn, whom he mentored, to interfere with his professional duties as chairman. Lesson No. 5: Being friends with your subordinates sometimes leads to bad decision-making.

Determining whether Dunn's personal relationship was also sexual became a moot point after his resignation, sources close to the investigation told journalists. Had Dunn remained CEO, proof of a sexual relationship would have been a significant matter because it would have emphasized the degree of bad judgment, sources noted. Lesson No. 6: Your sex life could become a matter of public scrutiny when it's mixed with business.

The story ends with Dunn leaving after three years at the helm with a $4 million severance package. Schulze, having been forced to walk away from the company that he built from scratch and dedicated almost half a century of his life to, is now attempting to buy out the retail giant, perhaps having learned the lesson that silence is not always golden.

Robin Paggi, a human resources consultant with worklogic legal solutions, can be reached at rpaggi@worklogiclegal.com. These are her opinions, not necessarily those of The Californian.

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