Best Buy founder and chairman Richard Schulze is to step down after an internal investigation found he failed to alert the board that its chief executive was having an affair with a female employee.

The probe found that Schulze “acted inappropriately” by not telling the retailer’s audit committee when he first heard allegations of chief executive Brian Dunn’s infidelity.

Dunn resigned last month, and the electricals giant originally claimed it was for business reasons. However, it emerged Best Buy was investigating whether he misused company resources during the affair.

The investigation, which ended yesterday, showed that he did not misuse resources but he exercised “extremely poor judgement” in the relationship.

Schulze will step down next month, meaning Best Buy will have lost its two most important figures at a time when it struggles to win investor confidence as it battles against online players such as Amazon.

Best Buy director Hatim Tyabji is to replace Schulze as chairman. It expects the search to find Dunn’s replacement to take six to nine months.  

Dunn will receive $2.85m (£1.8m) severance pay, increasing to $6.6m when share options are included.