Former Chief Executive Officer Brian Dunn resigned in April when it was brought to the attention of the board he had "an extremely close personal relationship with a female employee that negatively impacted the work environment," the company said in a statement.
An investigation released by the firm said Schulze, who is the chairman of the board, had confronted Dunn about the affair, but failed to alert the firm's ethics committee.
"In December, when the conduct of our then-CEO was brought to my attention, I confronted him with the allegation … told him his conduct was totally unacceptable and contrary to Best Buy's policies," Schulze said in a statement.
Schulze also said Dunn denied the affair. His undoing, however, came as he "failed to bring the matter to the Audit Committee of the Board of Directors in December," the firm said.
"I understand and accept the findings of the Audit Committee," Schulze said.
The company said it also reached an agreement with Dunn in which it would pay him $6.6 million for 2011, including stock grants valued at $2.5 million and severance pay valued at $2.8 million.
Dunn was also to receive $106,742 for "compensation for unused vacation," the statement said.
In return, Dunn agreed to extend the non-compete clause in his contract from one year post severance to three years.
Board member Hatim Tyabji, with 40 years of experience on the board, will take Schulze's job, the firm said.