Microsoft & Activision, Part II: Repairing Culture

In a post earlier this week we explored the numerous antitrust and privacy concerns that arise from Microsoft’s proposed acquisition of Activision Blizzard. Today let’s assume that Microsoft somehow does close this deal. How would Microsoft then address the deeply troubled corporate culture at Activision? 

That’s a challenge ethics and compliance officers encounter all the time: you the parent company acquire another business, and now you need to bring that subsidiary’s corporate culture into alignment with your own. 

This case, however, is particularly interesting because Activision’s culture has been in the pits at least since the state of California filed a lawsuit against the company last year, alleging a culture rife with sexual harassment. Many other published reports say that deeply flawed culture had existed for years, and that long-time CEO Bobby Kotick was well aware of the problems. 

So how would a parent company rectify that situation at a newly acquired operating unit? What steps would you need to take to revamp the corporate culture and convince those jaded employees that, for real, the parent company is going to make things better? 

I explored a few of those issues in the most recent episode of the Everything Compliance podcast, entirely devoted to the Microsoft-Activision deal. Let me recap the main points here, too. 

Changing Culture Begins With Leadership

First, the parent company needs to change who’s in charge, both at the senior level and in the middle management ranks that allowed the corporate culture to rot for so long. 

Activision seems to be making at least some progress already with problematic middle managers. The company says it has fired more than three dozen people (and disciplined dozens more) since last summer. We don’t know precisely how many of those people were middle or senior managers, but some portion of them definitely were. Allen Brack, head of the Blizzard part of Activision Blizzard, was forced out last August, shortly after California filed its lawsuit and brought all these sleazy allegations into the sunlight. 

Microsoft also needs to decide what to do with Kotick, who has been CEO at Activision for more than 30 years. Speculation is that he would depart soon after the deal closes, although Microsoft said in its press release that Kotick will remain as CEO of Activision, and “he and his team will maintain their focus on driving efforts to further strengthen the company’s culture and accelerate business growth.”

I believe that would be a mistake. If senior executives are supposed to be responsible for defining and supporting the corporate culture, then a parent company demonstrates its seriousness about changing a defective culture by changing the leaders at the problematic subsidiary. 

So put me in the camp who believes Kotick won’t last, no matter what Microsoft’s PR team says today. 

I also wonder about the long-term prospects of Activision’s chief compliance officer Frances Townsend, a woman with little ethics and compliance experience. Activision has been building up the rest of its ethics and compliance bench, which is good. But we should also remember that Microsoft already has an ethics and compliance team, and consolidation will happen. 

Other Gestures to Change Culture

Second, the acquiring company needs to change how people get rewarded. Sometimes that can be a revamp of salary levels and incentive compensation packages, including bonus structure and equity awards. It can also mean how people are rewarded with career advancement — so the acquiring company also needs to look at who gets promoted, who gets plum assignments, and the like. 

The latter might be the more important concern for Microsoft. After all, the fundamental complaint about Activision is that it harassed, alienated, and marginalized female employees for years. To remedy a corporate culture like that, you need to show employees that they are valued and rewarded not just with money, but also in practical, day-to-day interactions with management. 

Third, the acquiring company needs to change how people complain. Employees need to feel comfortable making complaints, and they need to trust that the processes for reviewing and deciding complaints will unfold in a fair, impartial way. 

Certainly that can include specific mechanisms, like an internal reporting hotline that works well in every location and that keeps whistleblower identities confidential. It also includes corporate policies, too — on investigation protocols, use of non-disclosure agreements, disciplinary actions, mandatory arbitration clauses, and the like. 

Think about it: You can have a wonderful internal hotline, and even do a fine job investigating complaints and firing a harassing manager. But if you also require employees to sign an NDA about the sexual harassment, what message does that send about the corporate culture? 

In other words, the policies you use to guide how people complain are a reflection of the company’s ethical priorities — and therefore, they will exert great influence over your corporate culture. So adopt policies that exert influence in a positive direction.