Activision Clears Self of Misconduct

Activision Blizzard published the results of an internal investigation today that found “no widespread harassment” at the videogame giant from 2016 to 2021, despite a lawsuit from California regulators last year alleging exactly that and massive turmoil among Activision employees since then.

The investigation was ordered by Activision’s board last year after the California Department of Fair Employment filed a lawsuit against the company accusing it of a long-time “frat boy workplace culture” where female employees “are subjected to constant sexual harassment.” Soon thereafter, the Wall Street Journal ran an expose that said CEO Bobby Kotick knew about the sexual harassment allegations for years and even withheld reports of rape and other harassment from the board.

Today’s report, filed with the Securities and Exchange Commission, contradicts those claims. First, the reports that Kotick withheld information from the board:

Contrary to many of the allegations, the board and its external advisors have determined that there is no evidence to suggest that Activision Blizzard senior executives ever intentionally ignored or attempted to downplay the instances of gender harassment that occurred and were reported… The review of contemporaneous documentation and statements by relevant individuals shows that media criticism of the Board and Activision Blizzard senior executives as insensitive to workplace matters is without merit.

Moreover, Activision’s board hired a former chairman of the Equal Employment Opportunity Commission, Gilbert Casellas, to conduct a wide-ranging review of sexual harassment allegations at Activision. That, the board said, turned up no systemic dysfunction in corporate culture either:

Based on his review, Mr. Casellas concluded that there was no widespread harassment, pattern or practice of harassment, or systemic harassment at Activision Blizzard or at any of its business units during that timeframe. Mr. Casellas further concluded that, based on the volume of reports, the amount of misconduct reflected is comparatively low for a company the size of Activision Blizzard.

Today’s report is stunning to say the least. Activision was one of the most high-profile examples of corporate misconduct in 2021 — and to be clear, numerous instances of sexual harassment did happen at the company. Chief compliance officer Frances Townsend circulated a memo last October that said the company had fired or disciplined dozens of employees (out of roughly 9,800) in the wake of the sexual harassment bombshell. Allen Brack, the president of the Blizzard part of the Activision Blizzard empire and a 15-year veteran of the company, was fired shortly after the California lawsuit was filed.

The company went on a compliance program improvement spree that continues to this day. Activision also paid $18 million last fall to settle a case with the EEOC alleging discrimination against female employees. 

Now we have this statement from the board that does express dismay (“a single instance of someone feeling diminished at Activision Blizzard is one too many”), but also essentially says that for a business of its size, the problems at Activision are nothing unusual. 

“The company has been subject to an unrelenting barrage of media criticism that attempts to paint the entire company (and many innocent employees) with the stain of a very small portion of our employee population who engaged in bad behavior and were disciplined for it,” the report said. “Much of this originated with the highly inflammatory, made-for-press allegations of the [California Department of Fair Employment]… That said, rather than dismiss these criticisms, the board and management have taken these allegations seriously and according to outside advisors, have investigated these appropriately.”

A Raft of Compliance Improvements

Despite those findings, Activision also announced a long list of improvements it has been making to its compliance program. Among them were several structural changes to the ethics and compliance function:

• Combined the investigations groups into one centralized Ethics & Compliance team, which is separate from business units and other groups like Human Resources or Employee Relations;
• Broadened the Employee Relations Team to align the results of investigations with recommended actions and communication back to affected employees;
• Quadrupled the size of Activision Blizzard’s Ethics & Compliance team since July 2021;
• Tripled investment in anti-harassment and anti-discrimination training resources;
• Announced the launch of a new company-wide zero-tolerance harassment policy.

The compliance hiring spree includes the promotion of Jen Brewer to senior vice president of ethics and compliance last fall; she has been with Activision since 2012 and had been vice president of compliance and chief risk officer. The company also hired Joy Hayes as a senior director of ethics and compliance, plus many more. Jared Gaither joined as senior manager for workplace integrity investigations just this month. 

Activision also released its U.S. Pay Equity Review for 2020 in October 2021, finding that, after accounting for factors such as role, location, tenure, and job classification, female employees on average earned about $1.01 for every dollar earned by men doing comparable work. The company subsequently released its ESG report in May 2022, which said that on average, women earned $1.00 for every dollar earned by men for comparable work.

And Activision implemented numerous policy reforms, including a global drug and alcohol policy for Company-sponsored events and zero tolerance for alcohol consumption in the workplace; and ending arbitration for individual claims of sexual harassment, discrimination, or retaliation arising after October 2021.

Don’t Forget Microsoft

We would be remiss if we didn’t mention that while Activision’s board and senior management are trying to resolve this crisis, Microsoft is also trying to acquire the company for a staggering $68.7 billion. That deal raised significant antitrust issues and regulators still haven’t given their final blessing to it. 

Cynical people would note that Activision putting this harassment business behind it would be a big step forward toward getting that Microsoft deal done, which would make the board directors, CEO Kotick, and other senior executives even more rich than they already are.