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Activision Blizzard pushes dozens of employees beyond fraudulent behavior in the workplace

Activision Blizzard Inc. THAT WE 1.90% has fired or pushed more than three dozen employees out and disciplined about 40 others since July as part of efforts to address allegations of sexual harassment and other misconduct by the video game giant, according to people familiar with the situation.

A summary of these staff actions was scheduled to be released by Activision before the winter break, but CEO Bobby Kotick held it back and told some people it could make the company's workplace problems seem bigger than is already known, people familiar with the situation said.

Activision's initiatives follow a constant pressure from shareholders, employees and business partners for more responsibility over its handling of fraudulent problems. The recently concluded summary also says that Activision had collected about 700 reports of employees' concerns about fraud and other problems - in some cases separate reports of the same incidents - since July, when a California state agency filed a lawsuit against the company for harassment claims.

An Activision spokeswoman, Helaine Klasky, confirmed that 37 people have been "abandoned" and 44 have been disciplined as part of the company's investigation. She challenged the 700s. In a statement, she said employee comments included statements on social media, and the questions raised ranged from what she described as benign concerns in the workplace to "a small number" of potentially serious allegations that the company has investigated. She said that "the claim about Mr. Kotick is untrue," and "our focus is to ensure that we have accurate data and analyzes to share."

Santa Monica, California-based Activision, the maker of popular game franchises including Candy Crush and World of Warcraft, has been under intensive investigation since a November Wall Street Journal investigative article showing that Mr. Kotick, who has served as CEO for more than three decades, did not inform the board of allegations of sexual abuse he was aware of, including rape, against executives throughout the company.

The November 16 article, citing interviews and internal documents, also described allegations of dishonesty against Mr. Kotick, including when an assistant in 2006 complained that in an answering machine he had threatened to have her killed.

Activision has said that the Journal's reporting gave a misleading view of the company and its CEO. Mr. Kotick has said he was transparent with his board, which issued a statement supporting him. A spokeswoman for Activision has said he would not have been informed of any report of misconduct and that Mr Kotick regrets the alleged incident with his assistant.

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Activision Blizzard employees staged a protest in July to call for changes in conditions for women and other marginalized groups.

Photo: david mcnew / Agence France-Presse / Getty Images

Activision is also facing regulatory investigations into its culture and its handling of harassment allegations from the Securities and Exchange Commission and the California Department of Fair Employment and Housing, which filed the lawsuit against it in July in the Los Angeles Superior Court. The company has disputed the California agency's claims, saying it cooperates with the SEC.

In September, Activision said it had agreed to a settlement with the Equal Employment Opportunity Commission regarding sexual harassment and other offenses within the company. That agreement is awaiting approval by a judge.

Following questions from the Journal in October, Activision announced a number of changes, including a zero-tolerance policy on harassment and an end to mandatory arbitration for harassment and discrimination claims.

In December, Chief Operating Officer Daniel Alegre said in an employee letter that Activision was committed to increasing the proportion of women and non-binary employees by 50% within the next five years to more than a third of the total number and to Be more transparent about workplace issues. "One of the key areas for feedback has been the need to share more information openly as a business," the letter said.

As described in the unpublished summary, company officials led by Frances Townsend, Activision's chief compliance officer, have also worked to remove employees whom they have found guilty of misconduct, according to people familiar with the situation.

The data collected by Activision shows that so far it had reviewed more than 90% of the approximately 700 employee reports it had collected, according to the people. The journal's article in November reported that Activision had received more than 500 reports of workplace fraud and other problems since the California agency's lawsuit in July, a figure that Ms. Klasky disputed in his Friday statement.

The summary does not describe specific events. Among the cases that matched was one where a couple of employees together asked colleagues for inappropriate sexual behavior, the people said. Activision learned of the abuse in October and fired the couple shortly after, according to the people. The Activision spokeswoman confirmed that the company fired the two people "within weeks of the first message to us."

In a letter to employees published in October, Townsend said Activision had "left" 20 employees and another 20 had been subject to disciplinary action. "We know there is a desire to know about the outcome when reporting fraud," Ms. wrote. Townsend. "Sometimes there are privacy reasons we can not share. But where we can, we will share more information with you. We will also provide you with regular, aggregated data on investigation results."

Following the Journal article, nearly one-fifth of Activision's approximately 10,000 employees signed a petition urging Mr Kotick to resign. The company has also met questions from major partners. This month, toy company Lego A / S said it had suspended the planned release of a product line based on Activision's Overwatch franchise and is reviewing its partnership with Activision due to "concerns about the progress being made to address continued allegations of workplace culture. "

Ms. Klasky said Activision appreciates Lego's feedback and talks to the company about changes it's making.

Activision's share price has fallen nearly 30% since the first regulatory study was published in late July, a period in which the Nasdaq Composite Index rose a few percent. Investors have been calling and writing to the company and its directors in recent weeks, expressing concern over Activision and its board of directors' handling of allegations of fraud and the board's independence in general, according to people familiar with the communication and correspondence seen by the board. . Journal.

Ms. Klasky said Activision "is routinely in discussions with our shareholders regarding inquiries they make."

Fidelity International, a UK-based investor, sent a letter to Activision chairman Brian Kelly urging an independent review of an external law firm, saying the board should consider placing Mr. Kotick on administrative leave while it happens.

The letter, seen by the Journal, is dated November 30 and has not been previously reported. It also called for more board independence and pointed out that Mr. Kelly and senior independent director Robert Morgado have both served in their roles for more than 20 years.

The letter warned that Fidelity International, which owns about 0.6% of Activision, according to FactSet, would divest shares or "summon support from other shareholders" if its concerns were not addressed properly.

Kelly and Morgado did not respond to requests for comment.

A spokeswoman for Fidelity International declined to comment. Fidelity International operates separately from the correspondingly named US investment company.

Activision's board has supported Mr Kotick, with executives telling some investors he is the right person to lead the company, pointing to initiatives taken to change its culture, according to people familiar with investor communication.

'The Board's support for Bobby is unchanged and it is pleased with the commitment and leadership that Bobby has shown so far.'

- Helaine Klasky, a spokeswoman for Activision

In late November, the board announced the formation of a "workplace responsibility committee" consisting of two independent directors to improve the workplace culture and eliminate harassment and discrimination.

Mr. Kotick told senior executives in the days following the Journal article that he would consider leaving Activision if he could not quickly address the culture issues, the Journal reported.

Ms. Klasky said Friday: "The board's support for Bobby is unchanged and it is pleased with the commitment and leadership Bobby has shown so far" in implementing changes.

U.S. government officials overseeing investments have also put pressure on Activision over its workplace problems, including the New York State Comptroller, who oversees the New York State Common Retirement Fund, which owns a 0.23% stake in the company, according to FactSet.

In a previously unreported shareholder proposal in late November to Activision, seen by the magazine, the auditor called for an annual transparency report covering the company's efforts to prevent abuse, harassment and discrimination of employees.

New York State Comptroller Thomas P. DiNapoli said in a statement to the Journal that its proposal to Activision "asks the company to provide us with answers, but we keep all other options open to resolve these troubling allegations."

It could not be determined whether Activision or its directors have responded to letters from the New York State Comptroller or Fidelity International.

Problems with Activision Blizzard

More coverage of the unrest at the video game company, selected by the editorial staff

Write to Kirsten Grind at kirsten.grind@wsj.com

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