Employees and investors are calling for Activision's CEO to resign amid reports that he knew for years about sexual harassment and rape allegations at the company
Ben Gilbert
Fri, November 19, 2021
Activision CEO Bobby Kotick.
Activision CEO Bobby Kotick knew for years about claims of sexual misconduct at his company, the WSJ reported.
More than 1,000 Activision employees have since signed a petition calling for Kotick to resign.
Xbox head Phil Spencer said Microsoft is "evaluating" its relationship with the "Call of Duty" publisher.
Activision's longtime CEO Bobby Kotick reportedly knew for years about a variety of claims of sexual harassment and rape at his company.
A huge new investigation by the Wall Street Journal details several specific examples of harassment and rape at Activision. Kotick was not only aware of those claims but, in a least one instance, reportedly intervened to keep a male staffer who was accused of sexual harassment despite the company's human resources department recommending he be fired.
In the wake of the report, more than 1,000 current Activision Blizzard employees have signed a letter calling on Kotick to resign.
"We, the undersigned, no longer have confidence in the leadership of Bobby Kotick as the CEO of Activision Blizzard," the letter says. "The information that has come to light about his behaviors and practices in the running of our companies runs counter to the culture and integrity we require of our leadership — and directly conflicts with the initiatives started by our peers. We ask that Bobby Kotick remove himself as CEO of Activision Blizzard, and that shareholders be allowed to select the new CEO without the input of Bobby, who we are aware owns a substantial portion of the voting rights of the shareholders."
And Activision employees aren't alone in calling on Kotick to resign — a group of Activision investors, albeit a small percentage of overall investors, are echoing the sentiment.
"It's clear that the current leadership repeatedly failed to uphold a safe workplace — a basic function of their job," Strategic Organizing Center (SOC) Investment Group director Dieter Waizenegger told The Washington Post this week. "Activision Blizzard needs a new CEO, board chair and lead independent director with the expertise, skill set and conviction to truly change the company's culture," he said.
Additionally, the heads of both Sony's PlayStation and Microsoft's Xbox issued statements internally.
PlayStation head Jim Ryan criticized Activision's response to the article. "We do not believe their statements of response properly address the situation," he said in an email obtained by Bloomberg.
Xbox leader Phil Spencer took his response one step further: Xbox is "evaluating all aspects of our relationship with Activision Blizzard and making ongoing proactive adjustments," the email from Spencer to staff, also obtained by Bloomberg, said.
Microsoft confirmed the email's veracity to Insider, and shared the following statement from Spencer: "I personally have strong values for a welcoming and inclusive environment for all of our employees at Xbox. This is not a destination but a journey that we will always be on. The leadership at Xbox and Microsoft stand by our teams and support them in building a safer environment for all."
When asked for comment regarding calls for Kotick to resign, Activision representatives pointed to the statement published by Activision's board earlier this week and said the sentiment stands: "The Board remains confident that Bobby Kotick appropriately addressed workplace issues brought to his attention," the statement said.
The Journal's report on Activision is the latest in an ongoing reckoning at the blockbuster video game publisher.
The State of California sued the company this summer over allegations that female Activision employees face "constant sexual harassment," from "having to continually fend off unwanted sexual comments" to "being groped." When employees report issues to human resources and management, the lawsuit claimed, no action is taken.
The suit — filed on July 20 to the Los Angeles Supreme Court — followed a two-year investigation conducted by California's Department of Fair Employment and Housing. It claims "Call of Duty" maker Activision fosters a "pervasive frat boy" culture where women are paid less for the same jobs that men perform, regularly face sexual harassment, and are targeted for reporting issues.
Alexis Keenan
·Reporter
Sat, November 20, 2021
Bobby Kotick, chief executive officer of Activision Blizzard, attends the annual Allen & Company Sun Valley Conference, July 10, 2019 in Sun Valley, Idaho. (Photo by Drew Angerer/Getty Images)
On Wednesday, a group of Activision Blizzard (ATVI) shareholders joined a chorus seeking to oust longtime CEO Bobby Kotick after The Wall Street Journal reported that he knew of sexual harassment and rape claims at the gaming giant but failed to report some of them to the board.
The outcry has raised questions about Kotick's duty to disclose what he knew about sexual misconduct allegations within the video gaming company. Frustrations over the matter have been escalating since August when California's Department of Fair Employment and Housing sued Activision, alleging that female employees were subjected to sexual harassment and unequal pay.
“Generally, the CEO, CFO, anyone at that level, does have a fiduciary responsibility, if something comes to their attention — whether it's embezzlement or sexual harassment, or whatever it might be — to inform the board,” Jeffrey Cramer, senior managing director at Guidepost Solutions, and former federal prosecutor, told Yahoo Finance.
The Journal reported Monday that Kotick, who's also a board member, knew but failed to tell the rest of the board about the alleged rape of a female employee of Activision’s subsidiary, Sledgehammer Games, by her male supervisor. Internal documents, the Journal's report states, show Kotick held back the extent of what he knew about complaints “of employee misconduct in many parts of the company.”
The rape complaint, which was reportedly settled out of court without alerting the board, adds to federal regulatory investigations into the company's handling of misconduct.
On Tuesday, Activision's board released a statement in support of Kotick. "The Board remains confident that Bobby Kotick appropriately addressed workplace issues brought to his attention," the statement read.
At this stage, Cramer says, it’s not surprising that the board is maintaining public support for Kotick. Typically, the directors call for an independent investigation to find out who knew what, when, he says.
“The board will do a thorough review, and then once the board has more information," Cramer said, "that position might change."
'The standards are shifting'
Corporate law and governance experts say it's not just Kotick who can face scrutiny about who knew what, and when. It's unclear, he said, whether Kotick and the other board members could be legally liable for failing to alert shareholders and the board about alleged sexual misconduct. That's because of shifting expectations in the post #MeToo world, Douglas Chia a senior fellow at Rutgers Law School’s Center for Corporate Law and Governance, tells Yahoo Finance. Few courts, he says, have evaluated how fiduciary laws govern obligations of public company executives to disclose claims of sexual misconduct.
Employees of the video game company, Activision Blizzard, hold a walkout and protest rally on July 28, 2021. (Photo by DAVID MCNEW / AFP)
“In today's environment, the standards are shifting, and there's more of an expectation that the investors want to know more earlier,” Chia says. “... There's nothing that really says what's legally required.”
The current legal landscape is “a very gray area” that likely invokes state corporate laws and federal securities laws that can pressure both the board and Kotick, according to Case Western Reserve University School of Law associate professor Anat Alon-Beck.
“I put it on the board, not just on the CEO,” Alon-Beck adds. “It’s a very delicate situation because the CEOs have obligations under securities laws to report on material events. I think today, after the #MeToo movement, this is a big deal.”
In Delaware, where Activision Blizzard is incorporated, state corporate laws make CEOs such as Kotick, as well as board members, fiduciaries to the corporation, Alon-Beck explains. The role requires them to exercise duties of care and loyalty to shareholders and makes them liable for breaching those duties.
Under federal securities laws, liability can arise if a “material” disclosure is omitted — though “materiality” has no clear and consistent definition, Chia said.
“You could have a claim that the CEO and or the board breached their fiduciary duty because they failed to monitor what was going on at the company, from a compliance point of view on sexual misconduct,” Chia says.
In August, shareholders filed one such suit, claiming Activision failed to inform investors that California’s Department of Fair Housing and Employment had been looking into claims of discrimination and sexual harassment, prior to the agency's lawsuit filed that month.
Several hundred Activision Blizzard employees stage a walkout which they say is in a response from company leadership to a lawsuit highlighting alleged harassment, inequality, and more within the company outside the gate at Activision Blizzard headquarters on Wednesday, July 28, 2021 in Irvine, CA.
(Allen J. Schaben / Los Angeles Times via Getty Images)
Still, requiring a CEO of a large public company to report each and every instance of misconduct to the board is not likely a standard a court would impose, Chia said. However, he added, major allegations such as rape, and patterns of sexual misconduct claims, should indeed go that far up the chain of command.
For Alton-Beck, reporting significant events just to the board isn’t far enough as a strategy to protect against modern legal claims. Shareholders, she suspects, are going to have to be part of the equation.
Delaware state law requires board members to exercise oversight to avoid potential illegal conduct, she explains. In turn, the board should ensure that systems are in place within the company to help prevent illegal sexual misconduct and to learn about and investigate them, if they occur.
“If the court finds that [Activision] breached the duty of loyalty because they didn't exercise oversight, then they need to answer for the harm that they caused the corporation,” she says. “To me, it's a clear-cut case that there's a violation of duty of loyalty here, if they failed to put a system in place.”
Yahoo Finance contacted Activision Blizzard to obtain information about its oversight policies but did not receive a comment before publication.
Shares of Activision Blizzard (ATVI) were trading at $62.50 at market close on Friday, approximately 60% down from their 52-week high of $104.53.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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