Many chief compliance officers today report directly to the board or chief executive officer. But what happens to the CCO when the CEO is the problem and, furthermore, has such an authoritarian hand in the company that even its board is left in the dark about critical ethics and compliance matters?
One real-life example is embattled videogame giant Activision Blizzard, whose CEO Bobby Kotick faces damning evidence that he knew of sexual misconduct allegations for years but did not inform the board, according to the Wall Street Journal. How much Kotick and other executives knew about the sexual misconduct and when is the focus of an investigation by the Securities and Exchange Commission.
For those in the compliance profession, the real kicker in the WSJ report is this: It was Kotick—not Chief Compliance Officer Frances Townsend—who drafted a controversial email to employees in response to a complaint filed against the company by the California Department of Fair Employment and Housing (DFEH) in July. The email described the DFEH’s allegations of widespread sexual harassment and discrimination at the company as painting “a distorted and untrue picture … including factually incorrect, old, and out of context stories.”
Kotick drafted the email and directed it be sent to employees by Townsend, appearing as if she authored it, according to internal documents reviewed by the WSJ. After the email created a firestorm of criticism, Kotick backtracked, calling the company’s response “tone deaf.”
As I noted in an earlier column on Activision Blizzard, I found it curious that a CCO who joined the company just four months prior to the DFEH filing its lawsuit would respond so defensively. Now, it makes sense.
Kotick approves most internal emails and media responses, the WSJ reported. An Activision Blizzard spokesperson told the newspaper Kotick takes responsibility for the email and regrets it, adding, “‘Ms. Townsend should not be blamed for this mistake.’”
If the WSJ never published its exposé, would it have come to light Kotick himself penned the email? For taking the blame, Townsend’s reputation suffered, and she was forced to step down from her post as executive sponsor of the Activision Blizzard King Employee Women’s Network.
In a video message, Kotick said the WSJ report “paints an inaccurate and misleading view of our company, of me personally, and my leadership.” In a separate statement, Activision Blizzard announced Monday the creation of a “Workplace Responsibility Committee,” initially comprised of two independent directors that will, in part, “require management to develop key performance indicators and/or other means to measure progress and ensure accountability.”
The company’s efforts are valiant, but for an ethics and compliance program to be truly effective, it must have a CCO who is not only independent but—as noted in the Department of Justice’s “Evaluation of Corporate Compliance Programs” guidance—has “adequate authority and stature.” It shouldn’t be someone who serves as the mouthpiece of a CEO, especially one at the helm of an ethically tarnished company.