Video game developer Activision Blizzard will pay $35 million to resolve charges laid by the Securities and Exchange Commission (SEC) it violated federal securities laws by failing to adequately disclose how its ineffective response to workplace complaints was harming its ability to hire and retain skilled employees.
The company was further faulted for violating the SEC’s whistleblower protection rule.
Between 2018-21, Activision Blizzard lacked controls and procedures to effectively analyze whether its failure to address numerous workplace sexual harassment complaints was affecting its ability to attract and retain qualified workers. As a result, the company could not properly relay the depth of the problem in its disclosures, the SEC alleged in its order.
“The SEC’s order finds that Activision Blizzard failed to implement necessary controls to collect and review employee complaints about workplace misconduct, which left it without the means to determine whether larger issues existed that needed to be disclosed to investors,” said Jason Burt, director of the SEC’s Denver regional office, in a press release Friday.
In response, the company remediated the issue by implementing “several company-wide structural changes and policies that enhanced the manner in which employee complaints were required to be documented, maintained, and communicated to the company’s senior management and disclosure personnel,” the order said. The changes occurred between May 2020 and May 2022.
The alleged whistleblower rule violations involved language in employee separation agreements between 2016-21, the SEC said. The agreements required employees to notify the company if they received any requests from an administrative agency regarding a report or complaint.
The language undermined the SEC’s whistleblower protection rule, the agency said, which allows whistleblowers to remain anonymous.
The agency said it was not aware whether any former Activision Blizzard employee was prevented from contacting it with information about a securities law violation or if the company took any actions to enforce the provision. It was removed from all agreements in early 2022.
Activision Blizzard employees long complained about the company’s “frat boy culture” that allegedly allowed sexual harassment of female employees to happen without consequences from management. The California Department of Fair Employment and Housing filed a complaint in July 2021 claiming female employees were regularly subject to boorish behavior by male employees, including constant, unwanted sexual comments and advances and even rape jokes. One female employee committed suicide on a business trip, in part because of workplace sexual harassment, the complaint alleged.
The company filed a countersuit; both lawsuits are still pending.
In September 2021, Activision Blizzard committed to strengthen its culture to prevent sexual harassment, discrimination, and retaliation as part of an $18 million settlement with the Equal Employment Opportunity Commission.
While not admitting or denying the SEC’s allegations, Activision Blizzard agreed to a cease-and-desist order from future violations.
“We are pleased to have amicably resolved this matter,” the company said in an emailed statement. “As the order recognizes, we have enhanced our disclosure processes with regard to workplace reporting and updated our separation contract language. We did so as part of our continuing commitment to operational excellence and transparency. Activision Blizzard is confident in its workplace disclosures.”
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