Activision Blizzard under investigation by SEC

This week, the Wall Street Journal reported that the Securities and Exchange Commission (SEC) has announced the opening of an investigation into Activision Blizzard regarding sexual misconduct and workplace harassment. The investigation follows July’s lawsuit from the California Department of Fair Employment and Housing (DFEH) alleging a toxic “frat boy” culture. A walkout was staged shortly thereafter demanding an end to mandatory arbitration clauses, fair recruitment practices, the publication of compensation data, and the formation of a diversity task force at the company.

As part of the SEC’s new investigation, it has issued a subpoena to Activision Blizzard CEO Bobby Kotick. The filing demands that Kotick disclose a number of documents, including the personal files of six previous employees and Kotick’s communications with other executives relating to allegations of sexual harassment and discrimination.

It’s important to note that, rather than investigating the truth of the allegations against the company, the SEC is mostly concerned with whether or not Activision Blizzard has intentionally withheld information from its investors. After all, the SEC’s primary function is to “enforce law against market manipulation,” meaning that the federal agency’s highest priority is shareholders. Still, the implications of such an investigation are substantial, according to Richard Hoeg, attorney at Hoeg Law in Michigan.

“The most important thing is that, unlike California or the EEOC, the SEC is primarily concerned with whether a company lied (or omitted something important) in communications to investors,” Hoeg told GameDaily. “So the SEC’s investigation is less ‘did they do something bad and more ‘did they think they did something bad or that this investigation would go really poorly’ and then failed to tell investors.” 

Hoeg, who has been covering the situation extensively in his Virtual Legality YouTube series, noted that the SEC investigation won’t necessarily end poorly for Activision Blizzard because the company can claim plausible deniability. If it doesn’t believe it did anything wrong, and that it unknowingly withheld information from shareholders, the company can potentially emerge undamaged. This will be a lynchpin of the SEC’s investigation.

In August of 2020, Activision Blizzard was reportedly contacted by the EEOC–the Equal Employment Opportunity Commission–meaning that, coupled with the DFEH lawsuit and the SEC investigation, the company is under fire from two federal organizations and one representing the State of California. Clearly, it’s not a good look.

“California would still have to prove its case (just as the EEOC would if it came to it), but settlements all around have to start looking pretty good to Activision at some point,” Hoeg said.

That said, Hoeg pointed out that federal organizations tend to be less threatening to larger companies than something like the state-based DFEH: according to the EEOC itself, it pursues litigation in less than 10% of all of its discrimination investigations.

“The federal agencies are not quite as threatening as something like California in most instances, primarily because their statutory structure often requires them to pursue settlement, and because they have limited resources for policing the entire country,” he explained.

Since the DFEH’s suit was filed, a number of high-profile departures have plagued Activision Blizzard, the most recent of which is Overwatch executive producer Chacko Sonny. Sonny did not give a reason for leaving in his email to colleagues. His departure follows the likes of Blizzard president J. Allan Brack, Blizzard SVP of global HR Jesse Meschuk, Blizzard chief legal officer Claire Hart, and Activision Blizzard chief people officer Claudine Naughton. 

GameDaily has reached out to Activision Blizzard about the ongoing investigations, but has not heard back as of publication.

All told, a handful of investigations and the exodus of a number of high-profile executives do not paint a pretty picture for the embattled company. Discrimination and harassment are rampant problems in the games industry, particularly among AAA developers. Ubisoft, for example, is experiencing its own problems in this regard, and crunch remains an ongoing problem that industry leaders are struggling to address.

It may be messy, but large companies ought to be held accountable for their actions. Investigations like the ones Activision Blizzard is facing are an important step in weeding out the bad actors who perpetuate vile practices like naming a hotel room after a convicted rapist.

Update (September 22, 2021)

An Activision Blizzard spokesperson responded to GameDaily’s request for comment with a statement that has been published elsewhere as well:

“We are deeply committed to making Activision Blizzard one of the best, most inclusive places to work anywhere,” CEO Bobby Kotick said in the press release. “There is absolutely no place anywhere in our Company for discrimination, harassment, or unequal treatment of any kind. While we continue to work in good faith with regulators to address and resolve past workplace issues, we also continue to move ahead with our own initiatives to ensure that we are the very best place to work. We remain committed to addressing all workplace issues in a forthright and prompt manner.”

The statment notes that the company is complying will all investigation requests, and claims to have made a number of changes that will lead to a heathier working environment.