Rather than face proceedings before the US Securities and Exchange Commission, Activision Blizzard has agreed to pay $35 million to settle charges that it both failed to maintain appropriate misconduct reporting controls over so-called “frat boy culture,” and also violated whistleblower protection laws.
More specifically, the SEC alleged the World of Warcraft maker “lacked controls and procedures among its separate business units to collect and analyze employee complaints of workplace misconduct” between 2018 and 2021. The toxic work culture at the company was the source of frequent complaints from staffers.
The Commission also said the games biz used separation agreements, which contained language compelling ex-employees to inform the management if contacted by the SEC, were violations of whistleblower protection rules.
This being the SEC, the case is less about HR problems and more about whether Activision-Blizzard violated its responsibilities to its shareholders with its separation language and failures to police workplace misconduct. SEC Denver Regional Office Director Jason Burt said the investigation concluded it did.
“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,” Burt said.
The first reports of the SEC investigation into Activision Blizzard came in 2021, when it came out the Commish had subpoenaed communications from current and former executives, including CEO Bobby Kotick.
In the course of those investigations, the SEC said, it came to the conclusion that Blizzard’s story to investors was that its future hinged on “the ability to attract, retain, and develop key personnel and developers that can create high-quality titles, products, and services,” the SEC said in its order.
While the company acknowledged those problems publicly, including on SEC filings, it internally “lacked controls and procedures designed to ensure that information related to employee complaints of workplace misconduct would be communicated to Activision Blizzard’s disclosure personnel to allow for timeless assessment on its disclosures,” the Commission said.
That lack of disclosure, as has been well documented recently, has come back to sting the Call of Duty maker in the form of multiple lawsuits into harassment, misconduct, union busting and the like. The company is also facing legal hurdles as it attempts to merge with Microsoft in the form of several legal proceedings, including one filed by gamers upset about the potential purchase.
The Federal Trade Commission is also suing Acti-Bliz in court to stop the $69b merger, which is still pending. Microsoft was also reportedly handed a list of complaints from the EU regarding the merger earlier this week, giving a chance to address the bloc’s complaints if it wants the merger to go forward.
As is often the case with settlements such as this one, the paying of the fine doesn’t mean the company is admitting or denying the findings, the commission said: All it did was agree to a cease-and-desist order and pay $35m, “without admitting or denying the SEC’s findings.”
A spokesperson for Activision-Blizzard told The Register that it wanted us to be clear that the settlement was related to disclosure controls and wording in standard separation agreements, and that it had already corrected said issues before the SEC issued its order.
“We are pleased to have amicably resolved this matter. As the order recognizes, we have enhanced our disclosure processes with regard to workplace reporting and updated our separation contract language,” Activision-Blizzard said. ®
