The U.S. Securities and Exchange Commission has launched an investigation into video game publishing giant Activision Blizzard, which is engulfed in allegations that company executives ignored reports of sexual misconduct and discrimination against women employees.
The Santa Monica-based company on Monday confirmed the probe and said it was cooperating with the federal agency.
"The U.S. Securities and Exchange Commission is conducting an investigation concerning the company's disclosures regarding employment matters and related issues, and has issued subpoenas to the company and several current and former employees that seek information related to this," a company spokesperson said in a statement.
An SEC spokesperson declined to comment.
The Wall Street Journal reported the investigation will include how the company handled employees' allegations of sexual misconduct and workplace discrimination, citing documents and people familiar with the matter.
The maker of World of Warcraft and Candy Crush was sued by the California Department of Fair Employment and Housing in July. The lawsuit said the company fostered a "frat boy" culture where women employees were subjected to constant sexual harassment, lower pay and retaliation.
WSJ reported the documents the SEC has subpoenaed include personnel files of six former employees, separation agreements reached this year with staffers and Chief Executive Bobby Kotick's communications with other senior executives regarding complaints of sexual harassment or discrimination.
The news organization reported the SEC is looking to discern whether Activision executives properly disclosed allegations of harassment and gender compensation disparities, and whether any of that information should have been shared with investors.
Activision initially said the California lawsuit used distorted and false descriptions of Blizzard's past. Hundreds of employees staged a walkout, calling for a change in the company's culture. Kotick issued an apology ahead of the protest saying the company's initial response was "tone deaf."
The Communications Workers of America filed charges last week with the National Labor Relations Board against Activision, alleging the company used coercive tactics to prevent its employees from organizing.
Days after the California lawsuit was filed, Blizzard president J. Allen Brack stepped down and Jen Oneal and Mike Ybarra replaced him as co-leaders of the company.
While Kotick has stayed at the helm of the company, Activision hired Julie Hodges, a Walt Disney executive, as chief people officer and Sandeep Dube, a Delta Air Lines executive, as chief commercial officer.
On Twitter, a prominent investor, Ross Gerber, called for Kotick to leave the company.
"We have to seriously reconsider our position in $ATVI - Bobby Kotick must go," Gerber, president and CEO of Santa Monica-based wealth and investment management firm Gerber Kawasaki, tweeted.
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Born in the wake of the #MeToo movement, Los Angeles-based startup AllVoices is hoping to make it easier for employees to report incidents of workplace harassment.
The company's platform acts as a third-party tool to let workers report incidents of harassment and give feedback to companies anonymously, but as founder Claire Schmidt readily admits, it's not an end-all-be-all to end workplace harassment.
Still, she says it gives employees a secure way to voice their concerns anonymously – both concerning isolated incidents and about broader patterns within a company's culture. This week, the company raised $9.6 million in an oversubscribed round of Series A funding led by Silverton Partners, M13 Ventures and Crosscut Ventures.
The funding comes in the wake of several high-profile workplace conditions incidents. Recently, Santa Monica-based Activision Blizzard was hit with a lawsuit from the California Department of Fair Employment and Housing alleging that male workers engaged in a "frat boy" culture at the company, drinking "copious" amounts of alcohol at work and treating female employees inappropriately.
The lawsuit led to an internal strike where hundreds of employees walked out of work and demanded change within the company and the resignations of several executives.
AllVoices' CEO and founder Schmidt said she has seen several examples of workplace culture veering into hostile territory. She recalled one employee who reported a company costume party where another worker dressed up as a religious figure.
"It wasn't about making the person who dressed in that costume bad or wrong," said Schmidt, who declined to name the company. "It was just like, 'hey, we're getting this feedback and in the future, we don't want anyone else to feel uncomfortable so we've decided to change the policy'."
The company eventually changed their policy to prevent people from dressing as religious figures.
Victims of workplace harassment often have a hard time getting their companies to take their complaints seriously. Around 75% of workers don't report workplace misconduct, largely out of fear of retribution – a figure that Schmidt wanted to address.
"To me, it seemed like there was a huge gap between companies' perceptions of what their employees were or were not experiencing and reality," said Schmidt. "I wanted to build a tool that could bridge that gap and help companies actually build trust with employees."
Schmidt sees the app as a platform for employees to voice complaints anonymously with a greater sense of security, particularly because employees might not trust internal reporting tools.
"If the employee doesn't have trust in the platform they're either not going to be honest in providing the feedback or they're not going to use it at all," she said. "We realized there was a massive need for a completely secure, encrypted third-party platform that placed the privacy and the security of the employee at the forefront."
AllVoices' user base includes companies such as Zillow, Box and GoPro, and is popular among companies in the tech and fintech industries, Schmidt said. She declined to comment on exact revenue figures, but said the company experienced around 400% growth in customers from 2019 to 2020.
Even if employees feel safe making allegations through AllVoices, companies that use the platform still have the responsibility to adequately respond to complaints.
It's also common for employers to respond to allegations of harassment inconsistently, which can dissuade victims from coming forward in the future, according to Sheerine Alemzadeh, the co-founder of Chicago-based nonprofit Healing to Action and a former litigator who worked with victims of workplace sexual violence. For example, companies may respond in favor of high-ranking employees or apply discipline in ways that victims see as unfair, she said.
"If you feel like people are not going to give you a fair shot when you make this complaint, especially around an issue that's already extremely stigmatized and embarrassing for a lot of people to talk about, there's really no incentive to come forward," she said.
Alemzadeh said it is important to have multiple avenues for employees to report harassment, particularly to prevent retaliation, and third-party platforms like AllVoices can be a good alternative for employees.
But she cautioned that an over-reliance on anonymous reporting tools may be an indication that companies need to address their company culture, she added.
"If you're feeling like the only way you can actually get people to come forward and share this is happening, is through an anonymous report that does not identify them, then you should probably be asking yourself some deeper questions," she said.
Even so, Schmidt said most companies she's worked with have been receptive to feedback received through AllVoices. AllVoices also lets employees give anonymous feedback on how they felt the company handled their complaint.
Schmidt believes a more proactive approach to working conditions could help prevent such large-scale issues from ever occurring.
"These are things that employees do, in my opinion, sort of a last resort," she said. "Ideally, if companies could identify these issues more proactively, provide more channels for employees to speak up, try to take action and help resolve the issues and show employees that you care, I think some of these more serious downstream incidents can be avoided."
Editor's note: dot.LA co-founder Spencer Rascoff is an investor in AllVoices.
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Despite facing lawsuits from California and investors surrounding its "frat boy" workplace culture, Activision Blizzard beat Wall Street's expectations for revenue and forecasted revenue.
Revenues of $1.92 billion were slightly down from the company's banner 2020 second quarter, but surpassed analysts expectations of about $1.89 billion.
Still, the scandal has cast a shadow over the company; CEO Bobby Kotick went on the defense on Tuesday's earnings call with a four-and-a-half minute statement about his commitment to setting things right by Activision employees.
"People will be held accountable for their actions," Kotick said, adding that he will terminate employees "where appropriate," along with company managers and leaders who impede the evaluation and addressing of claims of harassment and discrimination.
Activision's share price was down as much as almost 6% earlier in the day, but rebounded in after-hours trading to a 4% rise from the opening bell.
The workplace-culture imbroglio predominated the question-and-answer portion of the usually dry earnings call.
Chief Operating Officer Daniel Alegre pointed to Blizzard's hiring of an outside law firm to review the company's workforce policies and procedures as a sign of its commitment to improvement. Earlier Tuesday, though, a group of activist Activision employees published a letter criticizing the company's choice of the law firm.
Meanwhile, Gary Cheng filed a class action lawsuit Tuesday in California's Central District Court against Activision on behalf of shareholders for securities fraud surrounding the company's failure to disclose its workplace crisis, claiming this artificially inflated the stock price. Chen is being represented by The Rosen Law Firm of Downtown L.A.
And at least one senior-level human relations executive has recently left the company, said an Activision representative.
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