The U.S. Securities and Exchange Commission (SEC) has launched an investigation against Activision Blizzard. They want to determine whether the company has effectively and thoroughly communicated the difficult internal conditions to investors. This includes summoning high-ranking executives from Activision Blizzard (WoW, Call of Duty, Diablo 3), including the company’s CEO Bobby Kotick.
What is going on?
- A California state agency filed a lawsuit against Activision Blizzard in July, after investigating the company for 2 years. The agency accused Blizzard of having a culture of sexism, where women were paid less than men and were subjected to sexual harassment.
- The lawsuit grew into a scandal that harmed the company’s stock value and reputation.
- Now, the SEC has initiated an investigation: apparently, they want to get to the bottom of the matter. For the SEC, it is crucial whether the internal problems were communicated to investors quickly and completely. As a publicly traded company, Activision Blizzard is required to be transparent: anyone investing money in the company must be informed about matters that could affect the company’s value.
Subpoenas against high-ranking executives at Activision Blizzard
This is what is currently known about the proceedings: The Wall Street Journal reports that the SEC has launched a comprehensive investigation against Activision Blizzard. They have summoned several high-ranking executives from Activision Blizzard, including CEO Bobby Kotick.
It is said that the SEC also demands the handing over of various documents, including six personnel files of former employees and records about how Kotick handled various complaints about sexual harassment and discrimination at Activision Blizzard.
Apparently, the investigation mainly focuses on determining whether Activision Blizzard properly and timely communicated the complaints regarding
- discrimination
- the unequal pay of men and women
- workplace harassment
to investors and other involved parties.
Should Blizzard have informed the public earlier?
How has Blizzard communicated the information? In Activision Blizzard’s Q2/2021 quarterly report, there is a passage in the “Company Outlook” that mentions potential difficulties in the coming months. Here, the lawsuit is mentioned. It states that if Activision Blizzard suffers from a prolonged period of negative attention, this could significantly reduce productivity and have further negative impacts. They are monitoring all aspects of the business for such effects.
The quarterly report was released on August 3.
However, the question could be whether Activision Blizzard should have reported to investors earlier that an investigation by the agency against the company was underway and how serious some of the accusations are. Because of this investigation, the management level of Activision Blizzard has apparently already taken action.
For instance, Blizzard responded to allegations of sexual harassment in 2020 and fired a key developer at WoW. The Game Director of WoW was apparently dismissed for an incident that occurred many years ago. However, the reasons for the dismissal remained confidential in 2020 and only became clear in the aftermath of the lawsuit.
This seems to be the critical point of the investigation: Should Activision Blizzard have informed investors much earlier that internal complaints were ongoing and even an investigation was underway – and not just when the scandal was already in the news?
What consequences could Blizzard face? The SEC has several ways to take action against a company if the investigation reveals that “abusive behavior exists.” The Commission can bring the case before a federal court or an administrative court.
Possible consequences include:
- An injunction preventing further violations of laws or regulations
- fines can be imposed
- illegal profits may be ordered to be returned
- a person can be barred from working as an executive in a company
- individuals could face fines or prison sentences
In 2013, the SEC imposed a penalty of approximately 13 billion USD on the bank “JP Morgan Chase”. The bank was accused of being involved in illegal activities during the financial crisis.
Blizzard says: Important changes have already been made
This is what those involved say: Blizzard states that they have already made several important changes to alter internal processes and behavioral guidelines to ensure that there is no place for discrimination, harassment, or inequality of any kind at Activision Blizzard.
Activision Blizzard has replaced the head of Blizzard, J. Allen Brack, with a new “man/woman” leadership duo. Furthermore, the head of HR has left Blizzard.
The SEC confirms to the Wall Street Journal that it has initiated investigations. Activision Blizzard is cooperating with the SEC, it is stated. The proceedings focus on the extent to which the company has disclosed matters concerning employees and other related topics.
We have intensively dealt with the topic on MeinMMO and shed light on the backgrounds and implications of the sexism scandal:
