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Activision Blizzard crisis a worst-case scenario employers should heed
12/08/2021
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John VDLD
John van der Luit-Drummond is editor of International Employment Lawyer

The crisis engulfing the developer and publisher of popular video game franchises Call of Duty, Diablo, and World of Warcraft is a perfect storm that industry observers hope will bring about real change to an industry that they see as blighted by a toxic “bro culture”.

Allegations of gender discrimination and sexual harassment in the disproportionately white male gaming industry is not unprecedented. Executives at well-known gaming firms Riot Games, Rockstar, and Ubisoft have been accused of workplace misconduct in the past several years, but more recent claims levelled at game publishing studio Blizzard Entertainment, and its owner Activision Blizzard, are troubling enough that employers in other industries would be wise to sit up and take note.

It all began with a two-year investigation into Blizzard Entertainment by California’s Department of Fair Employment and Housing (DFEH) and the agency’s subsequent filing of a lawsuit on 20 July alleging violations of California’s Equal Pay Act and Fair Employment and Housing Act by the gaming firm.

The 29-page DFEH complaint alleges that Activision Blizzard, whose approximately 9,500-strong workforce is around 80% male, engaged in “discrimination against female employees in terms and conditions of employment, including compensation, assignment, promotion, termination, constructive discharge, and retaliation”, and claims women of colour were particularly impacted by the company’s discriminatory practices.

Described by the DFEH as having a “frat boy” workplace culture, female staff working on World of Warcraft for Blizzard Entertainment were also subjected to “constant sexual harassment”, including unwanted advances and “derogatory comments about rape” from male employees and supervisors.

A particularly egregious allegation involved the prevalence of “cube crawls”, in which male employees reportedly “drink copious amounts of alcohol as they ‘crawl’ their way through various cubicles in the office and often engage in inappropriate behaviour toward female employees”. The suit also refers to a possible victim of sexual harassment committing suicide on a business trip and generally alleges that the company’s leadership “failed to take all reasonable steps to prevent unlawful discrimination, harassment, or retaliation”.

In response, Activision Blizzard issued a defiant statement accusing California’s DFEH of rushing to file “an inaccurate complaint” that contained “distorted, and in many cases false, descriptions of Blizzard’s past”. The Santa Monica-headquartered company added that it was “sickened” by the suggestion that a toxic environment at the firm caused the death of an employee.

An internal memo to all staff from the company’s chief compliance officer, Frances Townsend, said the DFEH’s complaint was “truly meritless and irresponsible” and presented an “untrue picture of our company, including factually inaccurate, old, and out-of-context stories”. Townsend said she personally felt “valued, [and] treated with respect” since joining the business, which offers a “safe, fair, and inclusive workplace” (Townsend, a former Homeland Security advisor to President Bush, has reportedly been blocking Activision employees on Twitter after she tweeted an article from The Atlantic on the problem of whistleblowing).

Employee reaction to Activision Blizzard’s public and private statements caught the company’s leadership unawares, however. On 26 July, an open letter – now signed by more than 3,100 former and current employees – described the statements as “abhorrent and insulting” and damaging to the industry’s “ongoing quest for equality”. Signatories added that they “no longer trust that our leaders will place employee safety above their own interests”.

An apology from CEO Bobby Kotick quickly followed. The Activision boss admitted the company’s initial responses to the lawsuit were “tone deaf”, revealed that law firm WilmerHale had been instructed to conduct a review of internal policies, and vowed that “anyone found to have impeded the integrity of our processes for evaluating claims and imposing appropriate consequences will be terminated”.

The next day, hundreds of workers staged a walkout at Blizzard Entertainment’s Irving, California headquarters, with organisers demanding the company “improve conditions for employees at the company, especially women, and in particular women of colour and transgender women, non-binary people, and other marginalised groups”.

Within days, and amid intense industry and international press scrutiny, J Allen Brack, president of Blizzard Entertainment, and Jesse Meschuk, Blizzard’s head of human resources, left the embattled game developer. And yet, the bad news for Activision Blizzard kept on coming.

Having been valued at around $62bn before the DFEH lawsuit, the game giant has reportedly lost nearly $8bn in market value as the cumulative effects of the toxic workplace allegations, heightened press scrutiny, and employee discontent all took their toll on the video gaming giant.

To date, two investors have filed a federal securities fraud claim and a derivative shareholder lawsuit aimed at forcing the company to reform its corporate governance and internal procedures. Meanwhile, the SOC Investment Group, another shareholder, has released a letter dismissing Kotick’s proposed remedies as they “do not go nearly far enough”.

The investment group, which works with pension funds sponsored by unions, was particularly critical of the company’s controversial retention of WilmerHale, stating the firm “has no track record of uncovering wrongdoing”; that lead investigator Stephanie Avakian has no “in-depth experience” investigating workplace harassment and abuse; and that the scope of her investigation fails to address the full range of equity issues at the company.

Although SOC may be drawing unfounded conclusions from the retention of WilmerHale, the appointment comes at a time when unionisation is a hot topic in the games industry. A majority of recently surveyed game developers (54%) responded “yes” and 21% said “maybe” when asked whether the industry should unionise.

Although polling from the Game Developers Conference also found that few workers believe unionisation will happen – only one in five respondents believe workers would unionise given the chance – the crisis at Activision Blizzard, coupled with industry concerns over staff burnout, could be enough to inject fresh energy into the union movement that some expect will grow under the Biden administration.

Whether the ongoing turmoil at Activision Blizzard will act as a crossroads for the $300bn gaming industry – sweeping away predatory and enabler executives, fostering greater workplace democratisation and employee relations, improved HR functions, and breakthrough unionisation – remains to be seen. However, employers in the industry, and elsewhere, would be remiss if they refuse to recognise this sorry tale as a worst-case scenario they can learn from to get their own houses in order.