Activision Blizzard to Pay $35 Million to Settle Workplace Misconduct Reporting Probe

The SEC found the video game maker violated whistleblower protection rules, failed to properly assess employee complaints

activision blizzard bobby kotick
Activision Blizzard CEO Bobby Kotick

Video game maker Activision Blizzard will pay $35 million to settle claims related to its process for deciding whether to tell investors about employee workplace misconduct complaints.

The fine follows a Securities and Exchange Commission investigation that found that Activision “lacked controls and procedures” designed to insure that workplace misconduct complaints would be communicated to investors through regulatory disclosures.

The SEC’s probe also found that Activision violated a whistleblower-protection rule from 2016 to 2021 by making former employees sign agreements that said they would notify the company if they were contacted by government investigators.

As is typical, the company settled without admitting or denying the SEC’s allegations.

Activision Blizzard shares slipped 63 cents, less than 1%, to $76.48 in late morning trading as the broader markets fell a fraction.

The settlement follows an $18 million settlement last year with the U.S. Equal Employment Opportunity Commission over claims of rampant sexual harassment towards current and former employees. Following that agreement, Activision shareholders voted to have the company issue an annual report on misconduct.

The SEC’s latest probe was looking at what Activision’s management knew about the incidents of harassment and how it addressed them inside the company and with investors. Regulations governing publicly traded companies say that disclosure controls and procedures “should capture information that is relevant to an assessment of the need to disclose developments and risks that pertain to the issuer’s businesses,” the SEC explained in the settlement agreement.

The regulatory agency found that Activision made risk factor disclosures to investors in its annual reports for 2017, 2018, 2019 and 2020 that referred to the need for attracting and training motivated and skilled staffers.

But the company did not have any system for collecting and analyzing employee complaints about workplace misconduct, the SEC said, and as a result, these complains were not properly disclosed to investors.

“By lacking sufficient information to understand the volume and substance of employee complaints of
workplace misconduct, Activision Blizzard’s management was unable to assess related risks to the
company’s business, whether material issues existed that warranted disclosure to investors, or
whether the disclosures it made to investors in connection with these risks were fulsome and
accurate,” the SEC settlement states.

The whistleblower issue apparently did not prevent any individual employees or former employees from communicating with the SEC staff about potential violations, the SEC said, and Activision revised its separation agreements to remove the offending clause in early 2022.

Separately, Activision is still trying to get dismissed a California case brought by the state’s Civil Rights Department in 2021 over allegations the company ignored complaints of sexual harrassment, discrimination and retaliation, The Wall Street Journal reported. The company has denied the state’s charges and after several failures at dismissal, sued last month over claims the agency improperly slow-walked or withheld information about its contacts with the media and labor unions regarding the case.

Activision Blizzard is set to release its fourth-quarter financial results on Tuesday.