CNBC reported that video game developer Activision Blizzard agreed to pay a $35 million settlement over charges it failed to maintain “adequate” controls for collecting and assessing reports of workplace misconduct and that it violated federal whistleblower protection rules, the Securities and Exchange Commission said Friday.
The SEC claimed workplace misconduct complaints were neither collected nor analyzed as expected by public disclosure regulations, CNBC reported. “Moreover, taking action to impede former employees from communicating directly with the Commission staff about a possible security law violation is not only bad corporate governance, it is illegal,” SEC director Jason Burt said.
The settlement is not an admission of wrongdoing but concludes a probe that focused on Activision Blizzard’s standards from 2018 to 2021.
The SEC included the following paragraph in its press release:
“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,” said Jason Burt, Director of the SEC’s Denver Regional Office. “Moreover, taking action to impede former employees from communicating directly with the Commission staff about a possible securities law violation is not only bad corporate governance, it is illegal.”
The Wall Street Journal reported that female employees at Activision complained for years about alleged sexual assaults and mistreatment. The SEC’s probe examined what Activision’s management knew about the alleged incidents and how it addressed them internally, the Journal reported.
Activision’s system wasn’t designed to collect and analyze complaints about workplace misconduct across its separate business units, the SEC said in a settlement order. As a result, Activision’s management and directors often didn’t have information about employee complaints or incidents involving harassment, the SEC order said.
According to the Wall Street Journal, the settlement also said that Activision’s separation agreements with employees from 2016 to 2021 included an improper clause requiring ex-workers to tell the company if agencies such as the SEC contacted them about reports of misconduct. The SEC said that requirement violated the SEC’s whistleblower-protection rules, which seek to ensure that company insiders aren’t prevented from informing regulators about wrongdoing.
It is interesting to note that The Wall Street Journal reported that the $35 million fine is a significant penalty for an enforcement case focused on a company’s disclosure procedures. The SEC under Chair Gary Gentler and Enforcement Director Gurbir S. Grewal has ratcheted up penalties, saying fines need to be higher to effectively deter wrongdoing.
My hope is that the SEC’s order will result in Activision Blizzard to actually listening to employees who have been harassed or abused in the workplace and enact a significant penalty upon the person(s) who engaged in harassment or abuse. If not, I suppose the SEC can take additional action on the company.