The success of Microsoft’s biggest deal ever builds on Activision Blizzard’s rehabilitating culture, Microsoft CEO Satya Nadella announced after announcing a $69 billion transaction.
Accomplishing this would require Microsoft to deviate from its usual hands-off approach on acquisitions by tackling the “clean up” job of fixing the famed creator of the “Call of Duty” game franchise, which has been plagued by many of the sexual assault allegations. faces allegations of misconduct, say analysts and management experts.
RBC Capital Markets analyst Rishi Jaluria said Microsoft has traditionally allowed the companies it acquired to run autonomously. In recent years, Microsoft bought LinkedIn, GitHub, Skype and Mojang, the Stockholm-based maker of the video game series Minecraft, all of which haven’t seen major changes since the acquisition.
The Activision deal announced on Tuesday will require a heavy hand. Since July, Activision has faced a lawsuit from California regulators, accusing the company of “fostering a sexist culture.” Activision said it received requests for information “with respect to employment matters and related issues” from the US Securities and Exchange Commission and is cooperating with the agency.
According to a source, Activision CEO Bobby Kotick, whose handling of the alleged misconduct has attracted media scrutiny, is expected to leave the company after the transaction closes. However, “cultural issues are never one person,” Jaluria said. “There’s going to be a lot more work for Microsoft.”
The company has started making changes.
Activision recently laid off nearly three dozen employees after its investigation said it replaced high-level personnel and increased its investment in anti-harassment and anti-discrimination training as of last October.
Its board of directors formed a workplace accountability committee to oversee the company’s progress in improving the culture.
Activision said it has investigated — and will continue to investigate — complaints of harassment, discrimination and retaliation and will provide regular updates. In October, Activision announced a zero-tolerance harassment policy.
“We recognized that we needed to improve our culture and ensure an environment where people feel safe, comfortable and respected,” Kotick told Reuters.
A Microsoft spokesperson said the company is committed to inclusion and respect in gaming and “looks forward to expanding our culture of active inclusion to great teams at Activision Blizzard.”
Before the deal is expected to close by fiscal year 2023, Microsoft is limited in what it can do, said Katherine Harrigan, a professor at Columbia Business School who specializes in corporate development and turnaround. In addition to declaring that this is a priority, Microsoft can ask questions and collect data, he said, adding that a good place to start is to collect information such as salary data to identify pay disparities. Activision agreed to pay $18 million in September to settle a complaint filed by the U.S. Equal Employment Opportunity Commission on issues of sexual harassment and discrimination.
Brian Uzi, a professor at Northwestern’s Kellogg School of Management, said that after the deal closes, Microsoft could take a more active role by hiring consultants, bringing in law firms or mandating sensitivity training.
He said Microsoft may also start its own investigation of the culture at Activision.
Ultimately, Microsoft may decide to reform Activision’s management team, Jaluria said.
LIGHT AT THE END OF TUNNEL
This will be good news for some Activision employees, who have called for Kotick’s removal by walking out and circulating a petition.
Jessica Gonzalez, a former Activision employee who helped lead Activision, said she is cautiously optimistic that conditions will improve following the acquisition. But employees still need better representation in the company to achieve lasting change, she said.
Microsoft will need to address its culture issues. The company’s board of directors said in January that it had appointed a law firm to review its sexual harassment and gender discrimination policies, after shareholders backed a proposal in November to ask Microsoft to review the effectiveness of its policies. did.
That vote followed a Wall Street Journal report that Microsoft founder Bill Gates left the company’s board in 2020 amid an investigation into the billionaire’s past intimate relationship with a female employee.
Nadella issued a statement on January 13 announcing plans for the review, saying the board appreciates the importance of a safe and inclusive workforce. He called culture “our No. 1 priority”. He used similar language in his remarks about Activision on Tuesday.
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