Analysis-Microsoft faces challenge cleaning up Activision Blizzard’s culture


(Reuters) – The success of Microsoft’s greatest deal ever rides on rehabilitating Activision Blizzard’s culture, Microsoft CEO Satya Nadella declared after asserting the $69 billion transaction.

Accomplishing that can require Microsoft to deviate from its common hands-off strategy on acquisitions to sort out what quantities to a “clean up” job of fixing the famed maker of the “Call of Duty” video games franchise, which faces a number of accusations of sexual harassment and misconduct, analysts and administration specialists say.

Microsoft has historically allowed the businesses it acquires to run autonomously, RBC Capital Markets analyst Rishi Jaluria stated. In current years, Microsoft bought LinkedIn, GitHub, Skype and Mojang, the Stockholm-based creator of the online game collection Minecraft, all of which haven’t seen main adjustments since their acquisitions.

The Activision deal introduced on Tuesday would require a heavier hand. Since July, Activision has confronted a lawsuit from California regulators alleging the corporate “fostered a sexist culture.” It additionally has been the topic of investigative tales detailing allegations of sexual harassment internally, and its staff have staged walkouts to protest Activision’s response to the problems. Activision stated it acquired requests from the U.S. Securities and Exchange Commission for info “concerning employment issues and associated points,” and is cooperating with the company.

Activision CEO Bobby Kotick, whose dealing with of the alleged misconduct has attracted media scrutiny, is anticipated to go away the corporate after the transaction closes, in response to one supply. However, “cultural issues are never one person,” Jaluria stated. “There is going to be a lot more work for Microsoft.”

The firm has begun making adjustments.

Activision not too long ago pushed out about three dozen staff following its personal investigation and stated it made high-level personnel adjustments and elevated its funding in anti-harassment and anti-discrimination coaching as of final October.

Its board of administrators fashioned a Workplace Responsibility Committee to supervise the corporate’s progress in bettering culture.

Activision stated it has investigated — and can proceed to research — complaints of harassment, discrimination and retaliation and can present common updates. In October, Activision introduced a zero-tolerance harassment coverage.

“We acknowledged that we would have liked to make enhancements in our culture and guarantee an setting the place individuals really feel protected, comfy and revered,” Kotick instructed Reuters.

A Microsoft spokesperson stated the corporate is dedicated to inclusion and respect in gaming and is “wanting ahead to extending our culture of proactive inclusion to the good groups throughout Activision Blizzard.”

Before the deal is anticipated to shut by fiscal 2023, Microsoft is proscribed by what it could possibly do, stated Kathryn Harrigan, a professor at Columbia Business School who makes a speciality of company progress and turnarounds. Beyond declaring that it’s a precedence, Microsoft can ask questions and accumulate knowledge, she stated, including that one good place to begin is to assemble info reminiscent of wage knowledge to establish wage disparity. Activision agreed to pay $18 million in September to settle a grievance filed by the U.S. Equal Employment Opportunity Commission over sexual harassment and discrimination points.

After the deal closes, Microsoft can take a extra energetic position by hiring advisers, bringing in legislation corporations or mandating sensitivity coaching, stated Brian Uzzi, a professor at Northwestern’s Kellogg School of Management.

Microsoft might additionally launch its personal investigation of the culture at Activision, he added.

Ultimately, Microsoft might determine to revamp Activision’s administration group, Jaluria stated.


That could be excellent news for some Activision staff, who’ve demanded Kotick’s removing by staging a walkout and circulating a petition.

Jessica Gonzalez, a former Activision worker who has helped lead employee activism, stated she is cautiously optimistic that circumstances will enhance following the acquisition. But employees nonetheless want higher illustration on the firm to attain lasting change, she stated.

Microsoft might want to overcome its personal culture points. The firm’s board of administrators in January stated it employed a legislation agency to conduct a assessment of its sexual harassment and gender discrimination insurance policies after shareholders supported a proposal in November calling on Microsoft to assessment the effectiveness of its insurance policies.

That vote adopted a Wall Street Journal report that Microsoft founder Bill Gates left the corporate’s board in 2020 amid a probe of the billionaire’s previous intimate relationship with a feminine worker.

Nadella issued an announcement on Jan. 13 asserting plans for the assessment, saying the board appreciates the significance of a protected and inclusive workforce. He referred to as culture “our No. 1 priority.” He used related language in his remarks Tuesday about Activision.

(Reporting by Sheila Dang in Dallas, Julia Love in San Francisco, and Dawn Chmielewski in Los Angeles; Additional reporting by Krystal Hu in New York; Editing by Kenneth Li and Lisa Shumaker)

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