Top executive didn’t inform board of some reports, including alleged rapes; company faces multiple regulatory investigations

Bobby Kotick, chief executive officer of Activision Blizzard. Image credit: The Wrap

bKirsten GrindBen Fritz and Sarah E. Needleman, The Wall Street Journal

Bobby Kotick, the longtime chief executive of videogame giant Activision Blizzard Inc., received a troubling email in July 2018.

A lawyer for a former employee at Sledgehammer Games, an Activision-owned studio, alleged in the email that her client had been raped in 2016 and 2017 by her male supervisor after she had been pressured to consume too much alcohol in the office and at work events.

The female employee reported the incidents to Sledgehammer’s human-resources department and other supervisors, but nothing happened, according to the email, which threatened a lawsuit against the company.

Within months of receiving the email, said people familiar with the situation, Activision reached an out-of-court settlement with the woman, who also had reported one of the incidents to the police. Mr. Kotick didn’t inform the company’s board of directors about the alleged rapes or the settlement, said people with knowledge of the board.

Activision has been thrown into turmoil in recent months by multiple regulatory investigations into alleged sexual assaults and mistreatment of female employees dating back years. Mr. Kotick has told directors and other executives he wasn’t aware of many of the allegations of misconduct, and he has played down others, according to people familiar with the matter and internal documents.

Those documents, which include memos, emails and regulatory requests, and interviews with former employees and others familiar with the company, however, cast Mr. Kotick’s response in a different light. They show that he knew about allegations of employee misconduct in many parts of the company. He didn’t inform the board of directors about everything he knew, the interviews and documents show, even after regulators began investigating the incidents in 2018. Some departing employees who were accused of misconduct were praised on the way out, while their co-workers were asked to remain silent about the matters.

Mr. Kotick has been subpoenaed in a Securities and Exchange Commission investigation into how the company handled reports of misconduct and disclosed them to the public, The Wall Street Journal reported in September. What Mr. Kotick knew about the alleged incidents, and what he told other employees, the board of directors and investors, is part of that probe.

In addition, the California Department of Fair Employment and Housing filed a lawsuit in July alleging that the company ignored numerous complaints by female employees of harassment, discrimination and retaliation, citing what it called its “frat boy” culture. In response, Mr. Kotick drafted an email that he had another executive send to employees under her name that dismissed California’s allegations as presenting “a distorted and untrue picture of our company,” according to internal documents reviewed by the Journal.

In July, Activision employees staged a walkout after criticizing a statement by a company executive playing down a California lawsuit. PHOTO: BING GUAN/BLOOMBERG NEWS

The board of directors was blindsided by the California lawsuit’s allegations, including that an Activision employee killed herself after a photo of her vagina allegedly was circulated at a company party, according to people familiar with the board. Directors have questioned Mr. Kotick about what he knew and why they hadn’t been better informed, these people said. He has told them any cultural issues were centered at the company’s Blizzard Entertainment unit, which he said he had resolved years earlier, these people said.

In a recent interview, Mr. Kotick described himself as transparent with the board and said he provides directors with as much information as they require and is appropriate. “I am very committed to making sure we have the most welcoming, most inclusive workplace in the industry,” he said.

Activision spokeswoman Helaine Klasky said in a written statement that “Mr. Kotick would not have been informed of every report of misconduct at every Activision Blizzard company, nor would he reasonably be expected to have been updated on all personnel issues.” She said Activision sometimes “fell short of ensuring that all of our employees’ behavior was consistent with our values and our expectations.”

Activision’s board, in a statement sent by Ms. Klasky, said it has been “informed at all times with respect to the status of regulatory matters,” and that Mr. Kotick hadn’t said the problems were only at Blizzard, one of the company’s most successful studios.

Santa Monica-based Activision is the second-largest publicly traded videogame company by market capitalization. It employs about 10,000 people, and its hit franchises include Call of Duty, Candy Crush and World of Warcraft. Under Mr. Kotick’s leadership, the company’s market value has risen to about $54 billion, from $14 billion a decade ago.

Since the California lawsuit, Activision has received more than 500 reports from current and former employees alleging harassment, sexual assault, bullying, pay disparities and other issues, according to people familiar with the matter. The Activision spokeswoman said the company is investigating the claims using teams from both inside and outside the company.

The examples of alleged misconduct by Activision employees cited in this article haven’t previously been reported.

Mr. Kotick, 58 years old, is one of the highest-paid chief executives of a U.S. publicly traded company, with a pay package in 2020 valued at $154 million. In October, after the Journal approached Activision with questions for this article, Mr. Kotick told employees he would ask the board to reduce his total annual compensation to $62,500, and that the company was implementing a zero-tolerance harassment policy and ending mandatory arbitration for harassment and discrimination claims.

In August, Activision named a longtime employee, Jennifer Oneal, to be Blizzard’s co-head, making her the first woman to lead one of the company’s business units. The following month, she sent an email to a member of Activision’s legal team in which she professed a lack of faith in Activision’s leadership to turn the culture around, saying “it was clear that the company would never prioritize our people the right way.”

Ms. Oneal said in the email she had been sexually harassed earlier in her career at Activision, and that she was paid less than her male counterpart at the helm of Blizzard, and wanted to discuss her resignation. “I have been tokenized, marginalized, and discriminated against,” wrote Ms. Oneal, who is Asian-American and gay.

She described a party for an Activision development studio she attended with Mr. Kotick around 2007 in which scantily clad women danced on stripper poles. At the same party, a DJ encouraged female attendees to drink more so the men would have a better time, according to another person who was present.

Ms. Klasky said Mr. Kotick didn’t remember attending such a party. The company announced on Nov. 2 that Ms. Oneal is leaving Blizzard at year-end. Ms. Oneal said in an email statement that she made a decision that was best for her and her family.

Activision’s hit videogame franchises include Call of Duty, Candy Crush and World of Warcraft.

In the interview, Mr. Kotick disputed that Activision is unwelcoming to women and said the examples of misconduct identified by the Journal are exceptions that don’t reflect the company overall. He said he is spending more time on workplace issues. “If there are experiences people have in the workplace that make them uncomfortable, we’re much more adept at being able to respond to those,” he said. Mr. Kotick said that he and the board now expect to be kept better informed than in the past about workplace issues.

Mr. Kotick has been a technology entrepreneur since he dropped out of the University of Michigan in the 1980s at the urging, he said, of Steve Jobs. He has counted the former casino magnate Steve Wynn as one of his mentors. Together with a group of investors, he acquired Activision out of bankruptcy in 1991 for about $400,000.

He forged his reputation by acquiring successful development studios behind popular gaming franchises. Mr. Kotick long allowed those studios to operate as independently as possible, which he believed would foster the development of hit games. Former employees at several studios said behavior such as workplace drinking, comments about women’s appearances, the sharing of explicit content and staff-organized trips to strip clubs were common, and they didn’t feel comfortable complaining to human resources.

The Activision spokeswoman said human resources began reporting directly to the corporate office in 2019, and that the prior setup “occasionally allowed some employees to conduct themselves in truly regrettable ways.”

Mr. Kotick approves high-profile hiring decisions and the exit and pay packages of star developers, and he is typically aware of any major problems in each of Activision’s 12 development studios and three major business units, according to people familiar with his leadership.

Ms. Klasky, the company spokeswoman, said that although Mr. Kotick might express opinions on employment matters brought to his attention, he “generally isn’t involved in the hiring, compensation or termination decisions for most employees.”

Dan Bunting, co-head of Activision’s Treyarch studio, was accused by a female employee of sexually harassing her in 2017 after a night of drinking, according to people familiar with the incident. Activision’s human-resources department and other supervisors launched an internal investigation in 2019 and recommended that he be fired, but Mr. Kotick intervened to keep him, these people said. Mr. Bunting, who led Treyarch through the production of several successful Call of Duty games, was given counseling and allowed to remain at the company, these people said.

Mr. Bunting didn’t respond to requests for comment. The Activision spokeswoman said an outside investigation was conducted in 2020. “After considering potential actions in light of that investigation, the company elected not to terminate Mr. Bunting, but instead to impose other disciplinary measures,” she said. Mr. Bunting left the company after the Journal asked about the incident.

Although Mr. Kotick didn’t inform the board about the email accusing the Sledgehammer Games supervisor of rape, Activision did take action. The accuser’s lawyer, Harmeet Dhillon, identified the supervisor as Javier Panameno, and said he also had sexually harassed a second woman at the studio.

The employee who accused him of the assaults reported the second incident, in 2017, to the police. No charges were brought.

The Activision spokeswoman said the company immediately investigated the two assault reports after executives received the 2018 email, and fired Mr. Panameno two months later. She said that following the two incidents, the employee said she was too intoxicated to remember what happened, and that Mr. Panameno’s recollection of the second encounter conflicted with the employee’s report to police.

She said the female employee hadn’t reported either incident to the company before she left in November 2017. Ms. Dhillon’s email, however, said the employee had told Sledgehammer human resources about both incidents. A colleague of the former employee said the same.

Mr. Panameno didn’t respond to requests for comment. A spokesman for his subsequent employer, online game developer Zynga Inc., said it launched an internal investigation after questions from the Journal, and Mr. Panameno subsequently resigned.

The email that the accuser’s lawyer sent Mr. Kotick also said another Sledgehammer employee, Eduard Roehrich, had been accused of sexual harassment. A female employee, Ashley Mark, said in an interview that she complained to supervisors and human resources in 2017 about harassment by Mr. Roehrich, including at a company party at which there was heavy drinking.

Mr. Roehrich confirmed he was investigated for a harassment incident at an office party in 2017, and said “it was unclear what exactly did and did not happen, since a lot of alcohol was involved.” He added that “it was stupid of me and totally uncalled for to get that drunk.” He said he was given a two-week paid leave and allowed to remain at Activision in a different position.

In a human-resources letter to him in 2017, which was shared by Mr. Roehrich, Activision asked that he “keep this matter confidential.” Mr. Roehrich, a German citizen, said he was let go in 2018 after he had an argument with his manager about his green card. The Activision spokeswoman confirmed that he was terminated for that reason.

Excessive drinking has been associated with numerous complaints of alleged employee misconduct at Activision, according to former employees. Ms. Klasky said the company will soon ban alcohol in the office.

Mr. Kotick, Activision’s CEO, spoke at a Call of Duty event in 2010. PHOTO: JASON MERRITT/GETTY IMAGES

The Equal Employment Opportunity Commission, which has been investigating Activision since 2018, said in a complaint made public in September that employees endured “sexual harassment that was severe or pervasive to alter the conditions of employment.” Activision said it agreed to pay $18 million to settle the EEOC’s case. The company said at the time it would take other steps to “prevent and eliminate harassment.”

The California regulator that sued Activision in July has challenged the settlement, saying the proposed amount is too low and that the agreement is harmful to victims and its case. The Activision spokeswoman noted that the EEOC has accused the lawyers leading the California case of misconduct. The state agency has denied those allegations.

Activision didn’t make disclosures to investors about the more than two-year-long EEOC probe until the lawsuit became public this year, and disclosed the SEC probe in September after questions from the Journal. A lawyer for Activision said most companies don’t disclose EEOC investigations.

Over the years, Mr. Kotick himself has been accused by several women of mistreatment both inside and outside the workplace, and in some instances has worked to settle the complaints quickly and quietly, according to people familiar with the incidents and documents reviewed by the Journal.

In 2006, one of his assistants complained that he had harassed her, including by threatening in a voice mail to have her killed, according to people familiar with the matter. He settled the matter out of court, the people said.

The Activision spokeswoman said: “Mr. Kotick quickly apologized 16 years ago for the obviously hyperbolic and inappropriate voice mail, and he deeply regrets the exaggeration and tone in his voice mail to this day.”

In 2007, he was sued by the flight attendant on a private jet he co-owned. The flight attendant claimed the plane’s pilot had sexually harassed her, and, after she complained to the other owner, Mr. Kotick fired her. The defendants denied the allegations. In a separate action related to legal fees in the case, an arbitrator, citing what he said was sworn testimony, wrote that Mr. Kotick told the flight attendant and her attorneys, “I’m going to destroy you.” A spokesman for Mr. Kotick denied that he said that.

In 2008, they settled by paying the attendant $200,000, according to the arbitrator’s decision. A spokesman for Mr. Kotick said he couldn’t have fired her in retaliation for complaining because she never complained directly to him.

In 2020, about 30 female employees who worked in Activision’s esports division wrote an email to their unit’s leaders saying that female employees had been subject to unwanted touching, demeaning comments, exclusion from important meetings, and unsolicited comments on their appearance. Mr. Kotick was aware of the email, according to people familiar with the matter.

Activision’s spokeswoman said that after meetings with representatives of the group, the company took steps such as providing diversity and inclusion training to the esports leadership team.

Former Blizzard technology chief Ben Kilgore faced multiple allegations of sexually harassing female staffers over the course of several years, according to people familiar with the matter. During a company investigation, Mr. Kilgore lied about whether he had a relationship with a lower-level employee, some of these people said. He was fired in 2018 in a move approved by Mr. Kotick.

Videogamers played a new Activision game at a company event in 2017. PHOTO: JOE SCARNICI/GETTY IMAGES

Michael Morhaime, the former head of Blizzard, sent an email to employees thanking Mr. Kilgore “for his many contributions over the last four and a half years,” according to a copy of the email. Some employees said they were taken aback by the praise, particularly given that they had been told not to discuss the circumstances of Mr. Kilgore’s departure.

In their 2020 letter, the female esports employees complained about “the feeling of defeat when an abuser exits the company with positive, public farewells.”

The Activision spokeswoman declined to comment on the Kilgore case. Mr. Kilgore didn’t respond to requests for comment.

The employee email Mr. Kotick drafted about California’s lawsuit in July said it included “factually incorrect, old and out of context stories.” Mr. Kotick approves most internal companywide emails, as well as media responses, according to internal documents and people familiar with the matter.

He directed the email to be sent to employees by Frances Townsend, a former Bush administration official who joined Activision earlier this year and is one of the company’s few female senior executives.

Activision employees criticized the statement and Ms. Townsend on social media and later organized a walkout. Ms. Townsend apologized for the statement at a company women’s group she led, attended by hundreds of Activision employees. Some shared their own stories of harassment and asked why Activision didn’t care about them, according to a recording of the meeting. Employees asked Ms. Townsend to resign as head of that group, documents show, which she did.

Ms. Klasky, the Activision spokeswoman, said Mr. Kotick takes responsibility for the incident and regrets it. “Ms. Townsend should not be blamed for this mistake,” she said.

Mr. Kotick backtracked, publicly calling the earlier statement sent by Ms. Townsend tone deaf. “We will do everything possible to make sure that together, we improve and build the kind of inclusive workplace that is essential to foster creativity and inspiration,” he said in a new message to employees.

—Jim Oberman contributed to this article.

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