A new lawsuit filed by New York City Employees’ Retirement System has alleged Activision Blizzard CEO Bobby Kotick fast-tracked a takeover bid from Microsoft in order to escape liability for wrongdoing following a damning Wall Street Journal report claiming he’d known about sexual misconduct at the Call of Duty publisher “for years”.
Activision Blizzard has faced a relentless stream of shocking allegations relating to its workplace culture since last July, when a State of California lawsuit filing called the publisher “a breeding ground for harassment and discrimination against women”. Building on that lawsuit, the Wall Street Journal published a report in November claiming Bobby Kotick had been aware of the allegations of sexual misconduct and mistreatment of female employees across many parts of the company “for years”, but had failed to act on them or tell the board of directors and executives everything he knew.
It’s these claims relating to Kotick’s behaviour that form the backbone of a new lawsuit filed by the New York City Employees’ Retirement System and pension funds, which owns Activision shares. The filing (as spotted by Axios) aims to secure documentation Activision has reportedly so far refused to release so that the plaintiff can carry out an investigation into the board’s “failure to maintain a safe and non- discriminatory working environment for its (specifically minority and female) employees, and failure to take action in response to repeated, grave allegations of misconduct, discrimination, and harassment by Activision’s senior executives.”
The filing says it wants the documentation in order to investigate any wrongdoing by the publisher’s board of directors and to potentially bring a derivative action on behalf of Activision. Citing the Wall Street Journal report among others, the lawsuit specifically singles out Bobby Kotick’s reported awareness of “numerous credible allegations of misconduct by the Company’s senior executives” and his alleged failure to “address them or prevent further offenses” as an example of such wrongdoing, saying it believes Kotick faced a “strong likelihood of liability for breaches of fiduciary duty, together with other members of the Board.”
The lawsuit calls the board’s decision to allow Kotick to negotiate Microsoft’s 69BN acquisition of the Call of Duty publisher – a process reportedly started just days after the Wall Street Journal report was published – “inexcusable” given Kotick’s “potential liability for breaches of fiduciary duty”, and given that he “stands to personally receive substantial material benefits whose value is not directly aligned with the Merger price.”
“The speed with which Kotick moved to not just set an offer ceiling, but to execute an agreement, was to be expected,” the filing argues. “Not only did the Merger offer Kotick and his fellow directors a means to escape liability for their egregious breaches of fiduciary duty, but it also offered Kotick the chance to realise substantial nonratable benefits.” These benefits will reportedly include $22m for Kotick if he makes “appropriate progress” towards certain targets related to gender discrimination – targets the company is apparently already legally obligated to meet following an agreement with the Equal Employment and Opportunity Commission.
The New York City Employees’ Retirement System filing, which additionally argues the acquisition agreement reached by Kotick “appears to seriously undervalue Activision as it represents a mere 1% premium” over the company’s share price prior to last July’s California lawsuit, is aiming to secure the right “inspect certain corporate books and records” so that it can continue its investigation into alleged misconduct by the board of directors.
Despite a flurry of game announcements in recent weeks as it attempts to put the last ten months of shocking allegations into its workplace culture behind it, Activision – which recently wrote to shareholders urging them to vote against a New York State proposal that it should publish an annual report detailing the effectiveness and outcomes of its efforts to prevent abuse, harassment, and discrimination in its workplace – continues to be mired in controversy.
In March, it was sued for wrongful death by the parents of a former Activision Blizzard employee who committed suicide during a company retreat in 2017, alleged to be the result of sexual harassment by work colleagues. More recently, a US district court judge said they were “prepared to approve” Activision Blizzard’s $18m USD settlement of a separate sexual harassment lawsuit filed by the Equal Employment Opportunity Commission last year, despite objections from other parties, and events took a further dramatic turn in April when the governor of California was accused of interfering to support Activision Blizzard in the state discrimination and harassment lawsuit that kickstarted the publisher’s woes.