Minecraft, Mojang, LinkedIn, Skype saw no changes after Microsoft acquisition; Activision Blizzard isn’t going to be such an easy ride for Satya Nadella.
The success of Microsoft’s biggest deal yet hinges on restoring the Activision Blizzard culture, Microsoft CEO Satya Nadella said after announcing the $69 billion transaction. To do that, Microsoft will have to deviate from its usual hands-off approach to acquisitions to what amounts to a “clean up job” of fixing the famed creator of the “Call of Duty” game franchise, who faces multiple allegations of sexual harassment and misconduct, analysts and management experts say. Microsoft has traditionally allowed the companies it acquires to operate autonomously, said RBC Capital Markets analyst Rishi Jaluria. In recent years, Microsoft bought LinkedIn, GitHub, Skype and Mojang, the Stockholm-based creator of the video game series Minecraft, all of which have not gone through major changes since their acquisitions.
The Activision deal announced Tuesday requires a heavier hand. Since July, Activision has faced a lawsuit from California regulators alleging that the company “promoted a sexist culture.” It has also been the subject of investigative stories detailing internal allegations of sexual harassment, and workers have staged strikes to protest Activision’s response to the problems. Activision said it has received requests from the US Securities and Exchange Commission for information “related to employment and related matters” and is working with the agency.
Activision CEO Bobby Kotick, whose handling of the alleged misconduct has attracted media attention, is expected to leave the company after the transaction closes, a source said. “However, cultural issues are never one person,” Jaluria said. “There’s a lot more work to come for Microsoft.”
The company has started making changes.
Activision recently laid off about three dozen employees after its own investigation and said it has implemented high-level staff changes and has invested more in anti-harassment and anti-discrimination training since October last year.
The board of directors has formed a Workplace Responsibility Committee to monitor the company’s progress in improving its 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 make improvements in our culture and create 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 extending our culture of proactive inclusion to the great teams in Activision Blizzard.”
Before the deal is expected to close in 2023, Microsoft will be limited by what it can do, said Kathryn Harrigan, a professor at Columbia Business School who specializes in business growth and turnarounds. In addition to declaring it a priority, Microsoft can ask questions and collect data, she said, adding that a good place to start is collecting information such as salary data to identify pay differentials. Activision agreed to pay $18 million in September to settle a complaint filed by the U.S. Equal Employment Opportunity Commission about sexual harassment and discrimination.
After the deal closes, Microsoft could take a more active role by hiring consultants, engaging law firms or mandating sensitivity training, said Brian Uzzi, a professor at Northwestern’s Kellogg School of Management.
Microsoft could also launch its own investigation into the culture at Activision, he added.
Ultimately, Microsoft may decide to renew Activision’s management team, Jaluria said.
LIGHT AT END OF THE TUNNEL
That would be good news for some Activision employees, who have demanded Kotick’s removal by organizing a strike and spreading a petition.
Jessica Gonzalez, a former Activision employee who helped lead workers’ activism, said she is cautiously optimistic that conditions will improve after the acquisition. But employees still need better representation in the company to make lasting change, she said.
Microsoft will have to overcome its own culture problems. The company’s board of directors said in January it hired a law firm to review its policies on sexual harassment and gender discrimination after shareholders backed a proposal in November calling on Microsoft to review the effectiveness of its policies. .
That vote followed a Wall Street Journal report that Microsoft founder Bill Gates left the company’s board of directors in 2020 amid an investigation into the billionaire’s past intimate relationship with a female employee.
Nadella released a statement on January 13 announcing plans for the review and said the board values the importance of a safe and inclusive workforce. He called culture ‘our number 1 priority’. He used similar language in his comments Tuesday about Activision.