Activision Blizzard CEO pledges to cut his salary, waive arbitration in letter to employees

Activision Blizzard CEO Bobby Kotick, in a letter to employees published Thursday, pledged that major changes are coming to the video game publisher, including a “new zero-tolerance harassment policy,” the waiving of required arbitration of sexual harassment and discrimination claims, and a major pay cut for Kotick. He’s asking Activision Blizzard’s board of directors to slash his salary — and his overall total compensation — to $62,500 “to ensure that every available resource is being used in the service of becoming the industry leader in workplace excellence.”

Earlier this year, Kotick and the company agreed to halve his base pay for 2021 from $1.75 million to $875,000. But Kotick was also awarded nearly $150 million in stock, making his planned total compensation for the year $154.6 million.

Now, Kotick says he’s asked the company’s board to keep his compensation at that the minimum level allowed by law “until the Board has determined that we have achieved the transformational gender-related goals and other commitments” described elsewhere in his letter. He told employees that “five new changes” are being implemented at the company, citing the Equal Employment Opportunity Commission’s investigation into Activision Blizzard, “public discussion on discrimination and harassment,” and employee reports and feedback.

They are:

1. We are launching a new zero-tolerance harassment policy company-wide – In the past, when we discovered and substantiated harassment, we terminated some employees and provided verbal or written warnings or different disciplinary actions to others. In retrospect, to achieve our goals for workplace excellence, this approach is no longer adequate. We need tougher rules and consistent monitoring across the entire company to make sure reports are being handled correctly and discipline is appropriate and swift. As a result, we are implementing a zero-tolerance policy across Activision Blizzard that will be applied consistently. Our goal is to have the strictest harassment and non-retaliation policies of any employer, and we will continue to examine and tighten our standards to achieve this goal everywhere we do business. Any Activision Blizzard employee found through our new investigative processes and resources to have retaliated against anyone for making a compliance complaint will be terminated immediately. In many other instances of workplace misconduct, we will no longer rely on written warnings: termination will be the outcome, including in most cases of harassment based on any legally protected category. Future employment contracts and equity awards will be clear: termination for these reasons will result in the immediate forfeiture of future compensation. We also want to ensure that employees who file reports are encouraged, protected, and heard. For all reports of harassment and retaliation, we will investigate the allegation and whether the Activision Blizzard personnel who received the report of such behavior took the appropriate steps to protect the integrity of our compliance processes. There may be some places around the world where local law may restrict some of these measures. In those cases, we will apply the highest permissible standards and the strongest possible discipline.

2. We will increase the percentage of women and non-binary people in our workforce by 50% and will invest $250 million to accelerate opportunities for diverse talent – Today, approximately 23% of our global employee population identifies as women or non-binary. Building on the success that King and other business units have achieved, we will seek to increase our percentage of women and non-binary professionals by approximately 50% – to more than one-third across the entire company – within the next five years and hopefully faster. Each franchise team, business unit, and functional area will be expected to have plans to help fulfill this ambition. With respect to diversity, while we perform better than our peers with 30% of our U.S. workforce from diverse or under-represented communities, broadening this progress will continue to be a significant focus of mine as well as company, business unit, and franchise leadership. To further this commitment, we’ll be investing an additional $250 million over the next 10 years in initiatives that foster expanded opportunities in gaming and technology for under-represented communities. This commitment includes inspiring diverse talent to pursue career opportunities in gaming through an ABK Academy that includes partnerships with colleges and technical schools serving under-represented communities, mentorships for participants, and a rotating apprenticeship program that leads to game development jobs, similar to the programs we began with the United Negro College Fund and Management Leadership for Tomorrow. We will also provide learning, development, and advanced degree opportunities for current employees to increase the number of women and those from under-represented communities in leadership positions across the company and in our industry. In the coming months, Brian Bulatao, Julie Hodges, and I will share details about how we are operationalizing these goals and implementing and measuring this expanded investment.

3. Based on feedback from employees, we are waiving required arbitration of sexual harassment and discrimination claims – For any Activision Blizzard employee who chooses not to arbitrate an individual claim of sexual harassment, unlawful discrimination, or related retaliation arising in the future, the company will waive any obligation to do so.

4. We will continue to increase visibility on pay equity – As described in the recent note from our President, Daniel Alegre, and our Chief Administrative Officer, Brian Bulatao, the company continues to focus on pay equity for employees. In fact, our U.S. analysis showed that women at the company on average earned slightly more than men for comparable work in 2020. To ensure transparency on our continuing commitment to pay equity, we will report these results annually.

5. We will provide regular progress updates – We will be monitoring the progress of our business units, franchise teams, and functional leaders with respect to workplace initiatives and we will provide a status report quarterly. We also will be adding a dedicated focus on this vital work in our annual report to shareholders and in our annual ESG report with information on gender hiring, diversity hiring, and workplace progress.

In his letter, Kotick again both apologized to employees and thanked them for working under doubly difficult conditions, citing the COVID-19 pandemic and sweeping allegations of harassment and discrimination at the company.

“I truly wish not a single employee had had an experience at work that resulted in hurt, humiliation, or worse – and to those who were affected, I sincerely apologize,” Kotick said. “You have my commitment that we will do everything possible to honor our values and create the workplace every member of this team deserves.”

In July, Activision Blizzard was sued by the California Department of Fair Employment and Housing (DFEH) following a two-year investigation. The suit alleges that Activision Blizzard allegedly fostered a “frat boy culture” that allowed for gender-based discrimination and sexual harassment. Several top executives, including former Blizzard president J. Allen Brack, were named in the lawsuit for knowing about and enabling the alleged behavior. The lawsuit and investigation are ongoing.

Shortly after the lawsuit went public, Activision Blizzard made an official statement in which it said the lawsuit included “distorted, and in many cases, false, descriptions of Blizzard’s past.” Activision Blizzard CEO Bobby Kotick later apologized for the company’s “tone deaf” response to the accusations, and the company hired a law firm to audit the company’s “policies and procedures.” Upset with leadership response, Activision Blizzard workers sent an open letter to executives and walked off work in protest.

Activision Blizzard shareholders filed a separate lawsuit in August, alleging that negligent leadership damaged share prices. The DFEH later expanded its initial complaint to accuse Activision Blizzard of suppressing evidence in the investigation. It also adjusted some language throughout the lawsuit to explicitly include contingent and contract workers at Activision Blizzard. Activision Blizzard denied destroying evidence.

In September, it was revealed that Activision Blizzard was also the subject of multiple federal investigations from the U.S. Securities and Exchange Commission (SEC) and the Equal Employment Opportunity Commission (EEOC). The company settled with the latter for $18 million.