Scandal hit Activision Blizzard CEO tells staff he'd consider leaving, Dow Jones says

NEW YORK (BLOOMBERG) – Activision Blizzard chief executive officer Bobby Kotick told senior managers last week he would consider departing the video game company if he is unable to quickly fix culture problems, Dow Jones reported, citing people familiar with the comments.

Mr Kotick did not rule out the possibility for his departure if misconduct issues in the company are not resolved “with speed”, said the people, who were not identified by Dow Jones.

The comment came after a Wall Street Journal article last week alleged the CEO was aware of allegations of sexual harassment and assault against female employees, including rape, but failed to report them to the board of directors, prompting criticism from staff, investors and business partners.

Mr Kotick remaining CEO “will only elongate uncertainty” and “impede the rebuilding and restoring of morale and productivity”, Truist Securities analyst Matthew Thornton wrote in a report last week, adding that the company will likely change its CEO, which would be a positive.

Activision did not immediately respond to an e-mailed query seeking a comment on the Dow Jones report Sunday. In a statement following the earlier Journal article, the company said the board was confident Mr Kotick “appropriately addressed workplace issues brought to his attention”.

The company, known for hit video games like Call Of Duty and World Of Warcraft, has been in turmoil since the summer, when it was sued by California’s Department of Fair Employment and Housing over allegations of sexual harassment, unequal pay and retaliation.

The agency described a “frat boy culture” at the company and accused leadership of failing to take action. Mr Kotick’s plight worsened when the United States Securities and Exchange Commission later launched its own investigation into how the company handled the reports of misconduct.

A group of institutional investors also sued Activision in Delaware over claims that video game giant’s “1980s fraternity house” culture has made it a persistently toxic place for women to work.

Activision employees called for Mr Kotick to resign and staged a walkout on the company’s Santa Monica campus last Tuesday after the Journal article.

The video game giant is also facing pressure from business partners. Microsoft head of Xbox Phil Spencer said he’s “evaluating all aspects of our relationship with Activision Blizzard and making ongoing proactive adjustments”, in light of the recent revelations at the video game publisher.

In an e-mail to staff seen by Bloomberg News, Mr Spencer said he and the gaming leadership team are “disturbed and deeply troubled by the horrific events and actions” at Activision, referring to the Journal report.

Activision shares have lost a third of their value this year, compared with the 25 per cent gain in the S&P 500 index.

JPMorgan analyst Alexia Quadrani cut the recommendation on the stock to neutral from overweight last week, citing the growing controversy over Mr Kotick.

The “recent negative headlines introduce a significant amount of uncertainty into this story,” the analyst said, adding that “we don’t expect shares can outperform until there is clarity on this issue”.