Bloomberg Law
Aug. 6, 2021, 8:45 AMUpdated: Aug. 7, 2021, 12:45 AM

Activision Investors Join Calls Seeking Tech Culture Change (1)

Maeve Allsup
Maeve Allsup
Legal Reporter

Activist shareholders, who have used litigation to force businesses to address issues of workplace discrimination and harassment, are eyeing a new target: the video game industry.

A federal securities fraud claim from an Activision Blizzard Inc. shareholder claimed the company kept investors in the dark about a California state investigation into its alleged “frat boy” culture. And on Friday, the video game giant was hit with a shareholder derivative suit filed in California state court, seeking changes to internal policies and practices.

The lawsuits are the latest challenge to the video-game giant. Lawyers and industry watchers said such suits could be an effective tool to address persistent questions about workplace culture at Activision and in the broader gaming world, as investors take notice of the financial and public relations fallout from toxic employment practices.

Other companies including Alphabet Inc., Pinterest Inc., and Victoria’s Secret parent L Brands Inc., have faced lawsuits filed by shareholders over workplace culture and claims of harassment or bias.

“These shareholder suits are the ones that are really starting to change things in corporate America,” said San Diego attorney Frank Bottini. “They can have incredibly important, concrete results and really be a catalyst for change at a company or in an industry.”

Shareholder advocacy and engagement is “exploding these days,” according to Michael Connor, executive director of the Open Media and Information Companies Initiative, a group focused on shareholder engagement and corporate accountability.

“There are much larger numbers of investors who are willing to both engage with the companies directly and certainly support shareholder proposals,” he said.

Activision Lawsuits

The federal complaint filed on Aug. 3from the Activision investor alleges that after a lawsuit from the California Department of Fair Employment and Housing detailing claims of workplace harassment came to light on July 21, the company’s stock price plunged, leading to a “precipitous decline in the market value.”

The Friday derivative complaint alleges Activision Blizzard now has a reputation as a hostile work environment for women, and faces serious financial consequences and restrictions on its operations. It seeks to force the company to take actions to reform corporate governance and internal procedures.

Both complaints cite the California DFEH lawsuit, which followed an investigation that lasted over two years. That announcement sparked employee action, with Activision workers staging a walkout and over 2,000 current and former employees signing a petition supporting the agency suit.

Video game industry workers, similar to those in other industries, are often restricted from litigation and public statements by mandatory arbitration and non-disclosure agreements.

Former Activision Blizzard employees told Bloomberg Law those agreements, combined with a culture of secrecy around releasing new games, prevented employees from speaking out about alleged harassment.

That makes shareholder litigation important, Bottini said. Investors don’t sign the same arbitration agreements or gag orders, and can step up and file lawsuits when employees can’t, he added. But he cautioned that change through litigation can come slowly.

The stock-drop suit was filed the same day the company held its latest earnings call. Analysts questioned the company over the suits and the impact they would have on the company’s productivity, product pipeline, and worker morale.

Jen Oneal, who was named one of the company’s new “coleaders” after Blizzard President J. Allen Brack announced he was leaving the company, said she was seeing “great progress.”

“There’s a lot of work ahead of us but the passion and productivity are already here,” said Oneal.

The company also hired law firm Wilmer Cutler Pickering Hale and Dorr to investigate its culture. Activision CEO Bobby Kotick told employees in a July 28 statement that the review would “ensure that we have and maintain best practices to promote a respectful and inclusive workplace.”

Asked about the Aug. 3 investor suit, an Activision Blizzard spokesperson said the company engages with shareholders and works to be responsive to their “interests and concerns with respect to our executive compensation, corporate governance practices, human capital management, and any other matters of importance.”

The company did not immediately respond to a request for comment on the derivative shareholder action.

Shareholder Pressure

Molly Bowen, an attorney at Cohen Milstein, said there are two primary tracks investors looking to force change can pursue in court. Securities fraud claims, such as the first suit against Blizzard, filed in federal court are ultimately aimed at recovering harm caused to investors by alleged misconduct, while shareholder derivative suits have the goal of remedying harm caused by leadership for the benefit of the company.

The derivative suit against Google parent Alphabet, which alleged executives failed to prevent sexual harassment, ended in a $310 million settlement and pledges by the company to address diversity and gender equality issues.

Courts have a high bar for such suits, Bottini said, requiring plaintiffs’ lawyers to conduct a thorough investigation to be able to allege that company officers breached their duties. That process could involve requests for non-public company documents, such as emails or minutes from board of directors meetings, and can often include side litigation to force companies to comply with those requests.

“If you file a derivative case without getting those documents and doing an investigation, it’s likely the case would be dismissed,” said Bottini, who added that his firm, Bottini & Bottini, is also investigating a derivative suit..

New Precedent

Shareholder lawsuits seeking remedies related to workplace discrimination and harassment are relatively new, and the law in this area has moved quickly, Bowen said.

“Shareholders have a really important role to play in remedying these wrongs, but I don’t know if that’s how people thought about it even just eight years ago,” she said.

Attorney Louise Renne, who has represented shareholders in similar litigation, called lawsuits focused on equity and diversity issues in the workplace a fairly new phenomenon, citing Alphabet’s July 2020 settlement as a landmark moment.

Shareholders seeking changes in other companies should use that settlement as a template, Renne said.

As part of the settlement, Alphabet pledged to expand diversity efforts, and created an independent audit board to oversee issues of harassment.

Alphabet didn’t respond to Bloomberg Law’s request for comment.

In the case of L Brands, the company has a pending settlement to end shareholder lawsuits alleging a culture of sexual harassment. The settlement would see the company spend $90 million on workplace changes, including ending the use of non-disclosure agreements.

Pinterest is also facing shareholder derivative lawsuits that allege a culture of discrimination and bias against female executives.

Connor at Open MIC said shareholder suits could bring changes to workplace culture in the gaming industry.

“I don’t think there’s any question that there’s more litigation coming,” he said.

—With assistance from Paige Smith

(Updates throughout to add information about derivative suit filed Aug. 6.)

To contact the reporter on this story: Maeve Allsup in San Francisco at

To contact the editors responsible for this story: Meghashyam Mali at; Andrew Childers at