20 Jul Trust Incident Activision Blizzard
Case Author
Claude Sonnet 3.7, Anthropic, ChatGPT o1 for model constructs and cues, peer-revied by DeepThink (R1), DeepSeek
Date Of Creation
11.03.2025
Incident Summary
In July 2021, the California Department of Fair Employment and Housing (DFEH) filed a lawsuit against Activision Blizzard following a two-year investigation, alleging the company fostered a toxic ""frat boy"" workplace culture with widespread sexual harassment, gender discrimination, and retaliation against female employees. The lawsuit claimed executives were aware of and failed to address the misconduct. The company initially dismissive response triggered employee walkouts, consumer boycotts, federal investigations, and ultimately contributed to Microsoft bid to acquire the company.
Ai Case Flag
non-AI
Name Of The Affected Entity
Activision Blizzard
Brand Evaluation
5
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Industry
Media & Entertainment
Year Of Incident
2021
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Key Trigger
Legal action – The incident was publicly triggered by the California DFEH lawsuit, though the underlying behaviors had allegedly been occurring for years.
Detailed Description Of What Happened
On July 20, 2021, following a two-year investigation, the California Department of Fair Employment and Housing filed a lawsuit against Activision Blizzard, alleging the company fostered a ""frat boy"" workplace culture where female employees faced pervasive sexual harassment, gender discrimination, and retaliation. The DFEH complaint detailed disturbing allegations including ""cube crawls"" where male employees drank alcohol and crawled through office cubicles while engaging in inappropriate behavior toward female employees. Women were allegedly subjected to constant sexual harassment, including comments about rape, unwanted physical touching, and being denied promotions in favor of male colleagues. The complaint also alleged that human resources failed to keep complaints confidential, leading to retaliation against complainants. Activision Blizzard initial response was widely criticized as dismissive and combative. In an internal memo, the company called the DFEH allegations ""distorted"" and ""false,"" claiming the lawsuit included ""factually incorrect, old, and out of context stories."" This response triggered significant backlash from employees, with over 3,000 current and former employees signing an open letter condemning the company reaction. On July 28, 2021, employees staged a walkout to protest the company handling of the situation. In August 2021, Blizzard President J. Allen Brack resigned, and the company appointed Jen Oneal and Mike Ybarra as co-leaders. Oneal, the first woman to lead the company, resigned just three months later, reportedly after experiencing discrimination and being paid less than her male counterpart. In November 2021, a Wall Street Journal investigation alleged that CEO Bobby Kotick had known about and concealed incidents of sexual misconduct for years, leading to calls for his resignation from over 1,000 employees. In September 2021, the U.S. Securities and Exchange Commission began investigating the company, and Activision Blizzard settled with the U.S. Equal Employment Opportunity Commission for $18 million over sexual harassment and discrimination allegations. The scandal led to delays in major game releases, sponsor withdrawals from the company esports leagues, and a significant drop in the company stock price. In January 2022, Microsoft announced its plan to acquire Activision Blizzard for $68.7 billion, a move many industry observers linked directly to the company declining value and reputation following the harassment scandal.
Primary Trust Violation Type
Integrity-Based
Secondary Trust Violation Type
Benevolence-Based
Analytics Ai Failure Type
N/A
Ai Risk Affected By The Incident
N/A
Capability Reputation Evaluation
3
Capability Reputation Rationales
Activision Blizzard capability reputation was damaged because: 1) The alleged widespread misconduct suggested fundamental failures in HR processes, management oversight, and corporate governance, 2) The company initial crisis response was widely viewed as incompetent and counterproductive, inflaming rather than defusing the situation, 3) The resignation of Jen Oneal just three months after being appointed co-leader suggested ongoing structural problems in how the company handled leadership and equity issues, 4) Game development schedules were disrupted, demonstrating how the workplace issues affected the company core business functions. However, the company technical capability to create successful games remained relatively intact, which somewhat mitigated the capability damage.
Character Reputation Evaluation
2
Character Reputation Rationales
Activision Blizzard character reputation was severely damaged because: 1) The DFEH lawsuit described a toxic workplace culture that had allegedly persisted for years despite complaints, suggesting deeply entrenched problematic values, 2) The Wall Street Journal investigation alleged that CEO Bobby Kotick had known about and concealed serious misconduct, raising fundamental questions about leadership ethics, 3) The initial response attempting to discredit the allegations rather than address them demonstrated a lack of accountability and empathy, 4) The reported retaliation against employees who filed complaints showed a prioritization of reputation management over addressing legitimate concerns, 5) The company handling of Jen Oneal, who reportedly was paid less than her male co-lead and left after experiencing discrimination, reinforced perceptions that the discriminatory treatment described in the lawsuit extended to the highest levels of the organization.
Reputation Financial Damage
Severe – The scandal resulted in a approximately 14% stock price decline in the months following the lawsuit, sponsor withdrawals, consumer boycotts, talent exodus, game delays, and ultimately contributed to the company being acquired by Microsoft in what many viewed as a weakened position. The reputational damage extended beyond the company to the broader gaming industry.
Severity Of Incident
3
Company Immediate Action
Communication + Legal Response + Leadership Changes + Policy Reform – Activision Blizzard: 1) Initially responded with defensive communications that were widely criticized, 2) Engaged legally with the DFEH lawsuit and subsequent EEOC investigation, 3) Changed leadership including the resignation of Blizzard President J. Allen Brack, 4) Eventually announced policy reforms including ending forced arbitration for harassment claims and implementing a zero-tolerance harassment policy.
Response Effectiveness
Low – Activision Blizzard response is widely considered ineffective because: 1) The initial defensive stance severely damaged trust and triggered employee walkouts, 2) CEO Bobby Kotick remained in position despite calls for his resignation after allegations he knew about and concealed misconduct, 3) The appointment and subsequent departure of Jen Oneal reinforced concerns about ongoing discrimination, 4) Meaningful reforms only came after intense public pressure, suggesting reactive rather than genuine commitment to change. The Microsoft acquisition was viewed by many as the most significant response, but one that came from outside rather than within.
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Model L1 Elements Affected By Incident
Reciprocity, Brand, Social Adaptor, Social Protector
Reciprocity Model L2 Cues
Accountability & Liability, Proactive Issue Resolution
Brand Model L2 Cues
Brand Image & Reputation
Social Adaptor Model L2 Cues
Compliance & Regulatory Features
Social Protector Model L2 Cues
Media Coverage & Press Mentions
Response Strategy Chosen
Denial, Reparations & Corrective Action
Mitigation Strategy
Activision Blizzard response evolved in phases: 1) Initial defensive phase – The company responded to the DFEH lawsuit by calling the allegations ""distorted"" and ""false,"" attempting to discredit the investigation; 2) First shift after backlash – Following employee walkouts and public criticism, the company acknowledged the need for change, Blizzard President J. Allen Brack resigned, and the company appointed new leadership; 3) Accommodative phase after continued pressure – The company settled with the EEOC for $18 million, announced policy changes including ending forced arbitration for harassment claims, implemented a zero-tolerance harassment policy, and pledged to increase the percentage of women and non-binary employees by 50% within five years; 4) External resolution – The Microsoft acquisition announcement in January 2022 was viewed by many as an external solution to the company governance and culture problems. Throughout this evolution, CEO Bobby Kotick remained in position despite calls for his resignation, suggesting limits to the company willingness to fully acknowledge leadership accountability.
Model L1 Elements Of Choice For Mitigation
Reciprocity, Brand, Social Adaptor
L2 Cues Used For Mitigation
Accountability & Liability, Proactive Issue Resolution, Brand Image & Reputation, Compliance & Regulatory Features
Further References
https://news.microsoft.com/2022/01/18/microsoft-to-acquire-activision-blizzard-to-bring-the-joy-and-community-of-gaming-to-everyone-across-every-device/
Curated
1
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