Ahead of its annual meeting, Activision Blizzard’s board of directors is telling shareholders to vote against a request allowing for an employee-elected board member and the creation of a report on the company’s continued problems with sexual harassment.
As outlined in the report, an employee representative director would be a member of the board sourced from employees of the company and put forward by a vote from those employees. My understanding is this candidate would still need to be approved by shareholders, but naturally would be much more in-tune with employee desires and needs. The proposer, AFL-CIO Reserve Fund (a union pension fund), points out that in Europe similar positions are required by law.
They also state that a “recent academic study of co-determination in Germany did not find any negative profitability effects or detrimental changes in wages or investment levels resulting from employee representation on boards. The Organisation for Economic Co-operation and Development (OECD) has also urged that ‘[m]echanisms for employee participation should be permitted to develop.’”
They continue that they believe an employee-representative would help to avoid and resolve the long-term issues the company has faced with sexual harassment and assault allegations. “Activision can help repair its employees’ trust in the governance of the Company by adopting this proposal. We also believe that adopting this proposal will contribute to a needed refreshment of the Board by adding an employee perspective to Board deliberations,” they say.
The board’s opposing statement focuses on the fact they have a dedicated team that is on the lookout for new board candidates, with strict requirements. These include the diversity of the candidates (Activision Blizzard’s board is 60 percent male, 70 percent white, and 100 percent cishet) and independence from the company (not being direct employees of Activision Blizzard).
“This approach seeks to replace the careful judgment of the Board as to the criteria that should be reflected in a director candidate pool.
“The Board and Nominating and Corporate Governance Committee must have discretion to determine the director criteria to best serve the shareholders of the Company, as this continuously evolving criteria is necessary to help guide the Company in achieving its strategic priorities and managing risk. This is particularly important in light of the scope and complexity of the Company’s business. Providing non-management employees with a dedicated position on the Board utilizing a different process for Board representation or applying a different set of qualifications would adversely affect the role of the Board in this process.”
The implication is no one the employees would put forward could possibly fit the criteria of “experience; knowledge; skills; expertise; personal and professional integrity; character; business judgment; time availability in light of other commitments; and independence.”
The board goes on to say that “feedback from our employees is deeply valued” and lists changes made in the past year to help with the problems they’re facing from not deeply valuing feedback. Finally, they advise shareholders to vote against the proposal.
The second proposal requests an annual report into the stats and success of ATVI’s anti-harassment and workplace culture improvement initiatives. This includes details on how much money has been paid out to claimants, progress towards reducing complaint resolution time, the number of pending claims, and pay and hours worked data. The supporting statement reads:
“A report such as the one requested would assist shareholders in assessing whether the Company is improving its workforce management, whether its actions align with the Company’s public statements and whether it remains a sustainable investment. Civil rights violations within the workplace including but not limited to sexual abuse, harassment, and discrimination can result in substantial costs to companies, including fines, penalties, legal costs, costs related to absenteeism, and reduced productivity.”
It goes on to say the company will have problems retaining and hiring new employees while the PR disaster of walkouts and lawsuits continue.
The board responds, referring flippantly to the request as “yet another report” it believes this would not actually help to resolve matters. It points out the “significant time and expense” creating this report would require “would create a set of metrics that are simply not the best measures of how the Company is responding to employee concerns. The Board is committed to measuring the speed and effectiveness of our changes accurately, not based on metrics that are not precisely tailored to our Company’s situation.”
They go on to list the various changes made in the past year, and say that they expect to update the shareholders on the “outcome of our efforts relating to our workplace environment” soon, including the release of other reports. They also dismiss the proposal’s basis, saying that they believe it is premised upon “inaccurate and substantially overstated assessment of hypothetical liability” describing it as “based on faulty assumptions, inaccurate guesses about factual matters, and multiple mathematical errors.”
Their own company walkout on the subject, the hundreds of tweets, messages, and testimonials made by employees, and the massive departure of staff in the wake of these allegations go unmentioned by the board. They once again advise voting against the proposal.
Both proposals are also followed by a statement that, even if they are voted for, they are not binding and there is no guarantee they will be followed by the board. Of course, that would presumably have implications for the board’s re-election next year.
There are a number of other tidbits contained in the 153-page proxy statement. For example, it’s entirely possible for the shareholders to vote out Bobby Kotick (or any member of the ten-person board) during this voting period. It isn’t binding if they do, but ATVI’s bylaws require that the person voted out immediately tender a resignation letter. The board would then review their performance and position and decide whether to accept it. In other words, ultimately the board decides who is on the board.
That board, incidentally, failed to meet targets in 2021 (which the proxy statement describes as “aggressive” following a very successful 2020) and yet, by my reading, received $3,419,566 in fees and stock awards during the year. This includes $5,500 per person per day for “special assignments,” were there any. There are also expenses paid for any work they do for the company (hotels, food, etc) and for their spouses to accompany them, should it be deemed necessary or “when the incremental cost is negligible.”
Note that various members of the board, those that are direct employees of the company as well, received dozens of millions of dollars worth of pay in various other forms. Kotick, despite taking a minimum wage and no direct bonus payments until the current issues are resolved, received nearly $300,000,000 in vested stock options during 2021. I’m sure that’s fascinating information to the underpaid or laid-off staff at various Activision Blizzard studios.
Speaking of those staff, there’s mention of the incoming Raven Software unionization effort. Activision Blizzard is “reviewing legal options regarding a potential appeal” of the decision by the Regional Director of the National Labor Relations Board to recognise the bargaining unit. They also note that they estimate it will “consist of fewer than 30 employees.”
“We deeply respect the rights of all employees to make their own decisions about whether or not to join a union and to exercise all other National Labor Relations Act rights. Across the Company, we believe that a direct relationship between managers and team members allows us to quickly respond and deliver the strongest results and opportunities for employees,” reads the end of the statement on unionization efforts, right after downplaying the number of folks that are and saying they are considering legal options.
Exactly how all of this will resolve we’ll find out on June 21, when the shareholder meeting is actually held. There, the votes will be cast for these proposals. Much more available in the full statement, if you’ve the time and legal/financial mind to read and understand it. This includes details on all the board members currently serving and up for re-election, as well as various details on pay, diversity initiatives, and so on.
Written by Ben Barrett on behalf of GLHF.gg
