Microsoft needs to address its own culture issues after $69 billion deal

After announcing the $69 billion transaction, Microsoft CEO Satya Nadella declared that the success of Microsoft's biggest deal depends on rehabilitating Activision Blizzard's culture.

Accomplishing that will require Microsoft to change its approach on acquisitions to tackle what amounts to a clean up job of fixing the famed maker of the Call of Duty games franchise, which faces multiple accusations of sexual harassment and misconduct, analysts and management experts say.

Rishi Jaluria, an analyst at RBC Capital Markets, said Microsoft has traditionally allowed the companies it acquires to run autonomously. In recent years, Microsoft has purchased LinkedIn, GitHub, Skype and Mojang, the Stockholm-based creator of Minecraft, all of which have not seen major changes since their acquisitions.

The Activision deal will require a heavier hand, as it will require a heavier hand. Activision has been facing a lawsuit from California regulators alleging the company has promoted a sexist culture. It has also been the subject of investigative stories detailing allegations of sexual harassment internally, and its employees have staged walkouts to protest Activision's response to the issues. Activision received requests from the U.S. Securities and Exchange Commission for information regarding employment matters and related issues, and is cooperating with the agency.

According to one source, Activision CEO Bobby Kotick, whose handling of the alleged misconduct has attracted media scrutiny, is expected to leave the company after the transaction closes. Cultural issues are never one person, Jaluria said. There is going to be a lot more work for Microsoft. Activision has started making changes, for its part.

The company recently pushed out about three dozen employees after its own investigation and said it made high-level personnel changes and increased its investment in anti-harassment and anti-discrimination training as of October. Its board of directors has formed a Workplace Responsibility Committee to oversee the company's progress in improving culture.

Activision agreed to pay $18 million in September to settle a complaint filed by the U.S. Equal Employment Opportunity Commission has been involved with sexual harassment and discrimination issues.

The company said it will continue to investigate complaints of harassment, discrimination and retaliation and will provide regular updates. In October, Activision announced a zero-tolerance harassment policy.

Kotick said that we needed to make improvements in our culture to make sure people feel safe, comfortable and respected.

A Microsoft spokeswoman said the company was committed to inclusion and respect in gaming and is looking forward to extending our culture of proactive inclusion to the great teams across Activision Blizzard. Kathryn Harrigan, a professor at Columbia Business School who specializes in corporate growth and turnarounds, said Microsoft is limited by what it can do before the deal is expected to close by fiscal 2023. She said that Microsoft can ask and collect data, which is a priority, but she added that one good place to start is to gather salary data to identify wage disparity.

After the deal closes, Microsoft can take a more active role by hiring advisers, bringing in law firms or mandating sensitivity training, according to Brian Uzzi, a professor at Northwestern's Kellogg School of Management.

He said Microsoft could launch its own investigation of the culture at Activision.

Eventually, Microsoft could revamp Activision's management team, Jaluria said.

That would be good news for Activision employees who have demanded Kotick's removal by staging a walkout and circulating a petition.

Jessica Gonzalez, a former Activision employee who has helped lead worker activism, said she is cautiously optimistic that conditions will improve after the acquisition. She said that workers still need better representation at the company to achieve lasting change.

Microsoft is going to have to overcome its own culture issues. In January, the company hired a law firm to conduct a review of its sexual harassment and gender discrimination policies after shareholders supported a proposal in November calling for Microsoft to review the effectiveness of its policies.

The vote followed a Wall Street Journal report that Microsoft founder Bill Gates left the company s board in 2020 amid a probe of the billionaire's past intimate relationship with a female employee.

Nadella issued a statement on January 13 announcing plans for the review, saying the board appreciates the importance of a safe and inclusive workforce. Culture was our No. In his remarks Tuesday about Activision, he used the same language.