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Activision Blizzard stock drops after report that CEO knew about sexual misconduct for years

Activision Blizzard Inc. stock dropped Tuesday following a report that Chief Executive Bobby Kotick knew about sexual harassment and misconduct at the videogame publisher for years, which reportedly prompted employees to plan a second walkout.

Activision Blizzard
ATVI,
-6.09%

shares fell as much as 7% to $65.46 in recent trading. Shares are down 14% over the past 12 months, versus a 30% rise in the S&P 500 index
SPX,
+0.39%
,
and a 34% gain in the tech-heavy Nasdaq Composite Index
COMP,
+0.76%
.

On Tuesday, The Wall Street Journal reported that Kotick knew about multiple reports of sexual misconduct, including alleged rapes and that the company reached out-of-court settlements without informing the board. Employees are reportedly planning another walkout Tuesday in light of the report, and calling for Kotick to be replaced.  

In July, the California Department of Fair Employment and Housing sued Activision Blizzard alleging the company turned a blind eye for years to a “frat boy” workplace where female employees were subject to “constant sexual harassment.” The company has been in full damage control mode since executives’ perceived tone-deaf response to those, leading to a previous employee walkout.

Earlier this month, Activision Blizzard shares experienced their worst day in 13 years after announcing game delays that prompted Wall Street downgrades as newly installed co-head at Blizzard Jen Oneal suddenly stepped down after being on the job for three months. The Journal report said that Oneal stepped down after emailing the company’s legal team a month into the new position saying she lacked faith that leadership could turn Activision Blizzard’s culture around. Oneal also said in the email that she had been sexually harassed earlier in her career at the company, earned less than male counterpart Mike Ybarra, and that she wanted to discuss her resignation.

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In a statement, Activision Blizzard defended Kotick, but did not deny any specific instances included in the Journal’s reporting, such as the approval of out-of-court settlements without board knowledge.

“We are disappointed in the Wall Street Journal’s report, which presents a misleading view of Activision Blizzard and our CEO,” the statement reads. “Instances of sexual misconduct that were brought to his attention were acted upon.”

In the past two earnings reports, Kotick has stressed repeatedly that Activision Blizzard is changing its ways. Earlier in November, Kotick acknowledged the company fired more than 20 employees over the past quarter related to allegations of sexual harassment, and that it is waiving arbitration requirements for future claims of harassment and discrimination. Kotick also said the company plans to increase the number of women and nonbinary employees by 50% within the next five years, so that they comprise about one-third of the workforce.

In August, the company spent most of its earnings conference call with analysts discussing a zero-tolerance policy for “discrimination, harassment or unequal treatment of any kind.”

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