Under the agreement, which is subject to court approval, Activision Blizzard will take additional steps to help ensure fair pay and promotion practices at the company and provide monetary relief to women who were employees or contract workers in California between October 12, 2015 and December 31, 2020.

According to an investigation conducted by the CRD, Activision Blizzard discriminated against women during that time period, including by denying promotion opportunities and paying them less than men for doing substantially similar work.

“California remains deeply committed to promoting and enforcing the civil rights of women in the workplace,” said CRD Director Kevin Kish. “If approved by the court, this settlement agreement represents a major step forward and will bring direct relief to Activision Blizzard workers. At the California Civil Rights Department, we will continue to do our part to fight for the rights of our state’s residents.”

Violations of California’s Equal Pay and Fair Employment Acts

After more than two years of investigation, CRD filed a lawsuit against Activision Blizzard in 2021 for alleged violations of California’s Equal Pay Act and Fair Employment and Housing Act — civil rights laws intended to protect Californians against discrimination. In the lawsuit filed before the Los Angeles County Superior Court, the department sought relief on behalf of the State of California and a class of women employees and contract workers who allegedly experienced discrimination in compensation, promotions, and other aspects of Activision Blizzard’s workplace.

The settlement is in addition to measures Activision Blizzard has implemented through a separate 2021 consent decree with the U.S. Equal Employment Opportunity Commission and other proactive recruitment and retention steps as described in the company’s 2022 Environmental, Social, and Governance Report.

Consent Decree Details

If approved by the court, the settlement agreement will require Activision Blizzard to:

• Pay approximately $54,875,000 to cover direct relief to workers and litigation costs. Of the total, approximately $45,750,000 will go to a settlement fund dedicated to compensating workers.
• Distribute any excess settlement funds to charitable organizations focused on advancing women in the video game and technology industries or promoting awareness around gender equality issues in the workplace.
• Retain an independent consultant to evaluate and make recommendations regarding Activision Blizzard’s compensation and promotion policies and training materials.
• Continue its efforts regarding inclusion of qualified candidates from underrepresented communities in outreach, recruitment, and retention.

Past Compliance Problems

The settlement is not the first big compliance failure for Activision Blizzard. In February, the company agreed to a cease-and-desist order and to pay a $35 million penalty in a settlement with the Securities and Exchange Commission resulting from disclosure control failures and violations of the SEC whistleblower protection rule.

According to a complaint filed by the SEC, between 2018 and 2021 Activision Blizzard “lacked controls and procedures designed to ensure that information related to employee complaints of workplace misconduct would be communicated to Activision Blizzard’s disclosure personnel to allow for timely assessment on its disclosures.”

In September 2021, it reached an $18 million settlement with the Equal Employment Opportunity Commission (EEOC) to resolve allegations that its employees faced “severe or pervasive” sexual harassment, and that Activision Blizzard “failed to take corrective and preventative measures” upon receiving reports of sexual harassment, according to the EEOC’s initial complaint.  

Joseph McCafferty is editor and publisher of Compliance Chief 360°

The post Activision Blizzard to Pay $54 Million to Settle Discrimination Suit appeared first on Compliance Chief 360.

As Chief Ethics and Compliance Officer at Activision Blizzard, my priority is building a safe, inclusive workplace culture for all employees. But how do we do that when the ground is always shifting?

Step One: Find steady ground in policies and processes

Much like laying the foundation of a house, the bedrock of any culture is its policies and processes. At Activision, this meant auditing our existing documents and refreshing them with employee-first language full of real-world examples. Gone are the days of lawyer-speak: our focus was on building a Workplace Integrity Policy that our employees could see themselves in. It needed to feel current—and human. We applied the same approach to our Code of Conduct, which now includes scenarios and quotes from employees.

In addition to refreshing the language in policies, we also experimented with new ways of promoting policies to Activision employees. By releasing bite-sized narratives that revealed ethical dilemmas in Way2Play Stories and offering annotated PowerPoint guides and talking points for people leaders, we could start to bring our shared commitments to life.

Step Two: Create safe spaces for people to practice ethics

Once the foundation is in place, the job is to build virtual rooms of the house where employees can not only understand ethical decision making, but practice and role-play different scenarios. At Activision, we co-developed a live, interactive Workplace Integrity Training complete with common workplace situations. This gives all employees not only the chance to learn, but also the opportunity to rehearse bystander intervention in challenging moments fostering a speak-up culture.

Additionally, we empower our global group of ethics ambassadors (called Way2Play Heroes) to represent all parts of our business. They serve on the front lines of employees who might have concerns at work but aren’t yet sure what to do. To amplify the voices of all of our employees, these Way2Play Heroes champion speaking up at the grassroots level.

Along with equipping employees with practical insights about Workplace Integrity, we provide a clear list of reporting channels on our ASK List so employees know where they can raise issues. Those on the ASK List practice and gain additional skills to fulfill their roles and responsibilities when reports are made. Rather than have one singular reporting channel or escalation path, our preferred method is to share multiple ways of communicating concerns, including an anonymous hotline. By offering employees choice, they’re encouraged and empowered to select the path that makes them the most comfortable and confident in the process.

Step Three: Define a rock solid and transparent investigations process

Perhaps the most significant element of building a speak-up culture is the investigations process. Ensuring the right people, process, and technology are in place is table stakes; otherwise, employees lose faith in the system.

Over the course of a year, Activision’s Ethics and Compliance team has scaled from a few people to nearly thirty dedicated team members. Establishing the right resources and infrastructure to follow up on every elevated concern was paramount. By being as open as possible about how and when decisions are made, our Way2Play Ethics and Compliance team can follow through on our commitments to earn (and deepen) our employee community’s trust.

Step Four: Make speaking up a business imperative

In today’s competitive talent market, building a thriving workforce requires shared commitment across the business. To craft a speak-up culture, it can’t be solely a compliance, legal, or HR project. Real change comes from every member of the organization committing to speaking up and standing up for what’s right.

As part of a global company in throes of change, coordinated communication is key to enabling this speak-up culture. It also takes a shared commitment from the leaders who model day-to-day behaviors, and fully listening to people’s stories if we miss the mark.

The Heartbeat of the Organization

Your organization is likely experiencing its own version of uncertainty and state of change. We often see unethical behavior emerge during these inflection points—even when they’re positive ones. By fostering a speak-up culture, our goal is stay closer to the heartbeat of the organization, hear about the small issues before they escalate, and empower every player to be a part of creating a culture where everyone can do their best work together. We’re by no means perfect, but we’re committed to reinforcing a better and more ethical house. Brick by brick.  

Jennifer Brewer is Chief Ethics and Compliance Officer at gaming company Activision Blizzard. Anne Jacoby is CEO of Spring Street Solutions Co., a strategy consulting firm based in Los Angeles.

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These companies further admitted to negotiating with and paying armed groups and terrorists, negotiating revenue-sharing agreements with ISIS to seek economic advantage, and concealing their payments, falsified records, and backdated contracts. Under the terms of the resolution with the Department of Justice, Lafarge and LCS will pay a financial penalty, including criminal fines and forfeiture, of $777.78 million.

In remarks announcing the guilty plea, DoJ authorities said the historic resolution marks the first time ever the United States has charged a company with providing material support and resources to terrorist organizations. It also marks the first time ever a company has pleaded guilty to supporting terrorist organizations.

“Never before has a corporation been charged with providing material support and resources to foreign terrorist organizations,” said U.S. Attorney Breon Peace for the Eastern District of New York. “This unprecedented charge and resolution reflect the extraordinary crimes committed and demonstrates that corporations that take actions in contravention of our national security interests in violation of the law will be held to account.”

The scheme
According to court documents, from approximately May 2010 to September 2014, Lafarge, through LCS, constructed and operated a cement plant in the Jalabiyeh region of Northern Syria (the Jalabiyeh Cement Plant).

After the Syrian Civil War began in 2011, LCS executives purchased raw materials needed to manufacture cement from ISIS-controlled suppliers and paid monthly “donations” to armed groups, including ISIS and ANF, so that employees, customers, and suppliers could traverse checkpoints controlled by the armed groups on roads around the Jalabiyeh Cement Plant.

Lafarge and LCS executives “intentionally structured their agreements with ISIS to compensate the terrorist organization based on the amount of cement that LCS was able to sell—effectively, a revenue-sharing agreement—to incentivize the terrorist group to act in LCS’s economic interest,” the DoJ said.

As a condition of entering into this revenue-sharing agreement, Lafarge and LCS executives conspired with ISIS to act against its competitors, “either by stopping the sale of competing imported Turkish cement in the areas under ISIS’s control or by imposing taxes on competing cement that would allow LCS to raise the prices at which it sold cement,” the DoJ said.

From August 2013 through October 2014, Lafarge and LCS paid ISIS and ANF, through intermediaries, approximately $5.92 million in fixed monthly “donation” payments to ISIS and ANF, payments to ISIS-controlled suppliers to purchase raw materials, and variable payments based on the amount of cement LCS sold. The third-party intermediaries who negotiated with and made payments to ISIS and ANF on Lafarge’s and LCS’s behalf were paid approximately $1.11 million.

Moreover, in furtherance of the conspiracy, when LCS evacuated the Jalabiyeh Cement Plant in September 2014, ISIS took the cement LCS had produced and sold it, yielding ISIS approximately $3.21 million.

Over this period, from August 2013 through 2014, LCS obtained approximately $70.30 million in total sales revenue. Total gains to LCS, the intermediaries, and the terrorist groups, was approximately $80.54 million.

Concealing the scheme
Lafarge and LCS executives actively concealed their scheme in the following ways:

• Required intermediaries to create business entities with names not obviously linked to the intermediaries and created invoices with false descriptions of services rendered for an intermediary to submit to LCS;
• Structured the revenue-sharing payments to ISIS so that LCS’s customers would pay ISIS the amounts owed under LCS’s agreement with ISIS, while LCS discounted the prices it charged to the customers to reimburse them;
• Required ISIS not to include the name “Lafarge” on the documents memorializing and implementing their agreements; and
• Used personal email addresses, rather than their corporate email addresses, to carry out of the conspiracy.

In October 2014, as a condition of paying an intermediary for having negotiated with ISIS and other armed groups, Lafarge and LCS executives required the intermediary to sign an agreement terminating his agreement to provide services to LCS.

“Critically, the Lafarge and LCS executives backdated the termination agreement to Aug. 18, 2014, a date shortly after the United Nations Security Council had issued a resolution calling on member states to prohibit doing business with ISIS and ANF, to falsely suggest that he had not been negotiating with ISIS on behalf of LCS after the U.N. resolution,” the DoJ said.

Compliance lessons
In July 2015, Holcim acquired Lafarge. However, Lafarge executives did not disclose LCS’s payments to ISIS and ANF to this successor company during pre-acquisition diligence meetings. Nor did Holcim conduct pre- or post-acquisition due diligence of LCS’s Syrian operation, the DoJ said.

“Here, [Holcim] did not perform due diligence of Lafarge’s operations in Syria, despite the clear compliance risks posed by operations in the region, and it did nothing to investigate or address Lafarge’s illegal activities until they were publicly exposed,” Deputy Attorney General Lisa Monaco said in her remarks announcing the guilty plea.

Lafarge, LCS, and the successor company also did not self-report the conduct or fully cooperate in the investigation, she noted.

“This case sends the clear message to all companies, but especially those operating in high-risk environments, to invest in robust compliance programs, pay vigilant attention to national security compliance risks, and conduct careful due diligence in mergers and acquisitions,” Monaco said.

Lafarge and Holcim respond
In a statement, Lafarge said it now has effective compliance and risk management controls and functions in place to detect and prevent any similar potential misconduct and, thus, “the DoJ determined that the appointment of an independent compliance monitor is not necessary,” the company said.

“None of the conduct involved Lafarge operations or employees in the United States, and none of the executives who were involved in the conduct are with Lafarge or any affiliated entities today,” the company added.

Lafarge said it is cooperating with French authorities in their investigation of the misconduct.

Holcim also issued a statement: “None of the conduct involved Holcim, which has never operated in Syria, or any Lafarge operations or employees in the United States, and it is in stark contrast with everything that Holcim stands for.” 

Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.

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This year’s second Ethics & Compliance Program Effectiveness Report, published by compliance education firm LRN, examined the role and impact of boards of directors on ethics culture, compliance outcomes, and E&C programs throughout the country.

Of those surveyed, 79 percent of the ethics, compliance, and legal professionals indicated that the board of directors of their organizations effectively supported the ethics and compliance program during the COVID-19 crisis.

In fact, the research found that when boards effectively supported compliance programs during the crisis, the department was 2.6 times more likely to have played a role in the organization’s COVID-19 response than in organizations where the board was not supportive. Similarly, companies with boards that support the compliance function were also 2.5 times more likely to emphasize company values rather than procedural rules, indicating the nurturing of an overall compliant culture. Overall, 82 percent of respondents agreed that their ethics and compliance program and culture was actually strengthened as a result of the pandemic.

Holding Senior Leadership Accountable
LRN’s survey found that when boards are known to hold leaders accountable for misconduct, 51 percent of those organizations actually disciplined or terminated an executive or high-performer in the past year. In contrast, only 18 percent of organizations whose boards are less engaged in ensuring accountability took such action in the past year—a magnitude difference of three times.

The survey also found that ethics and compliance professionals play a larger role in major business decisions when senior executives know their boards are likely to hold them accountable. Indeed, 61 percent of these organizations substantially modified or abandoned a business initiative in the past year due to ethics and compliance concerns, while only 20 percent of organizations with less engaged boards did so.

“A well-positioned board in this new world of work is one that views the health, sustainability, and ethical foundations of its culture as a strategic priority,” the report concluded.

Fielded from October 2020 to January 2021, the report was based on a survey of 627 ethics and compliance professionals at corporations and organizations with a minimum of 1,000 employees. 

Danny Flynn is assistant editor at Compliance Chief 360°.

The post Survey: Engaged Boards Enabled Greater Compliance Outcomes During Pandemic appeared first on Compliance Chief 360.

This CEO—we’ll call him Jack—was a complete jerk. He told crass jokes around the office. He bragged about his old college sexual conquests. And he bullied people by swearing at them and demeaning them. Jack fostered a corporate culture bulging with masculine bravado and a dog-eat-dog mentality. He was in charge and he wanted everyone to know it, even if no one really respected him.

Things got so bad that all the women in the small office eventually quit their jobs. They were tired of the snide comments, the sexual innuendos, and the angry demands. Lets just say it’s likely that Jack was responsible for more than his share of “me too” moments. At the company Christmas dinner, he joked about the all-male staff: “People might look at us and say we are sexist, but it’s not true. Hey, we tried a few broads… they just didn’t work out!”

His abrasion wasn’t reserved just for women, though. One sales manager was so terrified that one day he simply stopped coming into the office. No two-weeks notice, no letter of resignation, not even a phone call. After wondering where he was after a few days, we found a note on his desk that had been buried by incoming mail. It simply read, “I quit.” This manager hadn’t had the stomach to tell Jack face to face that he couldn’t stand working in the environment the boss had created and that he was leaving.

Jack’s poor behavior was contagious. There were heated arguments in the office all the time. People swore at each other. Opposing fractions developed. We had two fistfights in the office. Yes, that’s right, physical fistfights. There is nothing more unsettling then watching two guys bloodying each other’s noses in double-breasted blazers and Brooks Brother’s ties.

Sour Notes
The term wasn’t popular then, but this was tone at the top and what a horrible tone it was. More than a sour note, it was a cacophony of irresponsibility and downright meanness. And here’s the thing: It was completely intentional. Jack was creating exactly the type of culture that he wanted. He believed that command-and-control leadership, Darwinian battles of the fittest, brawn, and heated competition, were the ingredients to a winning company—one that leaves competitors in the dusk, saves money by screwing over suppliers, squeezes staffers into pulp, and takes no prisoners.

He was wrong. The hard-charging sales guys drove potential customers away. The scorned suppliers stopped supplying. The friction in the office grew dysfunctional and important worked suffered. Eventually, the company collapsed in on itself. I’ll never forget the day the entire staff was summoned to the conference room to be told that despite it being payday, no paychecks would be issued.

It’s an extreme example of course—and hopefully we have all learned a great deal about the dangers of command-and-control management—but it’s a reminder that culture matters. Hell, kindness matters! And most of us now know that companies run on testosterone don’t usually perform very well.

Setting the Tone
I think we can all agree that “tone at the top” is a terrible phrase for an important idea—that the actions and behavior of the CEO, the board, and other corporate leaders have the most influence on shaping the ethos of any organization.

We could call it “lead by example,” “behavior at the top,” or “don’t act like jerks in the corner office,” but those just don’t have that poetic alliteration of tone at the top. And while the pithy phrase has wormed its way into how we talk about corporate culture, organizational ethics, and even risk management, it’s easy to toss it about without really thinking about or understanding exactly what it means. It’s easy to forget that tone at the top is about people.

It’s true too, though, that tone at the top is a tricky thing. These days, many organizational leaders talk about it, but they don’t spend time reflecting on what it really means. Tone at the top is way more than monkey see, monkey do. Tone at the top is about humanity and not about words like compliance and regulation. It is about doing the right thing and we all know what that is in our hearts. It is about treating people with dignity and respect.

Tone at the top is about creating an environment—from the boardroom to the mailroom—where people thrive. It’s about creating a place where they feel respected, where they are empowered, where they are reminded of their higher purpose, and where people flourish and do their best work. Those are companies that leave competitors in the dust.

Setting a tone, considered literally, can mean playing a note others can harmonize to or use to tune their own voices or instruments. As humans we tend to want to join the community and follow the actions of others, particularly those in leadership roles. It’s human nature to allow the actions of others to influence our own behavior, both for good and—as Jack reminds us—for bad.

Even small violations can have big consequences. It’s been long observed now that organizations where the leaders cut corners, take small liberties, hold themselves above following policies, and engage in many other minor transgressions, have more problems with employees who also break the rules and that wrongdoing can run the gamut from breaking policies, inflating expense reports, to outright fraud.

Internal Audit’s Tough Task
Internal auditors, familiar with the powerful connection between tone at the top and culture, must assess the tone as part of the increasingly common culture audit. But this is a difficult task. Assessing the behavior, actions, and words of those who sign your paychecks and decide your raises and promotions is tough work. How do you ask your boss, or maybe your bosses’ boss, if he or she handles conflicts in a proper way? What happens when you find that people who raise concerns inside the company get demoted or pushed out of the company? Internal auditors point out the behavioral failings of corporate leaders at their own peril, but it must be done. Internal auditors are the protectors of integrity in the organization.

As a young, inexperienced rookie in the workforce for the first time, I never confronted Jack. And to be honest, I never even considered it. At companies where internal auditors and risk managers share some responsibility for the ethical climate of the organization, they can’t afford not to confront the Jack’s of their worlds.  

Joseph McCafferty is editor & publisher of Compliance Chief 360°

The post So What, Exactly, Is Tone at the Top? appeared first on Compliance Chief 360.