Lawyers from gaming industry giant Activision Blizzard have rejected a proposal that many companies use to diversify their workforces, claiming that a new shareholder proposal submitted by the AFL-CIO is "an unworkable encroachment" on the gaming company's ability to compete for new talent "in a highly competitive, fast-moving market," according to a letter obtained by Motherboard.
Earlier this month, the AFL-CIO, the country's largest labor federation, submitted shareholder proposals asking Activision Blizzard and Electronic Arts (EA) to adopt policies mandating the inclusion of qualified women and people of color in the initial pool of candidates considered for open positions, according to letters sent to the Securities and Exchange Commission (SEC) that were obtained by Motherboard.
In letters submitted to the SEC, the AFL-CIO, which is a shareholder at both gaming companies, proposed that the two gaming industry giants adopt a system modeled on the National Football League's "Rooney Rule," which when it was launched in 2003 required teams to interview at least non-white minority candidate for coaching jobs, and was later expanded to include women and further measures.
The AFL-CIO argues, in the proposal, that such a policy would improve "workforce diversity by requiring that the initial pool of candidates from which new employees are hired by the Company shall include, but need not be limited to, qualified women and minority candidates." While such a rule does not dictate who can be hired, it does widen the pool of candidates considered for open job positions, and has been widely adopted by employers in the United States.
"The purpose of the requested Diverse Candidate Search Policy is to assure that the Company’s recruitment pools for external hires are adequately diverse," the letters from the AFL-CIO directed to both companies continue. "A diverse workforce at all levels of a company can enhance long-term company performance."
Responding to the AFL-CIO's proposals, a spokesperson for Activision Blizzard told Motherboard, "Our talent is the lifeblood of Activision Blizzard. We value the diversity of the Activision Blizzard community and understand that our employees and players come from a wide array of backgrounds. In order to deliver epic and engaging entertainment for a diverse, growing global audience, our workforce must reflect these communities."
"We have put in place a series of new programs like our scholarship programs with the United Negro College Fund and the Equal Justice Initiative," the spokesperson continued. "These high school scholarship funds help develop the best and brightest future diverse talent, setting them up with mentors and internships designed to ensure earlier success in their careers."
Despite this statement, Activision has taken steps to exempt itself from the AFL-CIO's diversity proposal. In the letter dated January 19, attorneys for Activision Blizzard requested that the SEC exempt the company from addressing the AFL-CIO's diversity hiring proposal at its 2021 shareholder meeting on the basis that it didn't fall within the SEC's guidance for shareholder proposals, which exclude topics that deal with "matter[s] relating to the company’s ordinary business operations."
Activision's attorney wrote, in the letter obtained by Motherboard, "While the Company has implemented a Rooney Rule policy as envisioned [for director and CEO nominees], implementing a policy that would extend such an approach to all hiring decisions amounts to an unworkable encroachment on the Company’s ability to run its business and compete for talent in a highly competitive, fast-moving market."
The attorneys continue to argue that the proposal further violates guidance set by the SEC because it seeks to "micromanage" the company to a significant degree. "The Proposal leaves no room for the Company’s management or Board of Directors to exercise discretion in how new hire decisions are structured," the attorneys wrote.
A spokesperson for Electronic Arts told Motherboard that it would consider the AFL-CIO's proposal: "We’re in regular conversations with our shareholders and we value the feedback we receive. In accordance with our standard procedures, EA’s Board of Directors will consider the stockholder proposal."
"The Board is committed to maintaining hiring practices that promote inclusion and diversity at EA," the spokesperson continued. "More broadly, EA believes that a diverse and inclusive workforce is key to our success. It fuels our creative culture and enables us to create amazing games and experiences for millions of players around the world. EA is committed to attracting diverse, dynamic talent – prioritizing inclusive values and practices at every step of the employee journey."
The AFL-CIO's shareholder proposals—which could be voted on at the companies' 2021 shareholder meetings—respond to years of reports that women and people of color face systematic discrimination in the gaming industry. While shareholder proposals are legally non-binding, even if they're voted in favor of by a majority of shareholders, investors can adopt policies to vote against boards of directors who do not act on proposals that receive majority votes.
But majority votes on shareholder proposals are rare. More often these proposals lead to discussions that provoke a company to implement new policies. Such was the case with five of the largest U.S. banks, including Bank of America and J.P. Morgan, that agreed this month to diversify their candidate pools, following another shareholder proposal submitted by the AFL-CIO that mirrored the so-called Rooney Rule. While the companies had already agreed to diversify their interview candidates, the adoption of the rule added a mechanism for accountability.
"Typically what happens is the shareholders files a proposal. Then they have a dialogue with the company, and then depending on the outcome, agree to withdraw proposals if the company agrees to taking steps to fix the problem. If they agree to disagree, then it goes to the shareholders for a vote," Brandon Rees, the director of investments at the AFL-CIO, told Motherboard.
"We see this as a helpful tool," Rees continued. "And felt that now was the right time to take steps to ensure their hiring practices promote diversity and inclusion in gaming. It's important given the Black Lives Matter movement's focus on racial justice, and #MeToo's focus on gender equity and sexual harassment in the workplace."
The AFL-CIO's diversity candidate shareholder proposal also responds to worker concerns related to diversity, discrimination, and harassment identified by union organizers who are leading a campaign to organize the games industry with the Communications Workers of America, an affiliate of the AFL-CIO.
"The idea that companies need to be responsible for diversity comes up often in the organizing meetings. Games workers want to be more diverse but they don't get to choose who's hired," said Wes McEnany, a union organizer with the Campaign to Organize Digital Employees (CODE), an initiative of the Communications Workers of America that formed in early 2020 with the aim of unionizing the games and tech industries. (This month, hundreds of Google workers formed the Alphabet Workers Union with CODE-CWA.)
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"It's really hard to attract talented candidates from marginalized and minority communities in games and tech when the only places you're looking to recruit are overwhelmingly white and male," McEnany continued. "And once people get hired, there's no community for them. They are expected to represent these groups."
The shareholder proposal aimed at Activision and EA is one of many AFL-CIO has proposed in recent years to pressure companies into taking steps toward improving conditions for their workers. In 2018, the labor federation submitted a proposal that would have required Amazon to inform shareholders about “the risks arising from the public debate over Amazon’s growth and societal impact and how Amazon is managing or mitigating those risks." The AFL-CIO has also submitted proposals related to executive compensation and golden parachutes, and discrimination aimed at major companies.