Can a Tech Giant Be Woke?

The December day in 2021 that set off a revolution across the videogame industry appeared to start innocuously enough. Managers at a Wisconsin studio called Raven began meeting one by one with quality assurance testers, who vet video games for bugs, to announce that the company was overhauling their department. Going forward, managers said, the lucky testers would be permanent employees, not temps. They would earn an extra $1.50 an hour.

It was only later in the morning, a Friday, that the catch became apparent: One-third of the studio’s roughly 35 testers were being let go as part of the overhaul. The workers were stunned. Raven was owned by Activision Blizzard, one of the industry’s largest companies, and there appeared to be plenty of work to go around. Several testers had just worked late into the night to meet a looming deadline.

“My friend called me crying, saying, ‘I just lost my job,’” recalled Erin Hall, one of the testers who stayed on. “None of us saw that coming.”

The testers conferred with one another over the weekend and announced a strike on Monday. Just after they returned to work seven weeks later, they filed paperwork to hold a union election. Raven never rehired the laid-off workers, but the other testers won their election in May 2022, forming the first union at a major U.S. video game company.

It was at this point that the rebellion took a truly unusual turn. Large American companies typically challenge union campaigns, as Activision had at Raven. But in this case, Activision’s days as the sole decision maker were numbered. In January 2022, Microsoft had announced a nearly $70 billion deal to purchase the video game maker, and the would-be owners seemed to take a more permissive view of labor organizing.

The month after the union election, Microsoft announced that it would stay neutral if any of Activision’s roughly 7,000 eligible employees sought to unionize with the Communications Workers of America — meaning the company would not try to stop the organizing, unlike most employers. Microsoft later said that it would extend the deal to studios it already owned.

Q.A. testers can work grueling hours for low pay, and testers at other studios were already considering a union. Two more groups of testers — one at Activision and one at a Microsoft subsidiary called ZeniMax — voted to unionize after the company’s neutrality announcements.

Now that Activision is part of Microsoft — it closed the purchase in October — testers at several parts of the combined company are seeking to unionize as well, according to union officials. These officials say that the company has bargained in good faith and that the two sides have made considerable progress toward a first contract. Within a few years, Microsoft could have thousands of union employees working under collective bargaining agreements, making it an outlier in big tech.

On one level, it seemed obvious why Microsoft, once a poster child for corporate ruthlessness, would go this route: The company wanted regulators to bless its deal with Activision. Given the Biden administration’s close ties with labor, it didn’t take a Kissingerian flair for strategy to see that a truce with unions might help. Cynics were quick to point out that the company laid off nearly 10 percent of its video game workers, most of them from Activision, once the deal was in hand.

Still, many large tech companies have business before the federal government — and almost all have taken steps to discourage unionization. That includes Amazon, Apple and Google, which are in the sights of antitrust regulators.

Like Microsoft, these companies routinely position themselves as progressive employers, pointing to corporate diversity initiatives and support for L.G.B.T.Q. rights. Some channeled their employees’ anxiety over Trump-era policies on travel and immigration. Yet only Microsoft, whose leaders say they have been on a “journey” rooted in the principle that “people have a fundamental right to organize,” has taken a permissive path on unions.

And for some employees, that’s a key distinction. Workers who have sought to unionize at Amazon, Apple and Google don’t seem persuaded of their employers’ benevolence, pointing to evidence of retaliation. (The companies have denied these accusations and say they respect workers’ right to organize.) The workers note that Amazon and Google have hired consulting firms that specialize in fighting unions.

By contrast, employees who have sought to unionize at Microsoft consider neutrality “an absolute gift,” said Autumn Mitchell, a quality assurance worker who was part of the organizing campaign.

All of which raises a question: In an age where companies routinely proclaim their commitments to civil rights and the environment, what does it even mean to be a woke employer? And can Microsoft, on many days the most valuable company in the world thanks to its success in artificial intelligence, and with a history of squeezing competitors, truly claim to be more evolved than most?

It’s not hard to understand why Microsoft executives in the 1990s sometimes came off as villains. In a case that went to trial in 1998, the Justice Department said Microsoft had illegally schemed to crush Netscape after the smaller company rejected its offer to divvy up the browser market. Witnesses said Microsoft executives tossed around phrases like “cut off their air supply” and “knife the baby” when discussing competitors. (Microsoft denied at the time that it had acted illegally; some executives denied using such phrases.)

Microsoft successfully appealed a judge’s decision to break up the company, but the ordeal still proved costly. It prompted comparisons with the great monopolies of yore, like Standard Oil, and cast a shadow over future deals, like the company’s abortive attempt in 2008 to buy Yahoo. A court monitored the company for nearly a decade.

It was during the antitrust litigation that a Microsoft lawyer named Brad Smith auditioned for the job of general counsel on the basis of a simple philosophy: “Make peace,” he urged his higher-ups.

Mr. Smith got the job, and Microsoft began to cultivate better relationships with government overseers. Even when Microsoft believed regulators were overstepping their authority, Mr. Smith later recalled in a speech on the legacy of the case, the company would often say “let’s figure out what it makes sense to do nonetheless.”

Underlying the approach was Mr. Smith’s feel for the shifting ideological tides — and his sense that shifting with them would serve the company best. One colleague recalled a 2021 presentation to the company’s top executives in which Mr. Smith predicted that the coming wave of tech regulation would be like the wave of New Deal-era financial regulations, and that “the next five years of regulation will define next the 50 years.” Mr. Smith said the company should help shape the new rules and adapt to them rather than resist them.

The break with Microsoft’s scorched-earth past was halting at first. In 2012, the company hired the political strategist Mark Penn, who produced a negative ad campaign targeting Google’s search engine.

But when a new chief executive, Satya Nadella, took over in 2014, he seemed determined to help complete the reinvention. He dispatched Mr. Smith to negotiate a peace agreement with Google. He hired a mindfulness guru used by the National Football League’s Seattle Seahawks to work with top executives.

Not that Mr. Nadella and Mr. Smith, who had been promoted to president, were averse to competition. They simply went about it differently. Instead of directly undermining fellow tech companies, they drew contrasts between Microsoft’s new high-road practices and rivals’ questionable behavior — for example, by proposing regulations on facial recognition software. Unlike Microsoft, companies like Google and Apple had declined to make their facial recognition versions available for government testing. (Google said the comparison isn’t apt because it does not offer general facial recognition software.)

In 2015, Microsoft, a pioneer among tech companies in hiring temporary workers and contractors to work for less pay and job security than long-term employees, became one of the first tech giants to require large contractors to provide paid time off for workers assigned to its projects.

Amazon appeared to be a particular foil. Mr. Smith noted in his 2019 book “Tools and Weapons” that Amazon had fought a proposed Seattle tax to fund affordable housing the year before, going so far as to stop planning for a building until the tax was lowered. Shortly after, Microsoft made a financial pledge, which eventually reached $750 million, to expand such housing.

(Amazon declined to comment other than to say it had invested more than $600 million in affordable housing to date.)

The next year, Microsoft proposed a state tax to subsidize higher education that would require it and Amazon to pay a higher rate than other businesses. “Let’s ask the largest companies in the tech sector, which are the largest employers of high-skilled talent, to do a bit more,” Mr. Smith wrote in an opinion essay. Amazon quibbled with the tax before backing a compromise.

Liberal policymakers noted the contrast between the two companies. “The level of engagement is totally different,” said Representative Pramila Jayapal, a Washington State Democrat who is the chair of the Congressional Progressive Caucus. “It’s like night and day from Amazon.”

In a way, Mr. Smith and Microsoft had turned the mantra of enlightened self-interest on its head. Increasingly, the company appeared to practice a kind of self-interested enlightenment, taking positions that appeared calculated to highlight the ways it had reformed itself and to deflect scrutiny toward competitors.

The makeover was so successful that the House antitrust subcommittee invited Mr. Smith to brief members in 2020 as they prepared for a hearing involving the chief executives of Amazon, Apple, Facebook and Google, which the panel was investigating for possible anticompetitive behavior.

Yet 18 months later, the company’s adult-in-the-room image was suddenly under assault. Shortly after Microsoft announced its plans to purchase Activision, a coalition of liberal groups told the Federal Trade Commission that the deal could “lead to an undue concentration of market power,” effectively reviving the 25-year-old critique of Microsoft as a monopolist. Among the groups in the coalition was a prominent union: the Communications Workers of America.

If someone were to design a tech job with the goal of maximizing interest in a union, there’s a good chance it would look like “quality assurance tester.” To an outsider, the tester’s job can sound dreamy — being paid to play video games before they’re publicly available. Within the industry, the work is regarded as a physical and mental slog. Testers frequently play sections of games over and over for hours in search of subtle glitches.

At times they must do this during punishing stretches known as “crunch,” when a game release is imminent and the work lasts 10 or 12 hours most days, often six days a week.

“One of the things getting us bad is finding out that overtime is happening at 5:30 on a Friday afternoon,” said Wayne Dayberry, a tester at a Microsoft-owned studio in Maryland.

“It’s like, dude, we need time, you can’t just do that. People have kids.”

And the work comes with some of the lowest pay in the industry. After their raise in late 2021, many testers at Activision still made under $19 an hour. Testers typically remain for years in the position with little prospect of promotion to other jobs, even with a college degree.

These frustrations had already provoked a union campaign at Activision when Microsoft announced its acquisition. C.W.A. officials worried that the tech giant, which had no unionized U.S. employees, would promptly squelch it, and that wages and employment could fall with fewer companies competing for workers.

But the opposition of the politically powerful union was not absolute. During a conversation in early 2022, two top union officials told Portia Wu, a Microsoft policy executive who is now Maryland’s labor secretary, that a neutrality agreement at Activision would help reassure them. Ms. Wu, who had worked with unions as an aide to Senator Edward M. Kennedy, agreed to float the idea at Microsoft.

She told colleagues that employees tend to win once they get to a union election, which some Activision employees were seeking, and that a contentious election process can damage morale. By reaching a deal with the communications workers’ union, she added, Microsoft could retain more control over the narrative as well as the timing of union elections, which often surprise employers.

Mr. Smith and other executives appeared receptive. “Every time we’ve talked about this, we’ve all come to the same point of view that this is the right path for Microsoft,” he said in an interview with The New York Times. “That we have way more that we can potentially gain than put at risk.”

Chris Shelton, the union’s president at the time, and Mr. Smith announced in June 2022 that Microsoft would stay neutral in union campaigns at Activision if the acquisition was finalized. Not long after, the union informed Microsoft that a group of Q.A. testers had also been organizing at ZeniMax Media, a video game company Microsoft already owned, with studios in Maryland and Texas. The company agreed to grant workers at ZeniMax the same neutrality deal it had negotiated for Activision.

Mr. Dayberry, a leader of the union campaign at ZeniMax, said the company was good to its word: Managers never so much as mentioned the union, much less sought to discourage support for it. After years in which workers had clashed with managers over issues like pay, promotions and scheduling, he said, “It was weird, but good weird.” The workers officially unionized in January 2023.

A few months earlier, Mr. Shelton had met with the F.T.C. chair, Lina Khan, and urged her to accept the Activision deal in light of the neutrality agreements. But Ms. Khan, who has helped make labor considerations a key criterion for analyzing mergers, was unimpressed.

“Time and time again, antitrust regulators have heard promises made by companies leading up to a merger, on everything from labor to lowering prices, that have been reneged immediately after the merger closes,” said Douglas Farrar, an F.T.C. spokesman.

The Activision deal finally closed in October, after a federal judge denied the F.T.C.’s request to block it temporarily. Analysts say the investment is important for expanding Microsoft’s presence in mobile gaming and could prove highly lucrative if the company can incorporate new A.I. capabilities into its games.

In the meantime, the opposition of the agency — which has appealed the ruling and said the recent layoffs contradict Microsoft’s earlier assurances — has continued. (Microsoft said many of the layoffs had been planned by Activision.)

The company’s courtship of labor has continued as well. In December, Microsoft announced that it would effectively extend the neutrality agreement to any group of employees seeking to join an affiliate of the A.F.L.-C.I.O., the labor federation that encompasses C.W.A. and nearly 60 other unions. Roughly 100,000 people will be eligible to unionize without opposition from their employer under the company’s new framework.

Liz Shuler, the A.F.L.-C.I.O.’s president, said Microsoft had gone further in collaborating with organized labor than almost any other major company. She said she first met Mr. Smith to discuss labor issues almost two years ago, at which point he told her, “If workers want a union, why shouldn’t they be able to form one?” Then he added: “This is the prevailing winds of change in the country. I think Microsoft should be adapting to it instead of resisting it.”

Is there such a thing as a woke corporation? Conservatives say the answer is emphatically yes. In their telling, corporate executives have been foisting left-wing values on the country for decades and redoubled their efforts around the time of Donald J. Trump’s election, taking liberal positions on transgender rights, voting rights and gun control. They note that scores of companies announced diversity initiatives during the protests that followed George Floyd’s death.

But skeptics question whether these corporate initiatives are examples of progressive convictions in action, or simply investments in placating liberals and warding off calls for regulation, higher taxes and higher pay. Certainly, the gestures aren’t breaking the bank: In 2020, Chipotle pledged $1 million to civil rights organizations. By contrast, a 10 percent increase in employee compensation would have cost the company tens of millions of dollars. (The company ended a 10 percent hourly pay increase about three months into the pandemic.)

Even companies often cited for their generosity to employees have generally spurned organized labor. Whole Foods and other progressive-minded companies, like Starbucks and Trader Joe’s, have at times offered retail workers above-market wages or benefits. Whole Foods has built an entire philosophy out of its crunchy righteousness, or what its co-founder calls “conscious capitalism.”

But Whole Foods fought unionization in the early 2000s, while Starbucks has been accused by the National Labor Relations Board of violating employees’ labor rights hundreds of times since its workers began unionizing in 2021. (Starbucks denies the accusations; Whole Foods has said it does not believe a union is in employees’ interests.)

When it comes to their employees, said Matthew Bodie, a law professor at the University of Minnesota, these companies favor a kind of corporate paternalism. “We want to be beneficent, but we want to do it on our terms,” he said, channeling executives.

Even tech companies famous for pampering employees have almost entirely resisted unionization. After employees began to organize in 2018, partly over concerns about the company’s contracts with federal security agencies, Google hired a consulting firm that specializes in stifling unions. The company fired at least four employees involved in protesting the contracts. (Google said the firings had nothing to do with protest activity.)

When I asked Mr. Smith why Microsoft was willing to embrace neutrality when its competitors were not, he told me that “the tech sector has often been built by founders, and founders have often been very focused on retaining a level of control over their enterprises.” By contrast, he said, “I think the fact that Microsoft is a little bit older, sometimes a little bit wiser, at least gives us an opportunity to think more broadly.”

Activision may have been the immediate impetus for Microsoft’s labor stance, but the neutrality deal could benefit the company far beyond the acquisition. It may be a relatively cost-effective way to cast the company as pro-worker at a time when millions are worried about losing their jobs to generative A.I., whose release has helped supercharge Microsoft’s share price. Noting that unions are not a topic raised by analysts on the company’s earnings calls, Gil Luria, who follows Microsoft for the investment bank D.A. Davidson, said, “I don’t expect this to be a material issue.”

The move could also hamstring two of the company’s competitors, Amazon and Apple, where unions have gained traction in recent years.

If these companies don’t follow Microsoft’s lead on neutrality, it could add to the public relations challenges they face in opposing unionization. It could also give Microsoft an advantage in the highly competitive market for engineers, some of whom have made clear that political and social issues affect their choice of employer.

If, on the other hand, those companies relent on neutrality, a much larger portion of their work force could end up unionizing than at Microsoft. Amazon employs hundreds of thousands of workers in warehouses across the country, while Apple employs tens of thousands of workers at retail stores.

By contrast, a large majority of Microsoft employees in the United States are white-collar and highly paid. “There’s not a threat of unionization at that level,” said Joshua Winter, a former Microsoft Philanthropies official focused on bringing economic opportunity to historically underrepresented communities. “They’re taking care of those people.”

Yet if Microsoft assumed the union effort would end with video game workers, it may have miscalculated. Over the past few years, highly paid white-collar workers have begun to assert themselves far beyond Google, engaging in forms of collective action that resemble union organizing. Corporate employees have protested what they see as overly strict return-to-office policies at companies like Apple and Starbucks, and over a variety of social issues, like their employers’ carbon footprint (Amazon) or lack of diversity (Nike).

Even at Microsoft, well-compensated employees have organized protests over political concerns. In 2018, more than 100 employees urged Mr. Nadella, the chief executive, to cancel a nearly $20 million contract with the Immigration and Customs Enforcement agency over its role in separating migrant children from their parents.

Mr. Nadella responded with an email calling the family separation policy “cruel and abusive” and emphasizing that the Trump administration was not relying on Microsoft technology to enact it. But the internal campaign continued the next year, when hundreds of workers at GitHub, a Microsoft subsidiary, signed a letter demanding an end to a separate contract with the agency. The pressure fizzled out after several of the employees involved left the company.

The outcome might have been different if they had the option of unionizing without resistance.

Fred Jennings, a former GitHub employee, said he and his colleagues discussed forming a union. “Quite a few people were saying, ‘Look, our best lever to get this to change is to also push for a union,’” he said, adding that, in the end, too many worried about retaliation to make it a viable option.

When I asked Mr. Jennings if neutrality would likely have changed his colleagues’ appetite for unionizing, he was unequivocal: “With all the advantages of hindsight,” he said, “absolutely.”

Kirsten Noyes contributed research.