[UPDATE 2] Now, Microsoft HR executive Kathleen Hogan has released a statement. As obtained by GameSpot sister site CNET, Hogan said Microsoft leadership was "embarrassed and appalled."

You can read her full note to employees below.

"When we heard about this and saw the photos, the entire Senior Leadership Team was embarrassed and appalled. This is unacceptable in terms of how we treat women and how we represent Microsoft, and it undermines the culture we are working so hard to cultivate - one that is diverse and inclusive and grounded in a growth mindset. We are not going to tolerate this. I appreciate that we will be judged by our deeds, and not just our words. And yet every day, we see our people taking important and meaningful steps forward in our journey towards inclusion. As one example, at this same Game Developers Conference we had dedicated and passionate Microsoft employees sponsoring a Gaming 4 Everyone event.

"I have heard from many of you individually and on Yammer that you can't believe we let this happen. It is not a stretch to say that the company as a whole is shocked and upset, and that we all are determined that this is never repeated....Microsoft's Employee Relations Investigations Team is involved to make sure we have a full understanding of what happened. And beyond this incident, we are strengthening our commitment to our diversity and inclusion efforts, while evaluating where we must take stronger action to show we are more resolute than ever to make progress and hold ourselves accountable."

[UPDATE] Microsoft has shared the memo that Phil Spencer sent to his employees today. In the email, Spencer talked about how Microsoft needs to do better job of holding itself "to higher standards." You can read his full memo below:

"How we show up as an organization is incredibly important to me. We want to build and reflect the culture of Team Xbox--internally and externally--a culture that each one of us can represent with pride. An inclusive culture has a direct impact on the products and services we deliver and the perception consumers have of the Xbox brand and our company, as a whole.

It has come to my attention that at Xbox-hosted events at GDC this past week, we represented Xbox and Microsoft in a way that was absolutely not consistent or aligned to our values. That was unequivocally wrong and will not be tolerated. This matter is being handled internally, but let me be very clear--how we represent ourselves as individuals, who we hire and partner with, and how we engage with others is a direct reflection of our brand and what we stand for. When we do the opposite, and create an environment that alienates or offends any group, we justly deserve the criticism.

It's unfortunate that such events could take place in a week where we worked so hard to engage the many different gaming communities in the exact opposite way. I am personally committed to ensuring that diversity and inclusion is central to our everyday business and our core values as a team--inside and outside the company. We need to hold ourselves to higher standards and we will do better in the future.

The original story is below.

Last night after Game Developers Conference sessions wrapped up, Microsoft held an afterparty--which many companies do. Parties are par for the course at GDC, and it was St. Patrick's Day, too. But one party in particular is garnering some amount of controversy because the Xbox-maker hired scantily clad "sexy schoolgirl" dancers, according to pictures from people who attended the event.

Developer Henrik Ludvigsen (via Crave) posted a picture on his Instagram page (above) of the party in which you can see dancers atop podiums. Kamina Vincent also posted some pictures on Twitter and said she was uncomfortable at the event and will file a formal complaint to Microsoft over it.

Earlier in the day, Microsoft held a Xbox Women in Gaming event.

Head of Xbox Phil Spencer said in a statement that the manner in which this party was hosted was "unequivocally wrong." He said diversity and inclusion need to be "central to our everyday business" and pledged that Microsoft will "do better" in the future.

"At Xbox-hosted events at GDC this past week, we represented Xbox and Microsoft in a way that was not consistent or aligned to our values," he said in a statement to GameSpot. "It was unequivocally wrong and will not be tolerated. I know we disappointed many people and I'm personally committed to holding ourselves to higher standards. We must ensure that diversity and inclusion are central to our everyday business and core values. We will do better in the future."

Xbox marketing director Aaron Greenberg said in his own tweet that he was "very disappointed to see this." He added that he plans to follow up with the marketing team at Microsoft about it.

This isn't the first time Microsoft has fond itself in hot water over issues related to women. Back in October 2014, Microsoft CEO Satya Nadella apologized for his controversial comments about women in the workforce where he said women don't need to ask for a raise, but should instead place their faith in the system to pay them well.