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by Derek Loosvelt | February 12, 2014


Before I address AOL CEO Tim Armstrong’s public justification for scaling back his firm’s 401(k) plan on rising health care costs such as those associated with “two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure were O.K.,” I’d like to make a few observations gleaned from my two decades as part of the so-called American workforce.

The first: people are typically paid commensurate with the amount of stress their job requires; that is, on average, the more stressful your job, the more money you earn.

The second: the more people who report to you and the more revenue your direct reports are responsible for both correlate positively with pay.

The third: jobs at public companies as well as jobs at companies in the public eye are typically more stressful than their counterparts at private companies and companies the public doesn’t much care about.

These three generalizations I present only to say that with respect to Armstrong, who later took back his plan to cut retirement benefits as well as his distressed babies statement (supposedly sincerely apologizing to one of the mother’s of one of the distressed babies), I have no problem with the fact that Armstrong earns $15 million a year (or the price of 15 distressed babies as some have pointed out). Nor do I take issue with his wanting to cut costs (even if I’m still unsure what retirement costs have to do with health care costs, and even if said cost cutting came on the same day that AOL reported a 13 percent rise in revenues). And I certainly understand the stress associated with having your every word dissected by employees, the media, and the public (even those words that you premeditatedly speak). In other words, I believe that Armstrong is paid fairly for his work, that he should (as he is more less legally required to) constantly be looking for ways to improved AOL’s bottom line, and that it’s no easy task to have to watch each syllable you utter when outside the confines of your own home.

However, what I take issue with is that it’s become apparent—from Armstrong’s distressed babies statement and from another incident last summer in which Armstrong nonchalantly fired an employee on a conference call in front of 1,000 of his coworkers—that the CEO is an impetuous decision maker, not to mention cares little about the satisfaction, well being, and privacy of those who work for him.

To say the least, it’s troubling that the head of a company as large as AOL would think it’s okay to single out two life-threatening health conditions of relatives of employees in a public forum, and publicly blame them for cost-cutting measures at that.

According to Forbes, which does a good job of paraphrasing what the AOL CEO meant by making those comments about the “distressed babies”:

“Armstrong is effectively blaming extremely premature infants, who are clinging desperately to life, for the cuts he chose to make in his employees’ retirement benefits. We’re still paying to keep these precious little angels alive, he assured his employees. But if any of you are mad about your pay cut, you know who to blame.

And, sure enough, within minutes of Armstrong’s statement, employees indeed knew who to blame. And unfortunately for Armstrong, one of the babies-to-blame’s mothers, the wife of an AOL empoloyee, turned out to be a novelist (and apparently in between books) and went on to pen a well-written, widely-read, widely-commented-on, well-worth-reading article for Slate criticizing the AOL CEO’s statements entitled “My Baby and AOL’s Bottom Line.” Here's an excerpt:

I take issue with how [Armstrong] reduced my daughter to a “distressed baby” who cost the company too much money. How he blamed the saving of her life for his decision to scale back employee benefits. How he exposed the most searing experience of our lives, one that my husband and I still struggle to discuss with anyone but each other, for no other purpose than an absurd justification for corporate cost-cutting.

Now that the dust has settled in the wake of the question of whether or not Armstrong’s statements were insensitive or not (they most definitely were, seemed to be the majority opinion), the question of whether Armstrong’s statements violated privacy laws is beginning to be addressed. The following comes from a New York Times piece on the subject:

“This example shows how easy it is for employers to find out if employees have a rare medical condition,” said Dr. Deborah C. Peel, founder of Patient Privacy Rights, a nonprofit group in Austin, Tex. She urged regulators to investigate Mr. Armstrong’s disclosure about the babies, saying “he completely outed these two families.”
In response to a query about how Mr. Armstrong learned the specifics of the AOL employees’ situations, Doug Serton, a spokesman for AOL, said, “We aren’t commenting on these issues.”

Which is probably the best decision an AOL executive has made all week.

Follow me @VaultFinance. 

Read More:
My Baby and AOL’s Bottom Line (Slate)
AOL’s Tim Armstrong Violated Decency, Not Employee Privacy Protections (BusinessWeek)
AOL Chief’s Words Leads to a Study in ‘I’m Sorry’ (DealBook)


Filed Under: Finance|Salary & Benefits