AOL CEO Addresses Criticism

Like all CEOs, Tim Armstrong of AOL wants to keep health care costs under control. But he seemed to use two employees' "distressed babies" as his rationale for reducing the company's 401(k) program.

The current 401(k) program matches employees' contributions every pay period, but Armstrong announced that the plan would match only at the end of the year. This changed would have affected employees who leave the company before that time; they would receive no company match for the year.

In a town hall meeting with employees, Armstrong explained the rationale as prioritizing the benefits for employees who stay with the company. This makes sense, but his examples offended people:

"We had two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure those babies were OK in general. And those are the things that add up into our benefits cost."

In an email to employees, Armstrong apologized for his comments: 

AOLers -

We began our journey together in 2009, and for the last four years have had an employee-first culture. As I have said before, the ability to change is a strategic advantage for us.  With benefit costs increasing, we made a strategic, financial decision last year to revise our employee matching 401K program from a per-pay-period contribution to a yearly lump-sum contribution.  We then communicated this decision in the fall through multiple channels to every AOL office in the US.    

The leadership team and I listened to your feedback over the last week.  We heard you on this topic.  And as we discussed the matter over several days, with management and employees, we have decided to change the policy back to a per-pay-period matching contribution.  The Human Resource team will be in contact with all employees over the next week to explain the change and to answer any other benefits related questions you might have.  We are proud to provide AOLers with a robust benefits offering that spans from exceptional healthcare coverage to 401K's to AOL fitness programs and beyond.  On a personal note, I made a mistake and I apologize for my comments last week at the town hall when I mentioned specific healthcare examples in trying to explain our decision making process around our employee benefit programs. 

Thursday we announced an outstanding Q4 and end to our fiscal year.  More importantly, it validated our strategy and the work we have done on it.  AOL is positioned for future growth and our long-term strategy to be one of the world's leading media technology companies.

Now, as we begin 2014, let's keep up our momentum. Thank you for the great 2013 year and for your ongoing passion.  And know that I am a passionate advocate for the AOL family – TA

This isn't the first time Armstrong is backtracking. Last year, he fired someone during an employee conference call that was recorded and went viral.  He later apologized.

Discussion Starters:

  • In what ways are Armstrong's financial concerns and comments understandable? Try to see the situation from his perspective.
  • How could he have described the company's pressures in a different way?
  • Did he make the right decision to retract the 401(k) plan change?
  • How do you assess his email to employees? What works well, and what could be improved?
  • In an interview with CNN Money, Armstrong boasted about being named one of the best places to work for working mothers, saying that AOL offers benefits for people with at-risk pregnancies. Do you think his comments will affect the company's ranking next year?