A company’s inner-office policies can be a sensitive topic, particularly when that office is AOL, one of the most high-profile media brands on the Internet, and especially when the topic is employee benefits.
That’s why when AOL CEO Tim Armstrong was reportedly heard during a conference call linking a change to the company’s 401(k) benefits package to the birth of two “distressed babies,” which he claimed cost the company $1 million each, the public’s reaction was, shall we say, less than favorable.
See also: AOL CEO Apologizes for Firing Patch Exec in Front of Hundreds of Employees
In a transcript of the offending comment, published by Re/Code on Feb. 6, Armstrong said:
We had a $7.1 million bill from the Obamacare act in general and we had multiple other things that happened at the company healthcare-wise. Two things that happened in 2012 we had two AOLers that had distressed babies that were born that we paid a million dollars each to make sure those babies were okay in general.
The benefits change in question specifically referred to Armstrong’s plan to delay the delivery of employee matching 401(k) payments, delivering them in a single lump sum, which would be paid after the year in which the benefit was earned.
In addition to a follow-up internal memo, presumable designed to quell the anger surrounding his comments, Armstrong further backed up his viewpoint during an appearance on CNBC, during which he specifically cited Obamacare as part of the issue affecting the company’s benefits package for employees.

Immediately following the wide exposure of Armstrong’s comments, the public’s outrage was made plain via social media. A number of well-known media professionals knocked the already embattled CEO for what many viewed as a callous approach to cost cutting.
Tim Armstrong is not apologizing for blaming high-risk pregnancies for benefit cuts. Not very woman-friendly. http://t.co/XW4CaV6hmK
— Heidi N. Moore (@moorehn) February 6, 2014
Amazing how AOL CEO blames two "distressed babies" for the all staffers losing their 401k contributions. http://t.co/Vj75pugoic
— Brian Ries (@moneyries) February 6, 2014
nice of Tim Armstrong to blame “distressed babies” and not, I don’t know, the millions wasted on his vanity project Patch for AOL’s woes
— maura johnston (@maura) February 6, 2014
That social media storm was swiftly followed by an open letter to Armstrong from AOL employees, which stated, in part:
We strongly object to the new 401(k) matching practice and encourage the company to reverse its policy. Single lump-sum 401(k) contributions are an unnecessarily risky investment strategy and deprive workers who leave the company of retirement benefits they have earned.
Following the general outrage, which showed no signs of letting up, on Feb 8. Armstrong reversed his decision, sending out an internal memo that AOL-owned site Techcrunch published the same day. In the letter, Armstrong wrote:
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.
In the letter, Armstrong also addressed his comments linking the children of employees to the issue. Armstrong wrote:
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.
That might have been the end of the matter, but now the situation has taken a new turn that promises to further put Armstrong, and his policies, up for criticism.
One of the mothers of the two babies mentioned by Armstrong has stepped forward to offer her side of the story. Her tale not only further humanizes the issue of employee benefits, but highlights exactly how painful Armstrong’s benefits discussion was for many staffers at the company.
In a Slate op-ed published on Sunday, titled, “My Baby and AOL’s Bottom Line,” Deanna Fei, an author, the mother of two, and the wife of an AOL employee, outlines what happened during her recent child birth procedure.
Fei describes the pain caused by the difficult child birth, which was fraught with peril for the baby, but eventually resulted in what is today a healthy baby girl. But it’s when Fei turns her attention toward Armstrong that the true callousness of the CEO’s comments come to bear.
I take issue with how he 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.
Later, after citing Armstrong’s $12 million salary, Fei also wrote:
For me and my husband—who have been genuinely grateful for AOL’s benefits, which are actually quite generous—the hardest thing to bear has been the whiff of judgment in Armstrong's statement, as if we selfishly gobbled up an obscenely large slice of the collective health care pie.
This latest episode comes only months after Armstrong was at the center of another flurry of negative attention for the company after he abruptly fired a Patch executive in front of hundreds of employees.
How Armstrong’s reputation will fare after this latest gaffe may not be as important as how AOL’s employees decide to move forward in the wake of yet another hit to the company’s image regarding the treatment of its employees.
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