Backlash hits AOL CEO who linked pension cuts to 'distressed babies'

Reuters News
Posted: Feb 07, 2014 2:53 PM

By Jennifer Saba and Lisa Richwine

NEW YORK/LOS ANGELES (Reuters) - AOL Inc Chief Executive Tim Armstrong tried to tamp down a backlash after he linked a cut to pension benefits with rising insurance costs due to two employees' "distressed babies," insisting that the Internet provider was focused on families.

Armstrong's comments on Thursday during a company town hall about why it was cutting 401(k) contributions caused a fire storm on social media overshadowing positive quarterly results from AOL and marked the second recent instance when a gaffe by Armstrong left the CEO with some explaining to do.

During the meeting, Armstrong singled out two unidentified employees who had babies with health issues in 2012.

"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," Armstrong said, according to the Capital New York, which first reported it.

He said changes to the company's 401(k) retirement plan were made in the wake of President Barack Obama's healthcare law, which he said added $7.1 million in expenses for the online media and entertainment company.

After the town hall, Armstrong sought to clarify his remarks in a memo to AOL's 5,000 employees.

"I discussed the increases we and many other companies are seeing in healthcare costs," he wrote. "In that context, I mentioned high-risk pregnancy as just one of many examples of how our company supports families when they are in need. We will continue supporting members of the AOL family."

Armstrong's comment was satirized by the technology blog ValleyWag, which posted a graphic counting Armstrong's multimillion-dollar salary in units of distressed babies.

It was the second time that Armstrong found himself on the defensive after making spontaneous comments during company meetings. In August, Armstrong issued an apology after publicly firing a Patch in front of a thousand employees.

An AOL spokesman declined to comment on the latest gaffe.

Armstrong's comments came on the same day that the company reported better-than-expected results and its best year of growth in a decade. AOL reported $36 million in net income during the fourth quarter on $679 million in revenue.

AOL shares were down 2.8 percent at $45.81 a share on Friday after falling on Thursday as well.

(Editing by Amanda Kwan)