AOL's Armstrong Is the Tin Man of CEOs
When something bad happens to a rich person, it is never the rich person's fault. That's No. 1 in the chief executive officer playbook.
No. 2 is that the rich person should use their greater power to make a lesser person pay the price of the bad thing that's happened.
No. 3, use a platform the lesser person doesn't have in order to manage any blowback and spin it your way. No. 4, if things get shaky, return to No. 1. You are always right. If the lesser people were right, they'd be rich, too.
In the latest example of CEOs behaving badly (toward the rest of us, that is), AOL Inc.'s Tim Armstrong tried to shift the blame for a decision to cut back on his company's benefits to two employees who saddled him with "distressed babies," which he said cost the company more than $1 million each. At a meeting with employees last week, he announced that he was changing the company's 401(k) plan to offset health-care costs. If it weren't for these parents having the misfortune to have children with complicated births who required hospitalization, everything would be fine for the rest of us.
The truth is that it is Armstrong's company that is distressed, and he might want to look at himself. AOL's stock price is up on the hope that he's going to turn things around, but since taking over in 2009 he's done little except splurge on acquisitions and other missteps. In January, AOL agreed to sell the majority of its nationwide local-news service, Patch, after years of losses. The whopping $300 million purchase of the Huffington Post has yet to bear fruit.
At the first murmurings that Armstrong was a jerk, his minions put out a wordy, confusing statement. The gobbledygook didn't stop the bleeding, and on Saturday, Armstrong apologized and backtracked on the 401(k) policy change. "We heard you on this topic," Armstrong said in a memo to employees. "I made a mistake and I apologize for my comments."
The damage was done. The mother of one of the "distressed babies" told the damning story behind Armstrong's accusation.
"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," Deanna Fei, a novelist who is the wife of Huffington Post Editor Peter Goodman, wrote in an essay for Slate. " ... The implication from Armstrong that the saving of her life was an extravagant option, an oversize burden on the company bottom line," felt like "a cruel violation, no less brutal for the ludicrousness of his contention."
How do CEOs get this way? In Armstrong's defense, he is not the worst among the super-rich when it comes to feeling wounded by underlings when no hurt has been inflicted. Take venture-capital billionaire Tom Perkins, who in a letter to the Wall Street Journal warned of a "Kristallnacht" being prepared against the wealthy. Perkins finds parallels between the Nazis' persecution of the Jews and the "progressive war on the American one percent."
What folks like Perkins and Armstrong have to endure, you wouldn't want to happen to a fast-food worker doing double shifts. It's just awful to be that rich and have someone question your smarts or challenge your accomplishments. The only war on the 1 percent is rhetorical, and barely that.
It's true, the rich are different from you and me. They're much more sensitive and more easily hurt. They're still smarting from the mild criticism during the financial crisis, when President Barack Obama called out some who were benefiting at the cost of those who had lost their homes. Those "fat cats" were pocketing huge bonuses even as they were being bailed out by the government, blaming others and telling us about how good credit-default swaps really were and how lucky we were that they were still around to unwind them.
The criticism didn't cause anyone to change their ways or any bonuses to be returned. The playing field is still tilted heavily in the direction of those already at the top.
To be worried about some disorganized 99 percent manning mythical barricades is ludicrous. Nothing's changed. The Dodd-Frank financial-reform legislation is only a problem if you are already very lucky. The tax code is your wet dream, treating the earnings of hedge-fund and private-equity managers not as income but as lower-taxed capital gains. Those at the top don't recognize how lucky they are and how protected from the slings and arrows of outrageous fortune they are. Armstrong is a bundle of blunders, but he took home $12 million in salary in 2012 and undoubtedly has great benefits.
If Armstrong were as smart as his position and pay suggest, he wouldn't be blaming Obamacare (along with those babies) for his troubles. At one time, corporations and their servants in Congress argued for delinking employers and health care, so that instead of being in your own risk pool, you would be in a bottomless one where a couple of neonatal crises would have no effect. But when Obama wanted to do that and insurers didn't, corporations stuck with their own.
In 2017, thanks to thePatient Protection and Affordable Care Act, Armstrong could enter his state's health-care exchange. He wouldn't have to worry about having a bad year because of a few "distressed babies." But then he'd have no one to blame for his mistakes but himself. He couldn't let that happen.
(Margaret Carlson is a Bloomberg View columnist.)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
--Editors: Max Berley, Brooke Sample.
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