AOL’s Error Leads to a Study in ‘I’m Sorry’

Was Tim Armstrong’s apology authentic?

Last week, I wrote about the increasing tendency of leaders and executives to provide cheap apologies as an easy way to wash away problems. Dov Seidman, founder of LRN, a firm that advises companies on their cultures and how they can translate them into better performance, described the “I’m sorry” epidemic as “apology theater.” We pledged that we would begin tracking apologies and their aftermath.

Almost on cue, a highly publicized case study arrived in the form of Mr. Armstrong, the chief executive of AOL.

On an internal call last Thursday, Mr. Armstrong described recent changes in the company’s 401(k) program, which alters the way it matched employee contributions. The matching payment would come as one lump sum at the end of the year instead of in each pay period. In explaining the switch, he extolled the company’s benefits program and said that it would help save money amid rising health care costs.

Then, he provided this example of those costs: “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 O.K. in general,” according to a transcript provided by an AOL employee. “And those are the things that add up into our benefits cost. So when we had the final decision about what benefits to cut because of the increased health care costs, we made the decision, and I made the decision, to basically change the 401(k) plan.”

With that, the Twittersphere was set aflame. The criticism came fast and furious.

“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,” Deanna Fei, the mother of one of the babies and wife of an AOL employee, wrote on Slate. She is a novelist and the wife of Peter Goodman, an editor at AOL’s Huffington Post.

“For me and my husband â€" who have been genuinely grateful for AOL’s benefits, which are actually quite generous â€" 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.”

Nearly 2,000 comments poured in, cheering her on.

Over the weekend, Mr. Armstrong reversed course and apologized.

“I made a mistake,” Mr. Armstrong said on Saturday in an email to his staff. “I apologize for my comments last week at the town hall when I mentioned specific health care examples in trying to explain our decision-making process around our employee benefit programs.”

He also reversed the changes in the 401(k) program.

But was Mr. Armstrong’s apology simply convenient public relations? After all, apologizing is easy, sincerity is harder.

Before we get to the apology itself, let’s examine the error.

Mr. Armstrong was, to put it generously, impolitic in his language and description of the situation. Many who heard his remark found it offensive. Singling out a specific medical situation, even without identifying the employee, feels to some like a personal violation, especially when they believe it is tied to a decision to cut back on another benefit program. It is even tougher to swallow on a day when the company reported a robust financial quarter.

Of course, there is something valuable to be said about having an honest conversation about a company’s expenses and using real-life examples â€" even when they make people uncomfortable â€" as opposed to generalities.

In truth, and I imagine I will be criticized for saying this, I strongly suspect Mr. Armstrong mentioned the “distressed babies” not to cast blame or point the finger but to convey the sincerity in which he believed the company stands by its employees. I think the intent of his comment was something like, “Hey, we think we have great benefits and here’s an example: We just spent $2 million last year to help some of our employees in a tough situation.”

Regardless of his intent, Mr. Armstrong recognized his mistake and was moved to apologize. Was he sincere?

I’m inclined to believe the apology was authentic. It wasn’t just words but was backed up by action â€" the reversal of the 401(k) match plan, which will most likely cost real money. A skeptic could say the money doesn’t belong to Mr. Armstrong but to the shareholders, or that it will likely come out of the employees’ pockets in some other way, or that he should contribute some of his own $12 million in compensation. That’s all true but probably a topic for another column.

In some regard, I’m of two minds about rolling back the 401(k) match plan. While it suggests he listened closely to the feedback of his employees who were upset about it, I’m worried two things became conflated: the change in the 401(k) program, which was unpopular but appears to be an unfortunately growing trend for companies to save money, and Mr. Armstrong’s comments about “distressed babies,” which was the clear mistake.

It is worth noting that Mr. Armstrong, who has a history of speaking off the cuff, has publicly apologized before. Last year, he fired an employee who was taping an internal call â€" after being warned not to do so the previous day â€" on the spot in front of the staff. It was a clear misstep to do so in front of the other employees.

But on his most recent foot-in-mouth, perhaps the most important issue in evaluating his sincerity was that his apology wasn’t just the public one we read about. He called some of the affected families personally.

The real arbiters of Mr. Armstrong’s sincerity are those whom he directly offended. So I asked Ms. Fei.

“I accepted Tim Armstrong’s apology, and I take him at his word that he’s genuinely pained by the pain he caused my family,” she told me.

“He spoke to me on a very personal level, as a human being and a fellow parent, and I think his regret is heartfelt. I am profoundly grateful for the support that my family received from AOL during our medical crisis, and I think AOL does strive to take care of its employees.”

“I felt the need to point out the gross injustice of putting any individuals on the defensive for suffering a medical crisis and simply using their health benefits,” Ms. Fei added.

“I think it’s legitimate and necessary to have a public discussion about health care expenditures, but this has to be done with sensitivity and mindfulness of the human lives at stake.”

Andrew Ross Sorkin is the editor at large of DealBook. Twitter: @andrewrsorkin