Last week, AOL CEO Tim Armstrong announced cuts in employees’ 401(k) benefits. He then made an appearance on CNBC, where he attributed the cuts to the effects of Obamacare and two “distressed babies”:
“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.”
Deanna Fei was the mother of one of those babies, and she struck back yesterday, writing about her daughter’s premature birth and struggle for life, and taking issue with how Armstrong “exposed the most searing part of our lives…for no other purpose than an absurd justification for corporate cost-cutting. Here’s what you need to know about Fei, and the controversy she’s a part of:
1. Fei Was Told Her Baby Had a 1 in 3 of Never Coming Home
In her article in Slate, Fei offers a harrowing account of her daughter’s premature birth:
“She weighed 1 pound, 9 ounces. Her skin was reddish-purple, bloody and bruised all over. One doctor, visibly shaken, described it as “gelatinous.” I couldn’t hold my daughter or nurse her or hear her cries, which were silenced by the ventilator. Without it, she couldn’t breathe.
That day, we were told that she had roughly a one-third chance of dying before we could bring her home. That she might not survive one month or one week or one day. She also had at least a one-third chance of being severely disabled, unable to ever lead an independent life.”
Fei and her husband were so frightened by their child’s frailty, they couldn’t bring themselves to name their child for a long time after her birth.
Fei doesn’t dispute that her child’s healthcare costs were staggering, explaining that her issue is not with Armstrong’s claim that hers was a million dollar baby, but with the critical tone in which he referred to her:
I have no expertise in health care costs, but I have a 3-inch thick folder of hospital bills that range from a few dollars and cents to the high six figures (before insurance adjustments). So even though it’s unlikely that AOL directly paid out those sums, I don’t take issue with Armstrong’s number.
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.
According to her account, Fei was given no advanced indications that her daughter was at risk until the morning when she suddenly found herself in labor. She likens this sudden onset of a catastrophic health problem to a cancer diagnosis. Would Armstrong single out employees who were diagnosed with cancer, and blame their profligate healthcare spending for forcing cuts to retirement benefits?
2. Fei Is a Best-Selling Novelist
Fei is the author of the 2010, New York Times Editor’s Choice novel, “A Thread in the Sky.”
The novel tells the story of a Chinese-American widow, who, in the wake of her husband’s death, embarks on a tour of mainland China with her adult daughters and elderly mother.
Fei attended the Iowa Writers Workshop, and is the recipient a Fulbright Grant a New York Foundation of the Arts Fellowship. She’s written essays for The New York Times, The Millions, and the Huffington Post.
3. AOL Reported 13% Rise in Revenue Last Quarter
According to Capital New York, the same morning Armstrong announced the company would have to cut it’s retirement benefits, his company reported a 13 percent rise in quarterly revenue, exceeding expectations thanks to an increase in ad sales. The company recently sold off most of its stakes in a struggling network of hyperlocal community sites called Patch.
Tim Armstrong brings home $12 million a year. Which isn’t bad for a CEO who’s seen his company’s revenue fall by 30% over the course of his 5 year tenure.
In their scathing assessment of Armstrong’s leadership, The Fool cited the fact that, of “the $147 million in adjusted operating income AOL reported in the fourth quarter, $146 million of it came from subscription revenues!”
The issue here is that no one pays a subscription for browser service anymore. To survive the deaths of the internet illiterate who prop up the company, AOL needs to transition to being a news site that turns profits off of add sales. The Fool writes of AOL:
It’s the ultimate legacy business — a company kept alive by people who can’t figure out how to get better service. Instead of putting what is essentially free money to good use by exploring new technological or service opportunities, Armstrong has been throwing it at doomed pet projects and blogs.
4. Armstrong Has Reversed His Decision on Benefit Cuts
CNN reports that Armstrong sent out an email to staff on Saturday, reversing his decision to cut back on the companies 401(k) contributions, writing:
“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 initial change meant that AOL would match its employees 401(k) contributions in one lump sum at the end of the year, rather than matching each paycheck as they’d previously done. The most obvious victims of this change are employees who leave in the course of the year, who would have received no retirement benefits from the company. However, according to experts who spoke with the Washington Post, “the change hurts all employees–not just those who leave mid-year–since savers miss out on the benefits of investing more money throughout the year, a strategy known as ‘dollar cost averaging.’”
5. Fei’s Daughter Is Back on Her Feet
Fei ends her Slate piece describing where her daughter finds herself, one year and a million dollars of healthcare later:
“These days, at the age of 1, my daughter is nothing short of a miracle, which is to say, she appears much like any healthy baby. This past week has been eventful for her. Right around when Tim Armstrong might have been preparing for that conference call, she took her first steps, two tiny steps, before plopping down and demanding to be hugged for her efforts.
Our daughter has already overcome more setbacks than most of us have endured in the span of our lives. Having her very existence used as a scapegoat for cutting corporate benefits was one indignity too many.”