Capitalism For Thee, But Not For Me

AOL CEO Tim Armstrong shows the titans of industry have no interest in real capitalism.

AOL CEO Tim Armstrong attends a cocktail party kicking off AOL becoming an independent company, at the New York Stock Exchange in New York, Wednesday, Dec. 9, 2009.

AOL CEO Tim Armstrong

By + More

The problem with some of the nation’s ruthlessly capitalistic CEOs and executives is not that they are ruthless capitalists. It’s that they aren’t true capitalists at all.

We saw this with the stunningly entitled and arrogant financial services industry executives during the economic meltdown. Despite having made (and then lost) pots of money by playing video games with other people’s pension funds, running the economy into the ground in the process, these same executives thought they deserved bonuses to clean up the mess they made. It’s one thing to spare a serial killer the death penalty if he leads you to the bodies of the people he killed; presumably, he’s going to prison for life, at least. It takes a mind-boggling lack of personal responsibility to play the game of capitalism, lose, then expect to suffer no consequences for it at all.

We’re seeing that again with Tim Armstrong, the CEO of AOL. Armstrong was trying to make up some lost cash, money the company said was incurred from increased health care costs for employees. Did the board, or Armstrong, consider reducing their own compensation (which, for Armstrong, totals more than $12 million a year, including stock options)? No – the instinct was to take the money away from the workers, in this case, rejiggering the way 401(k) matches are made. The idea was for the company to make a lump-sum contribution at the end of the year instead of week by week, which not only denies workers the cumulative growth of their retirement plans, but which would have meant that employees who left the company before December 31 would get bupkus.

[See a collection of political cartoons on the economy.]

Armstrong tried to explain the reason for the sacrifice he was asking employees to make. Two families in particular, he said, had cost the company $1 million each because they had “distressed babies” that required a lot of health treatments. Setting aside how that could happen (didn’t the company just pay into a health insurance plan, with the insurance company on the hook for the cost of un-distressing the babies?), Armstrong committed a horrific violation of privacy. And worse, he revealed what really matters – keeping his outsized compensation, no matter what the performance of the company or the unexpected costs that arise.

AOL has since decided not to move to the new retirement plan model, and Armstrong is trying to recover from the PR disaster of putting his own compensation ahead of the fate of sick infants. But there’s still a disconnect here: If the company is doing well, it makes sense that the executives would be rewarded with high salaries and stock options. But when some plans go wrong (the Patch news site ended up being not such a great idea, after all), the people at the top should take the hit. That’s not mean; that’s capitalism. Taking money away from distressed babies isn’t part of the equation.