AOL CEO Tim Armstrong: How many chances does he get?

AOL Tim Armstrong during TechCrunch Disrupt New York May 2011 at Pier 94 on May 23, 2011 in New York City.

AOL CEO Tim Armstrong is back in the spotlight for something he said.

A few days ago, he radically altered the company’s 401(k) program, making his employees mad. He implied the change happened because a couple of employees had difficult pregnancies that cost AOL a lot in health expenses. He called them “distressed babies,” which made a large swath of people across the country mad.

Over the weekend, he apologized and reversed the 401(k) changes.

This isn’t the first big apology for Armstrong. Last time, it was after firing an employee during a mass conference call because the worker tried to take a picture of him. The corporate board deciding his fate let him keep his job, despite widespread criticism from the public.

This time? "He’ll be cut some slack for these comments in large part because of the overall business performance," says Brian Wieser, senior analyst at Pivotal Research Group.

That’s not to say that AOL is doing fantastic. It’s recovering from the disastrous acquisition of the local news site Patch, and there are still big questions about its future. But the most recent earnings report showed an increase in revenue, and the numbers are ultimately what matter to corporate boards, even when CEOs say offensive things.

But when unlikable leaders have only numbers to protect them, it can be awfully lonely when those numbers change.

"You don’t realize that your enemies are lying in wait, and boom, when the performance goes south, you can get pushed out very, very quickly," says Stanford management professor Bob Sutton, author of "Scaling Up Excellence."

CEO gaffes are especially problematic for a company like AOL, which needs to draw an audience. There can come a point when bad press from bad behavior drags corporate numbers down.

"It becomes a pretty powerful force in the Twitter world, and on Facebook, and the bloggers talking about all the things they don’t like about this guy. That starts to add up," says Sydney Finkelstein, management professor at Dartmouth’s Tuck School of Business. "It could have a business effect, a business impact."

Finkelstein is known for his annual list of the best and worst CEOs. Armstrong didn’t make the bottom five for 2013, but Finkelstein says he was "in the running."

There are signs investors are concerned about the impact of Armstrong’s behavior on the company. AOL’s stock dropped more than 3 percent Monday.

Mark Garrison: This isn’t the first big apology for Armstrong. Last time it was after firing an employee during a mass conference call because the worker tried to take a picture of him. Armstrong still has his job because a corporate board decides his fate, not an outraged public. Brian Wieser  is senior analyst at Pivotal Research Group.

Brian Wieser: He’ll be cut some slack for these comments in large part because of the overall business performance.

Not that AOL is doing fantastic. There are still big questions about its future. But the most recent earnings report showed an increase in revenue and that’s ultimately what matters to corporate boards, even when CEOs say offensive things.

Bob Sutton: As long as they’re bringing in the money, this is what I always say, you can be an incredible jerk.

But Stanford management professor Bob Sutton also points out that when unlikable leaders have only numbers to protect them, it’s awfully lonely when those numbers change.

Sutton: The problem you’ve got is you don’t realize that your enemies are lying in wait and boom, when the performance goes south, you can get pushed out very, very quickly.

CEO gaffes are especially problematic for a company like AOL, which needs to draw an audience. Dartmouth management professor Sydney Finkelstein says bad press from bad behavior can drag the numbers down.

Sydney Finkelstein: It becomes a pretty powerful force in the Twitter world and on Facebook and the bloggers talking about all the things they don’t like about this guy. That starts to add up. In other words, it could have a business effect, a business impact.

And investors may already be walking away. AOL’s stock dropped more than 3 percent today. In New York, I'm Mark Garrison, for Marketplace.

About the author

Mark Garrison is a reporter and substitute host for Marketplace, based in New York.

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