Tim Armstrong

How to repair a ravaged reputation

February 13, 2014: 11:06 AM ET

Executives talk to different audiences all day, and sooner or later the exact wrong words are bound to pop out. It's smart to be prepared. Tim Armstrong: Take note.

AOL CEO Tim Armstrong

AOL CEO Tim Armstrong

FORTUNE -- It's a safe bet that when AOL chief Tim Armstrong's comment about the million-dollar price tag for saving "distressed babies" went viral, the resulting sound and fury sent a shiver through C-suites everywhere.

"This really proves that there is no such thing as talking to just one audience anymore," says Michael Maslansky, head of communications firm Maslansky & Partners. "Everything you say is public now."

Not only did Armstrong seem to overlook that fact during his now-infamous conference call with AOL (AOL) employees, but he then proceeded to make two other mistakes, Maslansky says, that could turn out to be just as damaging as the first one.

First, hastily restoring quarterly 401(k) matching made Armstrong "look weak," Maslansky notes. Then too, "his about-face was expensive for the company and accomplished nothing." Maslansky predicts that Armstrong will have to make the same cutbacks next year, "and employees will not be ready," so the uproar will be just as loud.

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A former corporate lawyer at Wachtell, Lipton, Rosen & Katz, Maslansky advises the top brass at Procter & Gamble (PG), FedEx (FDX), McDonald's (MCD), PepsiCo (PEP), and many other big companies on how to avoid, or survive, public relations debacles. Tim Armstrong isn't the first executive to get his foot stuck firmly in his mouth, of course, and he won't be the last. Maslansky suggests three ways for CEOs and other executives to minimize the damage.

1. Engage with social media before you're forced to. "Ten years ago, Armstrong's comment would have been water cooler chat, period. But thanks to the Internet, every screw-up gets broadcast," notes Maslansky. It doesn't help, he adds, that "public skepticism means that everything about Big Business is suspect now. The public expects the worst."

The best antidote to that: Build a strong online presence, one that humanizes your company (and yourself), before you need it. Loyal Twitter followers, for instance, may be willing to give you the benefit of the doubt. "Get comfortable communicating your ideas online," Maslansky says. "Armstrong should have started tweeting immediately, apologizing for bringing up 'distressed babies' but also putting the focus back on soaring health care costs, which was his original point." Maslansky thinks a series of five well-worded tweets would have helped get the conversation back on track.

2. Don't hide from controversy. "CEOs, and companies, tend to want to get past a mistake as soon as possible and put it behind them, so they stop talking," Maslansky observes. "But if you do the opposite by wading in and participating, it tends to lower the temperature of the discussion."

One current case in point: the biggest U.S. banks. Maslansky points to a recent survey by his firm showing that only 5% of the American public knows the banking industry has repaid, with interest, every nickel of the TARP money they borrowed from the federal government in 2008.

"That means 95% of the public still believes the banking industry 'owes' them that bailout money," notes Maslansky. He thinks the big banks need to do a far better job of, first, getting the word out about the TARP debt and, second, explaining the changes since the Crash, aimed at preventing another one. "Banks have done well financially in the past couple of years, but they've been way too quiet" -- and that silence has fed public anger and distrust.

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3. Accept the fact that nothing goes away by itself. "CEOs and big companies tend to be a very conservative group, and they worry that anything they say -- especially on social media -- will make them look even more conservative," Maslansky says. "So they hunker down and hope the controversy will just go away."

The bad news: It won't. A company with a crisis on its hands needs to "show that you're out there listening to people and responding," Maslansky says. BP's (BP) well-publicized cleanup and continuing presence in the Gulf of Mexico, years after the biggest oil spill in history (and then-CEO Tony Hayward's resignation), is one example of how to do it right.

Engaging with your critics and getting your point of view out there is "harder than it used to be," Maslansky adds. "It's not what you say that matters. It's what your audience hears." As Tim Armstrong found out the hard way, those can be quite different things.

  • The disconnect between AOL's stock and 'distressed babies'

    CEO Tim Armstrong proposed benefit cuts as the online media giant has its most successful year in a decade.

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    FORTUNE -- As AOL CEO Tim Armstrong has quickly learned, blaming innocent babies for unwelcomed changes to the company's retirement benefits is sure to spawn an uproar.

    The executive of the online media giant apologized last weekend and reinstated the benefits after a backlash from employees -- most notably, Deanna MORE

    Feb 11, 2014 1:24 PM ET
  • Add Tim Armstrong's distressed babies to the pile of gaffes

    In a call with AOL employees in which Armstrong tried to explain why the company had changed its 401(k) plan, the CEO said that two AOL employees' sick newborns factored into the decision. One can only imagine what he'll say next.

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    The most recent incident MORE

    - Feb 7, 2014 2:04 PM ET
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    Executives who take on the challenge of devising a corporate turnaround must face increasingly tighter deadlines to show results. But how much time should a comeback actually take? By Shelley DuBois

    Sep 16, 2011 5:00 AM ET
  • Can Tim Armstrong survive AOL?

    Three years ago, his resume was impeccable. Now, top recruiters and management experts told Fortune the charismatic CEO's performance could end up permanently tarnishing his reputation.

    By Shelley DuBois, reporter

    FORTUNE -- His résumé was to die for. Tim Armstrong had been Google's first salesman and, as president of American operations, presided over the firm's explosive expansion. He'd forged relationships with the world's biggest advertisers and solidified his reputation with a generation MORE

    Sep 13, 2011 11:35 AM ET
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