I imagine that if the managers had delayed the recall and the problem turned out to be as they originally suspected, that would have been their fatal mistake.
The article suggests that the other option wasn't "delay the recall" but "kill the phone". The fact that "kill the phone" came after "send supposedly safe replacements" is what was fatal, not the early recall.
i.e. they thought they had enough evidence to damn one battery manufacturer, but the truth was the problem was elsewhere, and they still don't know. Faced with continuing problems and no known cause, if they'd pre-emptively pulled the phone, the hope is that they'd be seen as looking out for their customers.
I'm not knowledgeable enough to say, but there are problems with these kind of batteries overheating, especially on recharging. Pumping electricity through a material produces heat. If it has nowhere to go then you end up with a fire and toxic fumes. The solution on airplanes being to put the battery in a sealed metal box with a pipe to vent any toxic fumes to the outside of the hull.
i.e. they thought they had enough evidence to damn one battery manufacturer, but the truth was the problem was elsewhere, and they still don't know. Faced with continuing problems and no known cause, if they'd pre-emptively pulled the phone, the hope is that they'd be seen as looking out for their customers.