‘They better have all their ducks in a row’

‘They better have all their ducks in a row’

It was a news release that quickly made headlines beyond Canada: RBC had dismissed its CFO and an interim CFO was stepping in.

And it was the details that garnered the attention:

“RBC was recently made aware of allegations involving [Nadine] Ahn and immediately launched an internal review and engaged outside legal counsel to investigate.

“The investigation found evidence that, in contravention of the RBC Code of Conduct, Ms. Ahn was in an undisclosed close personal relationship with another employee which led to preferential treatment of the employee including promotion and compensation increases. As a result, the two individuals have had their employment terminated.”

Seeing a top-tier executive at a prominent employer dismissed for misconduct – publicly – is rare. But RBC’s recent actions serve as a reminder of the importance of policies and procedure when it comes to handling such situations, say two employment lawyers.

Transparency with C-suite dismissals

Of course, RBC’s decision to reveal the details some eyebrows — was that much transparency needed?

It can be about sending a message, says Lior Samfiru, national co-managing partner at Samfiru Tumarkin in Toronto.

“In some cases, I think an organization wants to send a strong message, especially if the organization itself feels that it has clean hands, that it did things the right way, it wasn’t complicit and wasn’t involved in any form of misconduct. And if the organization has nothing to hide, it could take that opportunity to send that strong message to its clients, to the outside world and certainly to its employees.”

For an organization like the bank to show that it’s serious, that this type of behaviour is unacceptable, it has to take a strong position, he says, “so perhaps they’ve made an example of this particular executive, all in the name of that transparency.”

That’s even more true when a financial institution is involved.

“Banks have to abide by various regulatory rules and laws and expectations. So they have to also have transparency, in many ways, with respect to what is going on there, how decisions are made, etc. So those conflicts or even perceived conflicts could create further liabilities for a bank.”

Ordinarily, you wouldn’t necessarily see an employer going out of its way to publicly disclose the nature of the allegations, or the termination, says Daniel Lublin, founding partner of Whitten & Lublin.

“[RBC] seemed to be unusually generous in providing information that we wouldn’t ordinarily see,” he says. “This one could get really muddy because it wasn’t just the bank press release saying that ‘We’ve had to let our CFO go’ or ‘Our CFO has moved on’ — they really went out of their way to disclose why. And you have to question why it was necessary.”

As a result, it’s possible Ahn will challenge the bank, says Lublin.

“The public disclosure of the nature of the firing has rendered her virtually unemployable and went beyond what the bank ought to have or needed to say in the circumstances.”

Why workplace relationships should be disclosed

Ahn was apparently in an “undisclosed, close, personal relationship with another employee,” according to RBC. And that’s a problem, says Lublin.

“It all comes down to being in a position to confer or deny a benefit. So if you have two consenting individuals in a relationship who are peers or are lateral to each other, the issue from an HR perspective is not as profound as when you have someone who’s in a position of authority to confirm or deny benefits.”

And that doesn’t just apply to an executive such as a CFO, he says.

“It’s managers, directors, vice presidents and the C-suite — it’s anyone in a position of authority who really has to tread very carefully with relationships in the workplace. Not only is it a bad look, but it creates the inference towards other employees that the individual who’s in a relationship with the executive or manager may be favoured or preferred.”

It is important to have that disclosure when you’re dealing with more senior management, says Samfiru.

“It’s mainly because of the influence that those individuals can have on the careers of others,” he says.

“When you’re in a position to make important decisions, you’re counted on to make those decisions objectively to the benefit of the organization. And if you’re putting yourself in a position where you are now, potentially, in conflict, where your personal interests may contravene or may conflict the interest of the organization, that’s a problem.”

And when it comes to the C-suite, more is expected, says Samfiru.

“Oftentimes, they’re fiduciaries, they have to make the organization’s interests… primary. And, because of that, whenever there’s a potential conflict, that is something the organization must know about.”

Investigating misconduct in the C-suite

When it comes to investigating an individual with a public profile, such as a CFO, a third-party investigation would likely be the preferred approach, because that provides a level of stability, independence and neutrality, says Lublin.

“I’m not necessarily saying that the investigation couldn’t be competently done in-house. But given the individuals, given the seniority, and experience and reputation, the individuals involved, having an external party certainly makes the investigation report more forceful.”

And when it comes to investigating someone in the C-suite, the employer will want to act with haste, he says.

“Certainly, it would be awkward to have the chief financial officer under investigation for a code of conduct violation that drags on… for many months on end, which they sometimes do.”

Along with hiring an outside, neutral, experienced investigator, to avoid any perceived bias, you would want to be as comprehensive as possible, says Samfiru.

“It’s not just talking to the individuals in question — you’d want to speak to anyone who may or may not have may have information or may potentially have relevant information. So you want that to be as broad as possible. You also want to understand why they’re doing this investigation: ‘Is this an isolated scenario, or have these issues been happening under our noses with other people and other circumstances?’

“So there’s an opportunity here, for an organization like RBC to really understand what’s happening. So I think thoroughness must win the day as opposed to brevity.

Going for just cause after executive misconduct

Ahn earned $4.1 million in direct compensation in fiscal 2023, including $650,000 in salary and more than $3.4 million in bonuses and stock awards, according to the Financial Post. And RBC’s annual proxy circular states that if one of its top executives is terminated for cause, the bank won’t pay severance and the employee could also forfeit various other bonus awards.

While RBC clearly stated it was dismissing its CFO because of misconduct, it did not confirm if the termination was for cause.

If the financial institution did take this route, it would have to show that Ahn acted in a manner that contradicted her obligations, that she gave preferential treatment, and that she didn’t act in the best interest of the organization, says Samfiru.

“If they can establish that, absolutely, that can be cause.”

And keep in mind, the onus is on RBC to demonstrate cause, says Lublin — “The CFO doesn’t have to prove anything. “

“The bank has to demonstrate that this meets the definition for, essentially, the capital punishment of employment law, so they better have their ducks in a row.”

The mere possibility that that happened is not enough, the employer must prove what it’s alleging, while the employee does not have to prove it, says Samfiru.

“They absolutely must provide that truth, that evidence — and speculation is not going to be enough, suspicion is not going to be enough, they would have to prove that on a balance of probabilities, that means that it’s more likely that it occurred than it didn’t.”

It’s a fairly high threshold to meet, he says.

“But if [the employer] has that evidence, then I suspect that probably any court would say that that is cause. If there’s such evidence of preferential treatment, not acting in the organization’s best interest, giving preference to the relationship, I would expect — especially with someone at the suite C suite level — that that would be cause.”