Royal Bank of Canada (RBC) disclosed it has appointed Katherine Gibson, a 20+ year veteran of the bank, as interim CFO, following the dismissal of Nadine Ahn.
In a press release from April 5, the bank announced it had discovered evidence which, “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.” The decision followed an internal review that involved outside counsel.
The release noted that, despite the undisclosed relationship and preferential treatment, the investigation “found no evidence of conduct by the former CFO or the other employee with respect to the bank's previously issued financial statements, RBC's strategy or its financial or business performance.”
Gibson has been with the bank since 2002 and has held various senior roles, including controller and senior vice president of finance and vice president of finance and wealth management. She will remain as interim CFO as RBC searches for a permanent replacement.
Ahn, who earned C$4.1 million ($3 million USD) in direct compensation in 2023, had seen a 25% earnings increase over 2022, according to a Bloomberg report. Ahn has been with the bank since 2002, according to her LinkedIn profile.
According to RBC’s most recent proxy circular, sent in advance for an April 11 annual meeting of common shareholders, if a named executive officer (NEO) is “terminated for cause,” the bank will not pay severance. Per the board’s discretion, the NEO may also forfeit bonus payments, stock units previously awarded and unvested, unvested options, annual bonus awards, and RBC may instigate compensation forfeiture and clawback, “applicable in the event of fraud, misconduct or financial restatement.”
Companies face myriad challenges in protecting employees who may be involved in romantic relationships. According to a February 2020 study by the Society for Human Resource Management (SHRM), a majority of co-workers have dated a peer, and a significant number have dated either a superior or a subordinate. Though this study was conducted pre-pandemic, it indicates the near-impossible challenge of attempting to monitor employee romantic behavior but puts the onus on human resources and the C-suite to establish and communicate effective governance around appropriate and inappropriate behavior.
Policies put in place, made available through employee handbooks, and highlighted by human resources, typically establish anti-harassment guidelines and reporting mandates. And, as employment law attorney Dana Chang Dikas said, reported by Business News Daily, “policies also can (and in most cases should) prohibit relationships between supervisors and subordinates, which can be breeding grounds for claims of sexual harassment or favoritism, divulgence of confidential company information, gossip, and other workplace disruptions.”
Standard policies include mandatory disclosure to human resources, a ban on superior-subordinate relationships, acknowledgment of anti-sexual harassment policies, and a ban on public displays of affection in the workplace. RBC’s release indicates Ahn had failed in at least two of those, engaging in an improper relationship, and failing to disclose it.
Former McDonald’s CEO Steve Easterbrook is the most notorious executive to have violated such policies, after he was found to have multiple sexual relationships with co-workers — all of whom were de facto subordinates — and lied to the company and hid evidence.
The hammer dropped when he was required to return over $105 million in equity and cash. And in 2021, CFO of Ares Management Fund Michael McFerran was fired for “inappropriate personal relationships and interactions with certain employees in violation of company policies,” resulting in forfeiture of all future compensation and un-vested carried interest, potentially more than $50 million in total, according to a company 8-K. McFerran later co-founded Amatus Management, an alternative investment fund, in 2022.
RBC’s CFO transition occurs a week after RBC announced the completed acquisition of HSBC Bank Canada, a C$13.5 billion ($10.2 billion USD) transaction which was approved by Chrystia Freeland, Canada’s Minister of Finance, in December, 2023.