RBC terminated CFO after complaint sparked probe of relationship with VP, sources say

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Royal Bank of Canada RY-T terminated chief financial officer Nadine Ahn after an employee complaint sparked an internal investigation that concluded she influenced promotions and pay raises of a vice-president in the bank’s treasury department while having an undisclosed personal relationship with him, according to three sources familiar with the matter.

The sources said the treasury executive was Ken Mason, a vice-president and head of capital and term funding, who was terminated from the bank on Friday along with Ms. Ahn. The bank received a complaint to an internal tip line on March 11, RBC said, touching off a probe of one of the institution’s most senior executives.

The termination ended Ms. Ahn’s ascent to the C-suite of Canada’s largest lender, which had started positioning her as a potential successor to chief executive officer Dave McKay. The banking veteran was considered a rare serious female contender for the top job.

In a statement released late Friday night, RBC announced to shareholders, customers and employees that the CFO had breached its code of conduct, providing details rarely disclosed by a major bank. Banks are required to disclose material breaches of their codes of conduct, and the sudden departure of a key decision-maker in the most senior ranks can rattle the market.

In her role as CFO, Ms. Ahn had control over compensation and promotions in her division, which includes treasury, and she had the ability to accelerate Mr. Mason’s rise through the executive ranks, according to the sources.

The Globe and Mail is not identifying any of the seven sources cited in this story because they are not authorized to speak publicly about the matter.

The treasury division is responsible for the bank’s liquidity and financial risks, and one of its primary roles is to manage RBC’s cash and short-term funding in order to meet daily financial obligations and adjust to sudden changes to its balance sheet. Ms. Ahn was named CFO in 2021 but had spent more than a decade in the treasury division as she rose through the ranks.

Ms. Ahn and Mr. Mason could not be reached for comment by The Globe.

RBC said after it became aware of the relationship between Ms. Ahn and an undisclosed employee, it launched an investigation that revealed Ms. Ahn had provided preferential treatment through promotion and compensation increases. The bank said that it immediately commenced an internal review and contacted outside legal counsel to investigate, which ultimately led to the termination of both employees involved.

“RBC became aware of the allegations on March 11 and immediately launched an investigation,” RBC spokesperson Gillian McArdle said in a statement in response to detailed questions from The Globe. “We engaged outside legal counsel to investigate. Based on a review of the evidence, we terminated employment for both individuals on April 5.”

RBC told staff in an internal memo that the bank was notified of the allegations when an employee used a confidential internal channel – known as “Speak Up” – to provide details of the issue to the bank in confidence, according to three sources.

However, questions had been circulating inside the bank for some time about the nature of the relationship between Ms. Ahn and Mr. Mason before the issue was escalated in recent weeks, according to four sources. Ms. Ahn and Mr. Mason were occasionally seen together outside of the office, and suspicion grew after Ms. Ahn approved of a major reshuffle within the treasury division last fall, according to five sources familiar with the matter.

Mr. Mason’s rise within the treasury division saw him promoted over time from the middle ranks to vice-president and head of capital and term funding. On Oct. 31, 2023, RBC announced a significant reshuffle within the department that awarded him more seniority and elevated him to a level above long-term peers, according to five sources. As well, senior leaders left the division over time and Ms. Ahn used her authority over organizational decisions in the department to expand Mr. Mason’s role to include broader mandates that also led to pay increases, according to two sources.

While structural changes to roles within a bank are common, the issue behind the termination stems from the influence of the pair’s undisclosed relationship.

In response to a request from The Globe, Ms. McArdle said that RBC does not comment on specific matters relating to individual employees, past or present.

A similar issue arose a few years ago at RBC, resulting in the termination of employees involved in an undisclosed relationship. In 2022, another senior vice-president in the finance department was terminated after failing to disclose a relationship with a more junior employee that resulted in preferential treatment, according to two sources.

Ms. Ahn had been tapped as a potential successor for the chief executive officer position – one of the few women on Bay Street to be in line for the top job at a major bank – according to two sources. To this end, the board of RBC was considering moving her in the near future to a role overseeing a revenue-generating line of business, which is typically seen as a critical stepping stone for a CEO candidate, according to one of the sources.

RBC did not confirm this information.

While Ms. Ahn spent much of her two-decade-long career at RBC in the treasury division, she did a stint as the capital markets CFO to broaden her skill set. Before becoming CFO of the entire bank, her most recent role was head of investor relations. It was in this role that Ms. Ahn stood out, according to one of the sources, as having potential to be a group executive, in part because it is a public-facing position and she developed relationships with external analysts and portfolio managers.

When she was appointed CFO for the entire bank in October, 2021, she was promoted from senior vice-president of wholesale finance and investor relations, which meant she bypassed the higher executive vice-president level.

As CFO, Ms. Ahn was part of the senior executive team that set the overall strategic direction of RBC. She oversaw the finance, taxation, performance management, investor relations, corporate treasury and corporate development divisions.

In 2019, she was given a Champion of Change award by Women in Capital Markets as a leader who advocates for the advancement of women. Ms. Ahn is also on the board of the Michael Garron Hospital Foundation in Toronto.

In 2023, RBC increased Ms. Ahn’s pay by 25 per cent to $4.07-million. Among her performance highlights, the bank recognized her for exercising “a disciplined approach to resource management and stewardship of enterprise efficiency and cost containment” and “maintaining strong controls and governance environment.”

Ms. Ahn’s termination comes one week after RBC closed and integrated its $13.5-billion acquisition of HSBC Bank Canada, clinching the largest domestic banking takeover on record.

Canada’s banking regulator has called out cultural and character issues as significant non-financial threats to the banking sector. In January, the Office of the Superintendent of Financial Institutions unveiled its final guidelines on integrity and security issues affecting the country’s financial system, including oversight and enforcement culture and compliance practices.

OSFI said it will bolster its assessments of the character of board members and senior executives, and monitor the culture cultivated by senior leaders and the corporate governance structures that influence how and when decisions are made.