Along with the CEO — and perhaps even more so — the CFO is relied upon by the investment community to ensure that their company is steered free of fraud, scandal, insider trading and all other financial shenanigans. Most important, CFOs are counted on by investors and business partners to vouchsafe the integrity of the books on which they base their investments and dealings. Any scandal involving a CFO can rock a company. And one like this, showing poor judgment in apparently putting her personal interests ahead of her employer’s, can be doubly tumultuous and troubling.

No doubt aware of this sensitivity, RBC took great pains in its announcement to note that the bank’s finances and operations were not affected.

“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,” the bank said in the release.

It is hard to get to or near the top. And judgment is usually even more important than skills and ostensible credentials in reaching that level.

Now for some law: Any fiduciary (i.e., senior employee) has a legal duty to put their employer’s interest well ahead of their own. RBC says it found that Ahn had a personal relationship with another employee and directly favoured that employee, through promotion and salary increases. If true, that would be a direct conflict of interest even if it had not also been a code of conduct violation, which RBC claimed in its press release.

And a conflict of interest, particularly by an executive, is one of the clearest causes for discharge in our legal lexicon. It should deprive Ahn of any severance, as well as certain bonuses which were to be paid over time.

RBC’s code of conduct is entitled Integrity: Doing What’s Right. Accountability and integrity are two of its five core values. The code prohibits conflicts of interest, noting that “conflicts often arise where there is a personal interest that could compromise our objectivity.”

“It’s important to identify and disclose immediately if we will be working with (those) who we are in a close personal relationship with so conflicts can be appropriately managed or avoided,“ it continues.

Finally, the code specifically mandates providing “equitable opportunities” to its employees, something Ahn did not comply with if she favoured the employee with whom she had the relationship.

Breaches of a company’s code of conduct may not by themselves be cause for discharge even if the code of conduct prescribes that. It depends on the type of breach. But the fact that a code warns employees against certain misconduct makes it more likely to be cause than if there had been no such warning.

But what Ahn is accused of would normally be grounds for cause even if it had not been delineated in the code because of the level of her position and the reliance her employer has on her acting selflessly, with integrity and only in the interests of RBC.

That is an ironic aspect of employment law. The higher up you are in the hierarchy, the more likely misconduct is to be considered cause, depriving an employee of any severance. Because senior employees are fiduciaries and their employer relies upon them, they are expected to be role models of rectitude. That is especially so for financial executives who, for obvious reasons, must be beyond reproach.

If Ahn has done what she is accused of doing and RBC still ends up paying her severance, that could itself be a scandal, and shareholders would have cause to complain.

That is not only because RBC would be paying out monies unnecessarily but because it would not be setting an example to its other employees of how seriously it takes such misconduct.

Ahn, of course, has had her reputation severely tarnished with this press release alleging conflict of interest and breach of its code of conduct. If RBC does not have the goods it asserts, she will have a very strong claim, not only for wrongful dismissal but for punitive and other damages.

And if, after all of this, she goes to court and wins, it will damage not only RBC’s reputation but the morale of its employees.

But if RBC does have the goods, Ahn should duck and hope that this storm blows over. If she sues and loses — which she almost certainly will if the allegations are well-founded — she will be living this case for the rest of her career and paying a fair chunk of legal fees, both to her own lawyers and to RBC’s.