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Yes, not all blackmail is illegal or undesirable. For example, "Go to detention or I will call your parents," is technically a form of blackmail, but hardly illegal.

If the blackmail is illegal, the blackmailer should be arrested. This assumes that someone aside from the blackmailer and the person who is being blackmailed knows about the blackmail. If not, it is unlikely that the person who is being blackmailed will tell anyone they are being blackmailed and the principal isn't going to say anything. The school principal should not be allowed to keep their job, but if no one knows about it, there is no one to complain about it.

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Q: Can a school principal blackmail a student and keep his job?
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