It doesn't have to be blackmail. It could be that the person has so entrenched himself or herself in his or her role that even their boss can't really fire them. This is especially true in companies that tend to hire top management from outside or do a lot of lateral transfers. It's entirely possible that the middle manager here knows more about that part of the business than his or her boss, and so the boss can't let this person go, because the boss doesn't know enough about the requirements of the position to hire a replacement.