Two, the general tone of the advice is "plan things well in advance" (compensation, structural adjustment etc.). The fact is that you can never plan everything well enough in advance, especially things like structural adjustment. The article doesn't address what to do when your plans inevitably "collapse in the presence of the enemy".
Three, it is a fact that you can't simply fire an executive just because it is obvious to the wiser people in the company that he's incompetent. He will have plenty of friends and will be sure to raise hell for it. This is a sure way to get lots and lots of politics, and of the most unpleasant sort too. Oftentimes, the only reasonable solution is a "structural adjustment" - create a sinecure for the guy where he has few responsibilities and can safely slide into irrelevance.
-> Telling her to "wait three months until the next review process" will probably lose that employee.
Asking someone to wait several months is asking them to place their faith in the fairness of the company and to trust that they will be rewarded for their trust and faith at the "normal" time. An employee's ability to trust in the company is going to be highly dependent on the company's past behavior, make sure your employee's have reasons to trust in you before you ask them to. A company needs to earn this faith, it'd be foolish to expect it blindly.
They don't owe you anything if they work for you. They're not family. Welcome to the free market. Try not to die.
 well, indoctrinated people still do but they're probably not going to leave the place they're currently serving life at
Your insertion of the word "naive" makes this difficult to refute. But if I may rephrase by removing that word, I do think that loyal employees exist. I've been with my current employer 14 years with no plans to leave (as have the other 3 managers in my area, plus many employees). My wife has been in her company for 10 years.
There's much more to having a job you enjoy than just pay. Having one free of politics (as is my office) is important to me. Having a team that one gels with is also very important. I'm spending half of my waking life at work: I want to enjoy it.
But "loyal"? This is not rational. You should never be more loyal to some party than that party is to you. If you are then you've been indoctrinated. You've been had. It's fine to work somewhere a long time because you feel it's currently the best place to meet your overall objectives. It's not ok to work somewhere because "you owe them" or "they've been good to me in the past".
Being somewhere 14 years is certainly an "employee smell" if you will. Usually when someone stays that long it's because they have a misplaced sense of "family", believe their market value to be low (they could be correct), etc., etc. Not because they think it's the best overall deal out there.