You're wrong. Anything you produce in company time that is even remotely jon related, is company property. The code, the binary, the password and any intellectual property rights protecting them is the company's property. Every contract clearly arranges that, so you can't extort your former boss, as in the story. If your contract doesn't contain such clauses, your company is incompetent.
Property is tangible. The computer that stores the software is property, the software is merely a configuration of the property. Certain monopoly privileges regarding that configuration (copyright) might be assigned to the company depending on the details of the contract and local laws.
Providing a password is an activity. Whether the employee has a duty to perform that activity depends on the contract and circumstances. In this case, the employee was not assigned the task of writing down the password, so failing to write down the password was not a breach of duty. His boss attempted to negotiate a new employment arrangement involving writing down the password, and negotiations fell through.
Extortion is the threat to perform an unlawful act unless demands are met. This case was not extortion because the employee did not perform any act, let alone an unlawful one.
Put simply, if an employee goes beyond the call of duty, the employer cannot compel them to continue going beyond the call of duty. All the employer can do is fire them.
