Actually, in any at-will employment state in the U.S., he certainly does have the power, just because he's a manager. I'd go so far as to say that in all the U.S., he has a right to fire the guy; he just might have to give him severance because 'fucking my wife' isn't 'for cause'.
And on a practical level, no one could reasonably expect him to continue working with, let alone managing someone who'd done this, in this small a company.
I believe the supreme court of Iowa recently ruled that an employer (a dentist I believe) was not wrong to fire an female employee to whom he found himself irresistably sexually attracted. According to court docs, his wife wanted her fired and he did so. [0]
Dentist had made some pretty dumb comments that could probably count as a hostile work environment but he wasn't liable for wrongful termination. Obviously doesn't apply anywhere but Iowa but interesting nonetheless.
And on a practical level, no one could reasonably expect him to continue working with, let alone managing someone who'd done this, in this small a company.