Asking someone to choose one or the other is not the same as firing them. It’s clearly written that if Sam Altman had chosen YC he would have stayed there.
That's a perfect article of what happened in reality.
They belong to a similar high social class and protect each other. If it were just a random employee with no power, money, or status that was moonlighting or trying to run their side business, they would be scrutinized and possibly sued. If their generated IP were any good, the company would claim it was theirs.
But yeah, if you are a CEO, you can run a few companies and participate in a couple of boards, even while not disclosing this to the many boards you partake in and having many businesses with conflicting interests. As you are part of the elite, you are safe.