Ethically he can't but legally, especially if you are management and dependent on local laws if you aren't, he can.
This becomes a very interesting legal issue, but not if you are caught in the middle of it. If you complain to him, he can fire you, especially if you are in an At-Will Employment state. But if you report him to a regulatory agency, then you have whistleblower protections, which means he can't fire you, harass you, or retaliate.
The downside is that, in a small company, he can make your life miserable.
I would put your resume out there on LinkedIn, take courses, attend webinars, join industry organizations, and find someplace better. It may take you some time, but it will be worth it. If you are into revenge, report him after you leave.
My $0.02 worth.
Funny, once you accept certain things and realize you can't change a person so set in their ways, it becomes more fun to butt heads with them and nag them like a child about washing hands and putting on hairnets 
That's awesome! Make his life miserable!
Martha
"...everything can be taken from a man but one thing: the last of the human freedoms--to choose one's attitude in any given set of circumstances, to choose one's own way." Viktor E. Frankl
"Life's like a movie, write your own ending." The Muppets