How do you manage an 'indispendable' senior staff with bad attitute

I was recently engaged to consult with successful and established group of companies in Organisational Strategies Development and came across a common issue with many organisations today. How do you deal with someone who is accepted by the bosses to be 'indispensable' to the company in terms of being a pioneer staff, having strong product knowledge, a revenue performer but is unable to lead, cope and accepted by his fellow colleagues or subordinates and refuse to be accountable or responsible for other things?
You cannot sack him or reprimand him for fear of losing him but is causing other staff to leave or be demotivated. I propose that we create internal competition as a threat to him and also start implementing consequences for non compliance. What do you think.