Reads to me like your 30 years of (self-acclaimed) software rock-stardom has caused a certain fluid to go the wrong way for you. Sure, software is written by engineers, but guidance is provided by managers. I thought the same as you for a while: devs are more important than managers. Today I know they are equally important, not one is more, or less, important than the other. And I have half your experience and am not claiming I'm a rockstar. Guess that's because I don't just preach about humility, I actually am.

The problem is, director is a leadership role (this was also stated by OP for their company). In this case, a star developer who has failed in all described leadership opportunities can get offered "better sounding" tech role (e.g. principal engineer) but not a management role. Having personally immature people in management roles is another type of disaster. They can be moved to higher engineering roles, but not to people management roles.

@O.F. I think you've misread my intent, and I suspect from your tone that this was deliberate. I was careful in my choice of the word 'may' in that sentence. You're assigning it a much stronger interpretation than was intended. I didn't mean that managers are not needed, I said that it's possible to proceed without them and still get good software, but that the opposite isn't true. And, I carefully positioned my comments to show that the engineer had produced value but that the manager had failed to perform. Based on your comments I can only assume that you are a troll.

@miroxlav - I agree, that's what I'm complaining about. This should have a) been very clear to the engineer, and b) there should have been other options open to him and explained to him, where his particular contributions could be recognised and rewarded. The situation the engineer is in should not have been possible in the first place, this is very poor management.

@EngineerDollery the personal risk is something my mentor (now with another company) brought up when I asked him this question. His suggestion though was that I fire the engineer and basically blame any problems over the next six months on his "smoke and mirrors". Happily for everyone, I don't think I am at that much risk. RE: management, the reason it wasn't made clear to him is that his direct manager and I both assumed from prior offers that he had no interest in management. I'm happy to help him get there, but I didn't know he cared until the application came in.

This engineer, who is at least three levels below the OP's position, has repeatedly avoided / turned down pretty much anything that would involve other human interaction or management, then acted like a spoiled child (bordering on sabotage) when he didn't get a management position, and the OP is the problem?

@SteveFriedl yes, it is the OPs problem because OP is a manager and his job is to fix these kind of problems. That's why he's there: to be the one with social skills to keep his team working, keep the good performers happy and to keep them working. Issues with workers are ALWAYS managers' problems to solve. That's the job.

@Mavrik - exactly. This is the exact situation the manager is there to prevent. It should not have happened.

How is this an answer ? OP is asking how he can fix the situation and you spend 6 paragraphs bragging and saying you'd fire OP and then finally proceed to tell him he has to "fix this situation". No kidding ?

@StumpedMoneyHacker - you seem completely incompetent. Your have failed at your most basic and most important job. Good engineers are 10x better than average ones (there is plenty of scientific evidence to back this up, btw). You should have been doing everything in your power to understand this guy and helping him achieve his goals because he is the asset here. You didn't. You burried your head in the sand until it was too late. You saw his extra efforts and took them for granted. You assumed he was doing it because he was a 'geek'. You and I would not get along.

@Echox -- sorry, I thought the answer was clear. The OP is the problem and can't fix this himself. Not all answers are easily actionable. Sometimes the answer is introspection and removing yourself completely from the situation. If you can point out where the bragging is, I'll try to fix it.

On this page we see two good examples of the differences between rock stars and primadonnas.

The thing is, you spent so much time criticizing OP you didn't notice that you would have acted the exact same way he did. If developers are so much more important and valuable than managers, would you have allowed your Star Developer the promotion to director ? (And don't you know about the Peter Principle ?)

@Echox - totally wrong.

@Mavrik, sure, it is a manager's job to not even let problems happen, and if they do, to mitigate, but in case of the engineer in question... how was the OP to know such a storm is brewing? The engineer never showed interest, hell, he did everything to distance himself from human interaction, than, on the first rejection he gets, he throws an ongoing tantrum? Childish prick is what that engineer is. Like a child, he sees a new toy he would like, doesn't know what the "toy" requires, and when denied, goes on a fit and actively sabotage his surronding. How was OP to know ahead of time?

This was linked in one of the other answers and it makes a very good point. youtube.com/watch?v=Y4dyADuYfbg Untrustworthy, high performance individuals are not an asset to the company. Other people can write software too. No one - not even this guy - is irreplaceable. "Rockstar" or otherwise. The manager's job is not to keep him happy. The manager's job is to ensure that the work is getting done. And it's currently not being done because this employee is holding the company to ransom, a behaviour that should not be rewarded in any capacity at all.

@Stacey The manager's job is to keep EVERY single of his employees happy and productive. That's literally the job description. Keep the empoyees happy is one of the most important things to keep the employees productive. The OP has failed at that unfortunately. He also has failed at organising his team to not be so dependant on a single developer. Those are all managerial failures.

@O.F.: The OP (or his TLs) should act like a good managers and communicate with employees constantly to find out what their wishes are. There is a reason why regular 1:1 meetings are a thing - they allow managers to "know that a storm is brewing". If the manager is so oblivious that he doesn't know what his employee wants and fails to properly reward them, he's really bad at his job. Unfortunately such obliviousness is too common in many companies.

@Mavrik, keeping said developer happy at what cost? Promoting someone who, in hindsight, is totally unqualified for a managerial, leadership role to exactly one such role? And then, if another contender for the role is upset he didn't get the role, promote that other person to a made-up position so he is kept happy too? A manager's role is to keep his employees happy (and thus productive) within reason. Another role is letting unruly ones go when it becomes clear they are no longer productive but rather destructive.

The way I read it the OP rewarded the dev in question without the dev even asking: granting him unrequested raises that put the dev at a pay bracket twice that of the dev's line manager! On the other hand, the dev did anything in his power to distance himself, in the past, from any managerial duty which, to every reasonable person, would indicate lack of interest in such a role. If questioned, I'm willing to bet the dev doesn't even know himself why he wants the role. He just does. To me that speaks childishness.

@StumpedMoneyHacker if you do just that, the output of the team will be not much. You blame it on the star developer. Some people will already see that that's also your fault for allowing that a single person has so much exclusive knowledge. With the weeks and months, your excuse will become weaker and weaker. Not much will improve, because the management structure and processes are broken. No magic unicorn rock star developer turns up as replacement. After some time, your job is on the line.