1 - because even during a mass layoff, theres always a threat of a lawsuit. Sure, it may not go anywhere, but as already mentioned, defending is costly. An employee that decides to leave on their own volition is no risk. Plus, laying off people has in some states some remuneration and compliance requisites. Unemployment hearings that tie up senior staff and can be a time drain. Then theres fringe benefits. And of course, there's morale, reputation, and other intangible costs like IP loss and making an unwanted enemy or even encouraging a scrappy conpetitor. Its infinitely cheaper and desirable to get someone to leave vs termination.

2 - Please see serf's post. In addition - High performers can also be those that actively prevent product from actually shipping, ensnaring the org in turf wars, and similar (typical) large org roadblocks.

To be clear, my worldview was that this premise was insane. I still think it is strange -based own personal experience- but im far less certain of its invalidity, and I am forced to acknowledge that the CEO has better information than I have. Perhaps I need to reconsider my position.