"I would guess that a company would have to come up with a legitimate reason or risk being sued. "

That's just it. They do not have to justify these actions more than the "insurance reasons""health reasons" ..whatever. It's pretty easy to think up some sort of liability on just about anything. If you are employed and you get fat should the company have the right to tell you lose weight or be fired? You drive up insurance costs. Have the potential of higher absenteeism dealing with health issues. May not perform as well...whatever. How about sky diving?

A Corp is a public entity owned by the shareholders. Therefore the shareholders are the employer. Therefore Execs should be no different from any other employee and, in fact, have much more power to do harm.
If an employer has lax checks and balances to the point where a single employee can do great damage then, once again, I'd blame the employer and not take it out on all of the employees.
Do you really drug test your babysitter?
There used to be a seperation from work, which is time you are paid for and have a mutual agreement of, and personal time, which is your own time that your employer does not compensate you for. What you do on your own time should not legally be any business of the employer. We've really allowed a slippery slope to be put upon us.