As a tenured professor I can say something about that.
The short answer is, I don't really know the limits and don't want to know.
They can basically freeze your salary and not increase it, which over time can amount to a lot. I have heard of salary cuts in rumor, but nothing firm. Basically they can make your life a complete living hell, which is more unpleasant than it sounds.
At my university, I've noticed a trend where they have been increasing the number of bullshit rules; it seems like what they're doing is increasing the reasons they can have for firing people, in a kind of HR mindset.
Importantly, though, at my department, I can't think of anyone who's just a slacker. They're just not there. The weird thing is that some people who have reliably brought in grant money I think do poor actual research--they are funded because the areas sound important, much like terrorism or threats to children are always a good way of sidestepping political criticism. Conversely, some who have been poor at grant funding have been insanely cited. And then there are people who do neither, but who are powerhouse teachers.
To be honest, what constitutes "poor performance" is at the crux of a lot of issues. Increasingly, this means one thing, which is bringing in grants so universities can siphon off money in the form of "indirect costs."
However, with concerns about replicability in science, is that really the right goal? I mean, if you need the money to fund your research, fine, but what if you don't? Should you still be obligated to search for money you don't need and the agencies know you don't need, just so universities can take a cut?
The whole thing is a mess. As someone wanting out of academics but without a clear route to that, I've tried to think honestly about this, and I think getting rid of tenure would only make things worse. To some extent, med schools have gotten rid of tenure (if in practice if not on paper), and here we are, with the replicability crisis. The whole point of tenure is to avoid problems like the replication crisis. Academic politics is cutthroat, and tenure is about the only thing that makes the whole thing worth it. It's not even a risk-aversion issue, it just seems like a common-sense thing if you're in the middle of it. The only thing I can think of that's comparable is SCOTUS--I've realized that my problem with that isn't the lifetime appointments that protect from political crap somewhat, it's the fact that the bar for appointment isn't high enough.
Really, I'm not feeling the prestige of being a professor, even though I'm at a large research university. To me, it feels like I'm a vilified class, sort of like a lawyer.
One thing that I am puzzled by as a professor is how this idea came about that the value of a university education is in the classroom. To me, this makes no sense. If I were to give an incoming student advice about how to make the most of their education, I would say: get involved with research. Find faculty you can get to know and work one-on-one with. That's what you are getting out of it.
To be honest, I'd love to do MOOCs and whatnot, as it makes a lot of sense to me, more sense than a lecture course. But in the end, I think it's the small, one-on-one attention that's really where the heart of a university education should be.
I have a lot to say about this all, but it's difficult to put in words. People tend to oversimplify a lot of things about problems in academics, but the near future seems very bleak to me in a number of areas--not just academics but also business, tech, health care--as power becomes increasingly concentrated in an administrative elite. Increasingly I feel treated as a widget-maker, like administration expects everyone to conform to some dean's stereotyped wet dream of what a tenured STEM professor should look like.
My rough recommendations for solving the academic crisis, at least in the US:
* states, or someone, starts funding universities again at pre-1990s levels (or be at peace with no public unis anymore)
* administration serves faculty, not the other way around
* federal grants eliminate indirect costs (like a lot of private grants), or at least don't allow facility costs that aren't explicitly justified (to the GOP's credit, they proposed that and there was massive pushback, which was unfortunate)
* solve problems with the health care system
* businesses take responsibility for vetting and training employees--don't push that responsibility onto universities, and recognize people can grow
* students need to see university educations as something they participate in, not consume.
My inkling is that academic problems aren't really so different from problems in many other areas. It's the same old-same old: they're becoming increasingly politicized, increasingly hierarchically structured with an administrative elite controlling everyone else, people don't want to pay for anything because they themselves don't have the money, etc. etc. etc.