Step on his feelings. This kind of thing needs to show up on their (annual) reviews, and their performance should be derated. That doesn't necessarily mean fired, but their performance evaluation should be penalized. That would generally mean a failure to get COLA increases, to say nothing of merit increases. If they have 10 year old skills, then their wages should be frozen as of 10 years ago. If you don't have annual reviews, your company has a problem. That's what managers are for. If they're not doing their job, that should show up on their reviews as well.
Are they worried about hurting this guy's feelings? This isn't a daycare. Are you worried about this guy leaving for another company and taking valuable information with him? He's not going anywhere, no one else would hire him with skills that old.
If you have a company that mature without either annual reviews or management that feels that they should manage, your company has a dire problem and you should get out of there. The way you phrase this makes it sound like it's actually a government position, and sadly that is more par for the course. Now you know why people don't like paying their taxes.