If he was fired for sexual harassment, that is one thing. But a naughty password on its own? That was maybe not the case here but that is what I have doubts about.
What if it was violent, bigoted, or suicidal? Passwords are secret but they aren't necessarily private. If you wouldn't want to verbally verify it with your administrator you probably shouldn't use it.
I have seen many password policies that says that you never should disclose your password. I have never seen a password policy say that it must not be naughty. As for violent or suicidal, I am less sure. I guess I would reason like a doctor, who has a patient's privacy to consider, but when certain lines are crossed he can contact the police if he think there is risk of crime.
Then I think our only difference in opinion is whether making sexually aggressive statements about your coworkers is crossing a line or just "naughty."
The difference is maybe that I don't see a password as a statement. There is no intent to let anyone know it. The only purpose it serves is to be difficult to guess / crack and easy to remember.
It depends on whether the statement is public or private.
Otherwise we're getting dangerously close to thoughtcrimes.