The board sold players from under him, most notably James Milner. They were even considering selling Michael Owen at one point and Keegan felt this undermined his authority.

You're missing the point. Who comes and goes should be Keegan's decision, no one else's. When the board or owner(s) interferes with managerial issues, the manager feels undermined. What if the new set of players that come in aren't the ones he's looking for. As many would tell you it isn't just about bringing in the best players, they have to be the right players. What happens if they don't gel and the team performs miserably? Who gets the chop? If a manager is to be sacked, he'll want to be sacked because of a mistake he made, not because of someone else's mistake. It's as simple as this.