Your employee is playing a power game, and she is using her personal connections as a wild card to make her organizationally invincible. If she senses that you will overlook her work-related problems, errors, or shortcomings because of her powerful ties, she is going to take advantage of you and continue to raise the stakes.
This employee should be managed in the exact same way that you would manage anyone else. She should not be given favorable treatment in the hope that she will carry back positive messages to the owner, nor should she be singled out for disciplinary action to over-illustrate your desire to be fair.
If she is doing well, she should be given appropriate credit and recognition, and if she is performing poorly, she should be given appropriate coaching and documentation. If you find that providing her with constructive work-related feedback somehow generates problems for you from the owner, then you will have gathered a very valuable piece of insight about this company. The action you then take will give you a valuable piece of insight about yourself. | 
