Problem with penalties like taking away keepers is that it creates a class system. The haves- and have-nots. You want teams to be engaged, not make them less competitive going forward. If you create significant handicaps for owners to compete next season, there's no guarantee they'll see the wisdom in coming back.
I think the best method is not to penalize, but rather to incentivize improvement in the 2nd half. Award teams an extra keeper at a salary discount equal to the proportion of their improvement from mid-season to the end of the season.It is possible that owners might leave if they're penalized. I've never played in a league that takes away freezes, so you would have to ask someone in the American Dreams League if this impacts turnover.
We went through a phase in my A.L.-only home league in the late 1990s/early 2000s where some owners joined and then left after 3-5 years. We have a maximum of 15 freezes and no penalties for finishing at the bottom, yet they still left. These owners weren't engaged all year long, either refused to make dump deals or didn't understand the nature of dump deals and made them poorly, and typically had a below average freeze lists or worse.
These owners didn't leave because they were penalized but because they either didn't have the ability to compete in a tough money league or the time to do so.
The converse of this is that there are one or two owners in my league who are almost always in competition and rarely - if ever - throw in the towel. They are "handicapped" by their own success in that they have fewer freezes every year and the freezes that they do have typically aren't the cheap, young $10-15 studs you need to have in a competitive Rotisserie league. Yet these owners often finish in the money and even win now and again.
I agree with Observer's point that you don't want to force owners out of a league by making it too difficult to dump and build a team for next year. However, I do want to see owners - particularly new owners - learn from their mistakes and learn to field a competitive team.
In great leagues, there ultimately is a weeding out processes as you eventually knock out the owners who never respond to your e-mails, go to Amsterdam without submitting their freeze lists, and generally make the same obvious mistakes over and over. We have had the same core of 11 out of our 12 owners since 2005. From 2001-2005, we had four owners leave. They were good people, but they weren't going to be able to invest the time or effort into winning that it takes in a super tough league.
I liked almost all of the people who have left our league, but our league is stronger for their leaving. We never pushed any of these people out, but it became clear in almost every case that it was time for them to go and they seemed to know it too. There should be a balance between not penalizing owners (as Observer suggests) but also not rewarding futility either.