I am not quite sure how it works in R:TW, but in M:TW the general gave two morale bonusses: one for troops in his vicinity, dependent on his amount of command stars, and one for all troops, caused by specific V&V's. If he died, the first one instantly disappeared, but the second one remained. Also, the troops would lose their valour bonus conferred by the general's command ability (roughly +1 valour for each two stars, but without the morale bonus of "ordinary" valour) and incur a morale penalty for general's death. Disciplined troops suffered less from this, though.