It wasn't their call. UPN (the latter being the station that used to air Smackdown back in the day) were receiving so much hate-mail over the character that they pressured WWE to get rid of him. USA were getting hate-mail over it as well back when Hassan was still on the Raw brand.
The pussification of society (or at least of a select number of people) led to the character's demise. Shame, as it was originally planned to have him challenge Batista for the WHC at Summerslam the following month in Washington DC of all places. Would have loved to have seen that mega heat.