Then they should clear the clipboard via JavaScript when submitting the login form, not prevent pasting of the password. Password managers are simply too much of a win to block.
Clearing the clipboard would be annoying for people who commonly copy a bunch of text out of a document, log in to their bank, and then paste the text somewhere else, but I suspect this is a rare workflow for most people.
I did work for a very security-minded HR outsourcing company on an html site to be used on a public kiosk and we also disabled paste via javascript for the same reason - to prevent a user from being able to paste in a previous user's password at the same terminal.
"@passy I'm mistaken about the website security certificate but avoiding pasting of passwords is good practice & protects our customers 1/2" https://twitter.com/BritishGasHelp/status/463679554306203648
"@passy especially when using public computers. Alpha numerical policy ensures your protection without making special characters necessary^S" https://twitter.com/BritishGasHelp/status/463681274092462080