Agreed. This is especially problematic when pressure is put on managers to limit promotions. One friend works at a company where there's some sort of promotion quota. He put one deserving person up and was told other people deserved promotion more, so hopefully the promotion would happen in 6 months.

Not only does this serve to underpay people ready for promotion, but it makes it harder for them to move elsewhere. If they're working at level X but have the title/pay of level X-1, then they'll have a much easier time finding a job at X-1, which effectively resets the promotion clock.