It is even worse. For companies without SME tracks, SMEs find themselves getting almost no raises or comp despite contributing to more and more revenue and/or important/complex work. Then you see stupid things happen, like they find need for and hire 2 or 3 people just so they can justify a 5% raise. Then they find need for and hire more people to justify another 10% raise.
Suddenly you have a company with many FTEs doing almost no meaningful work, existing just to justify tiny increases in the manager's comp. This is really an HR issue -- ultimately they set a set of rules and people play by those rules.
Forward thinking companies I've seen have SME IC tracks where you can grow comp by contributing to more and more influential projects w/o forcing a management track.