I say this as an engineering director and someone who takes a lot of pride in my ability to do all the good things you describe: what's wrong with it is that bad management is hard to dislodge.

Bad managers will never admit they're bad; they have bad employees. It's really hard for upper management to tell the difference. The early signs of bad management look a lot like bad employee performance. It takes time for a pattern of behavior to emerge, and in the meantime projects and employees are getting ruined.

That said, traditional management, like democracy, is the worst form of management, except for all the others.