Good point. The end result is the same: inefficient allocation of resources that could pass for productivity. Weird incentives at the management level.
Firing productive engineers isn't going to fix managers whose vision is not aligned with business needs.
In my corporate life, I saw total of two exceptions to that rule ( now and my previous boss ).
My guess is "undercompeted", though I'd hope there is a better word.
If an organization has a large and secure revenue stream whether is works on improving output or not, it will focus inward, on making life better for the insiders, not the customers.
It's not always obviously true that there is such a project. Neither companies nor teams are fungible enough to make this necessarily true, at least not to the extent that ROI is expected to be higher than a smaller more focused team.