Peter Principle
en.wikipedia.org
en.wikipedia.org
It's actually a very rational perspective, but companies aren't rational. So I'm unconvinced that this actually exists despite seeing several examples of it in the wild.
In practice, it stabilizes corporate hierarchies by implying that everyone is exactly where they belong.
The people below you are there for a reason, or they'd be somewhere else, and everyone above you is simultaneously less incompetent than you but not perfectly competent, so you should work hard and strive to beat them. If you don't participate or you fail, hey, you just discovered your level of incompetence.
If you can think of any examples that might disprove this principle, then you've merely highlighted where Peter demonstrated his own level of incompetence, proving its validity. Obviously, though, we don't need to worry about that, because if there were anyone more competent than him, we'd all be using their principle instead.
I'm being ridiculous, but so is this.