Managers only hire and reward based on loyalty and threats in these highly political environments. It is very common to see a decent director with very weak managers under him, to ensure that nobody is a threat to his position.
Mediocre corporations work in a very different way from results oriented high performance companies. In mediocre places, games of power rule the place, even if it doesn't make sense economically.
On any given dimension, everyone/everything cannot possibly be above average. If you take competence, most companies will be mediocre. At best you have a bell curve, at worst it's an exponential curve with only a very small amount of high competence.