Not exactly on topic.

But I think you what you have observed does occur. Why?

Cronyism might be the cause in some cases. In other cases, as you point out, the manager feels threatened that they could lose their job to a more talented subordinate. You can't blame the manager in the second case. But either way, the manager is selfishly putting his or her own interests ahead of the company's.

You are also correct, the more a company gets filled with people that feel the way you describe, the less competitive the company will be and more likely it will be to fail or at least underperform.

I tried to address the issues, you describe as CEO, but it is harder than you might realize.

Another problem that perhaps impact the problem you identified, is that there are plenty of people prepared to stab their boss in the back in exchange for a shot at their job. And so, cronyism and hiring "weaker" skilled employees with all its negatives to the company, provides the manager a feeling of job security.

All of which is not to justify cronyism or failing to hire people who are the best long-term persons for the job, but rather to confirm your observations are not wrong. I was a aware of the problem you noted when I was CEO, think most CEOs are. It is just one of the many challenges CEOs try to address amid so many others. I once fired an employee guilty of what you have observed, three years after I should have. There were simply to many other bigger problems at the time and while the person was guilty of what you ascribe to managers, they were responsible for a department that was less critical to the success of the company and so "reforming" it could wait until more pressing problems were addressed.