That is the single reason for many orgs screwing up their system as this forces excellant developers/workers to abandon their core skills and move into management..
It becomes a problem when tech salaries are on the rise, because at some point the company either has to start paying coders more than managers, or has to implement pay rises throughout the management hierarchy in order to retain good technical staff.
At this point its really tempting to promote good coders into management to keep them.
This is just greed/pride. As a manager, the only person who knows that an engineer makes more than you is you. And it's pretty common these days for companies to have an engineering track that has a VP-equivalent top position, so it's pretty common that the most senior engineers will make more than most of the managers at the company.