When my eldest daughter was in high school (~2010, Argentina) there was a provincial policy where if every single student had a result below a certain score in a test, the scores had to be re assessed against the maximum result.

The resulting situation here was that she was constantly bullied into underperforming. Both cases are actually similar in that each individual has a personal incentive to underperform - the difference is that in your friend's case the policy is granted at the company level so no single employee can defect and break it for the rest, while in my daughter's case one high scorer could invalidate the reassessment for everyone, which is exactly what made defection punishable and the bullying emerge naturally.