I think you're living in one of those legends yourself. The overall IT sector is, along with every other sector of the economy, down over the last few years. There are companies that will cut 10% of every department just to cut costs for the stock price. Incompetent managers are just as likely as incompetent workers in any other line of work, and jerks are just as likely to be managers as any other line of work.
Performance evaluations aren't done for their own sake. They are done to validate actions the company or its staff take. A good evaluation validates a raise or promotion. A bad one validates no raise or letting someone go. If the evaluations are abused and data misconstrued, then people's jobs and pay rates are absolutely being abused as well.
Businesses don't always give the department lead a budget to be spent on whatever, and many businesses do not allow the department manager direct say in the exact pay rates of his or her staff. There is sometimes nothing but paperwork linking many workers to people making decisions that directly effect the employee's job and pay. They may not have ever met the people making the decisions. That paperwork needs to be accurate unless you really want someone to keep the wrong part of your staff around.