The principle actually refers to the systematically promotion in some companies of their least competent employees to management (generally middle management). The main goal of the promotion is to limit the amount of damage they can do without making a difference. Hereby they are creating a buffer between the employees and upper management.
Scott Adams told multiple times that managers do not understand the jokes in most strips. The problem is, most of the times they aren’t jokes and he’s trying to characterize how the management system really works.
As an opposite principle, we have the Peter Principle. The principle differs in promoting the most qualified person within the group regardless of the skills required in the new role. So employees only stop being promoted once they rise the level of their “incompetence“.