At some point, enough developers/managers will begin to take advantage of the system until executives wise up.
It's also possible that this is the CTO/CIO/management's first real position where they can throw around $100k projects out of a multi-million dollar budget and they are simply learning the ropes.
It's also again possible that the company has so much cash devoted to this department that no one cares because they are collecting large paychecks. In which case, you're likely acting against your best interest (long and short term) to not take advantage of it.
They only wise up if they have data that tells them they need to.
Who is the source of that data? Developers and managers.
This is why it is very, very hard for big companies to stay agile: the management hierarchy insulates self-interested managers from consequences.