I think you're both right to a degree. Yes, nobody's specifically hiring people just to keep them busy. But there are many instances where people are employed to make some manager (and it could be management at any level) look good, or retain power within the organization or even just for them to retain a management position within the organization long past the time when their position could've been eliminated. This is more likely in larger organizations, but can also happen in mid-size ones as well.