I believe evaluating software development only works at the bottom line of tasks with formal metrics like issues, bugs or tickets solved. Also in general only possible in larger teams and probably more for maintenance tasks than active development.

There are no boni for top performers in my company at all. If business is good everyone gets a bonus. The only exception here is sales. Here people are more competitive. I guess I would get martyred if I even suggested it for other departments. And I believe it would be pretty bad for morale and teamwork overall. It is good that people don't use energy to present themselves in a good light and instead solve the problems we have. I still believe there is a lot of incentive for employees to see the company performing well. As you said, I have the impression that this becomes a background issue if employees compete with each other.

There was a time I would love to have worked at Blizzard, even while being aware of the volatility and risk of the industry. I wouldn't want that today regardless of compensation. Still, I don't believe it is either or. Both systems you suggest probably have an overall net negative effect for development. There are other forms for employees to participate on company success. Administration for employee boni is wasteful overhead for the most part.

If it is true what the article reports, I believe the manager did the correct thing. On that metric he might be a high performer among his peers.