A view from someone who hasn't ever (yet) worked in the airline industry:
Meritocracy is, in general, a good thing. In the small companies that I've worked in and heard of, it has worked perfectly. In larger companies, politics do come in to play, especially within management, but at most levels below senior management people usually work in small enough teams that those who are responsible for promotion know those they are promoting sufficiently well for meritocracy to still work well.
However, I can understand why it doesn't work in the airline industry. Management don't fly with the line pilots, so they have no way of knowing who's the best.
A-V-8R gives good examples of why trying to measure a pilot's ability statistically won't work. The only way to tell how good a pilot is, is to fly with him. And it's just not possible for a senior pilot to fly with every line pilot on a regular enough basis to know who's good and who isn't.
Alternatively, you could judge pilots on their performance in the simulator, when it's much easier to measure their skill as a pilot than it is in a real cockpit. But that would turn sim sessions from a training exercise to a test, and discourage pilots from trying to spend time improving on things they're not so good at in favour of them trying to demonstrate the things they know they are good at. This would definitely be a bad move.
I'd be interested to hear from current commercial pilots whether they agree with this or not, because as I said this is a view that I've formed from a position of total ignorance.
FFF
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