(b) As I understood it, it is only used to determine comp adjustments
If you go into it with the view "We're all excellent people, and these people are the best of an excellent bunch, so they're getting the biggest raises this year", it seems like a reasonable system.
It's probably not competition that causes stack ranking to be a bad idea -- it's the measures that determine the ranking. Valve's flat hierarchy probably means that you only need to earn the respect of your peers, not of a group of managers that determine the rankings. I could see a situation in which a truly engineering-driven culture combined with stack ranking would become a meritocracy that rewarded the best engineers.
