The bigger issue with merit is that many and possibly most good jobs are either worth much less to society than they pay or net hurting us. With so much fraud and inequality rewarding perseverance and aptitude just incentives a downward spiral.
In this way The Peter Principle somewhat doesn't even apply anymore. Many managers aren't even vaguely aligned with their organization's goals and their organization's goals were somewhat evil. They aren't incompetent - they are simply fraudsters in an economically equally fraudulent corporation.
I'm not in anyway discounting that Nicole is being treated unfairly compared to Martin. It's just that both Nicole and Martin are likely both paid way more than what society gets from their work.