I'm not dealing with these situations myself, but I recalled a few cases I've seen happened over the years. I'm wondering why this happens and how should managers act to prevent this kind of issue.
BigCorp had a small department organizing an internal event, which involved keynote speeches by director level personnel from partner companies and should gather an audience of around 200 people. Let's say the event was scheduled to take place in August. On February, during a meeting about several subjects concerning said department, a VP in BigCorp (which has a whole hierarchy of VPs), asked: "So the event is taking place in May, right?". And absolutely nobody in the room had the nerve to correct him, the VP got confirmed that the event was scheduled for May (much earlier than August).
Afterwards, people seriously considered rescheduling the event such that the VP would remain uncorrected. There were almost a straw picking to see who would talk to him and explain that the event would happen in August.
Now, SmallCorp had been founded by a guy with a PhD who developed a nice software product after defending his thesis. Over time, they grew to be a small company where the CEO-founder no longer does relevant technical work, besides still being very knowledgeable in the technology.
A client once pointed out that a small module from this piece of software used some suspicious and complex scheme never found on the literature to perform a computation. This scheme was not much efficient and provided an approximate result, whereas the literature solution is known everywhere, is simple to compute and implement, and gives an exact result. It was noted that the suspicious scheme was taken from the CEO's PhD thesis, where it was developed to perform a similar, but different task. The client talked with the CEO directly about this, who wasn't really convinced, and a dismissive "I'll check this up" was probably given then.
The inappropriate computation had been kept in the product for years, and after being pointed out by that client, remained there. The CEO didn't look into the problem nor assigned a technical person to it. The inaccuracy was not critical, but did cause some minor performance degradation to the end-product, which was generally of relevant concern in that field.
So why this happens?
I've read once that a company's CEO claimed "The last time I knew if my jokes were really funny was the day before my new position was announced." And I can understand it so far, but it seems that something has gone wrong along the way when pointing out minor or objectively spotable mistakes from a person in high hierarchy place becomes such an issue to the point of accepting performance degradation on a product, or considering rescheduling events involving partner companies.
Is this more related to the CEO/VP profile or with the employees themselves?
One big concern is: Communication is not going well between the CEO/VP and his personnel or clients, and at least that much needs to be addressed.