Expectation Time For Promotions From Management

If the top management gives promotions to all the eligible employees in the top 20% in the annual review, and says, those who do not get promotion in 3 years are non-performant, it means, the top management is dumb and all those who are in the top management should join elementary school immediately.

Don't they know that, if they give promotions to at max 20% per year, there will always be atleast 40% people without any promotion at the end of the three years?