I'm going through the review process right now, and I finally learned the details after three years. Each director gets a pool of money to allocate towards raises in their department. The only way a high performer can get a better raise is for the director to screw someone else out of a raise worth offering, essentially, because they have to stay within that total allocation. It basically makes the entire process worthless, because the chances of getting a raise commensurate with your performance is quite low.
(The controlling interests in our company includes one of the world's largest industrialists and one of the world's largest banks. They don't lack for money.)