I think the issue is that ranks are customizable rather than ordered. If you have "officer in charge of activity A", "officer in charge of activity B", and "officer in charge of activity C", you can customize their individual titles and privileges, but there isn't any inherit order making one of those more important than the other two. You've got multiple ranks with different names and perhaps different privileges to go along with their individual responsibilities, but they're all on the same level. It seems like the entire ranking system in XIV is an extension of that.

Anyone you give promotion/demotion privileges to is assumed to be responsible for setting other players' ranks, irrespective of where those are, because "where those are" is meaningless. There aren't really ranks that are "above" or "below" any others, just ranks that have different sets of privileges. The real problem is that this fact isn't obvious. The ranks appear to be ordered, but their number is simply where to display them in the list rather than an actual higher-ranking / lower-ranking order.

I do think something needs to be done about this problem. But it would likely require first making the rank level itself more customizable than it currently is. Once you can specify which ranks share the same level as opposed to those that are genuinely higher or lower, then they'd be able to add a rule that you can promote/demote only between ranks lower than or equal to your own.