It seems like a group thing where they buy credibility with industry insiders. IPO's are all about lending credibility (that's why investment banks take a huge chunk), and the do-nothing hires are apparently related to that.
Yes, signaling plays a big part. At some point you’re basically buying a gold-plated LinkedIn profile for the VCs and the press releases and the keynotes in industry summits, and that feeds on itself - each new prestigious VP position is another layer of gilt on the CV.
In other words, they are hired to look good - any productive outcome is a mere coincidence.
The IPO process is very tricky too; they want large holders to keep their stock as long as possible either to avoid tanking it or to keep the float small so it will bid up quickly. Naturally all these people can get out before the employee lockup ends though.
If you see such behavior, I encourage you to look for personal relationships. Many of those situations that I have observed the grifting new hires were friends of the investors or founders, etc.
My memory is hazy but the first time I saw this, they were all followers of the same guru as the founders. Not actually Scientology but a similar sort of thing. They lost it all in the dotcom crash anyway!
The first thing you learn about business is that you don't know how it works.
The second thing is that no matter how experienced the competition looks, they don't know either.
Hiring cannot solve a lack of business knowledge ... and yet everyone keeps thinking, again and again and again, that it does.
So what makes people hire these idiots ?