>> Grade inflation refers to the phenomena of getting an "A" despite having what used to be a "B" or "C" level of knowledge.
> If an institution gives grade A based on some objective criteria and students getting the grade C turn out to be successful business people then methodology of the institution will be considered flawed by the vast majority. Soon, the institution will lose its relevance.
What you describe is grade inflation.
Grades aren't meant to be predictors of career success, they're meant to be indicators of past academic performance. My understanding is that once upon a time, a "C" grade meant your work was average or typical, which was perfectly respectable. An "A" or "B" mean your academic work was above the norm or outstanding. People could get C's and go on to have successful, non-academic careers (such as in business) with little comment.
With grade inflation, when "average" is an A or B, it's much harder to distinguish the truly academically talented based on their grades, since they're grouped into the same category as average performers.