I think it depends on how its done.
At the Taekwondo schools I've attended, it's common to have a certain amount of "leadership hours" to get your black belt and/or subsequent degrees. For most folks this was a volunteer position, but they're also mainly playing the role of babysitters, pad holders, and ukes. For me it was a paid position (after black belt).
I know in ATA you have to have so many points for things like how many people you've promoted, tournaments you've refereed, etc. This creates a system in which mid-to-upper-level black belts are encouraged to promote as many students to black belt as possible, which does create a potential conflict of interest in promotion requirements. (Master Alex may promote Ben not because of Ben's merits, but because Alex wants more points for his next promotion).
My BJJ Professor was talking about Judo, and how he quit at purple belt because he didn't want to jump through the hoops to get your black belt. According to him, you need to volunteer for a year for the Federation (helping run events, etc., all for free) in order to get your black belt.
I think when it's done at the local level to help build leadership skills it's fine. If it's just a way to get someone to teach class for free or a way for the organization to get free labor, I think its an issue.