Earned titles

How do you get a title? I mean, if you go from Junior Associate Operations Manager to Senior Associate Operations Manager, what's the mechanism that leads to that change? In the business world, titles are given as recognition, sort of like a knighthood or a trophy. Someone in a position of power (perhaps the Vice President of Operations Management) comes to you and says, "good work this quarter, Bob, I'm making you SAOM". Or you ask the VP nicely, push for it in your initial hiring negotiations, etc. Regardless, these titles are bestowed: someone (or a group of someones) gives them to you based on whether they think you deserve them.
This causes a number of issues. Firstly, the classic Peter principle: you get promoted as long as you're doing a good job and you stop being promoted when you're no longer doing a good job, so eventually everyone gets promoted into a position they can't do. The core problem here is that bestowed titles are optimistic; you aren't promoted because of your ability at the job you're being promoted into, you are promoted in the hope that your performance in your current job will imply performance in the new job. Problem is, that's not always true, so speculative promotions can backfire spectacularly.
Another problem is that bestowed titles make it hard to know what that title means. If someone is a senior, what does that imply about their abilities? Maybe they are much more qualified than a junior. Or maybe they just fooled their manager, or the manager is biased. Maybe the company just needed more seniors. Maybe they'd just been around so long that it became politically inconvenient for them to stay junior. To understand the meaning of a bestowed title, you need to understand the people bestowing it and what their motivations are. And if you don't know what someone else's title means, do you know what your own means? A side-effect of bestowed titles is impostor syndrome, because you can't be sure that you're actually qualified for your own job.
On the other hand, there are certain titles that are earned instead of bestowed. Academic qualifications, professional accreditations like in law or medicine, and even the certification process for using certain equipment. Earned titles are handed out on the basis of demonstrated, tested ability with, in theory, very little in the way of politics or personal judgement. By their nature, these can't be handed out speculatively or optimistically; you weren't given this title because someone wanted to take a chance on you, you earned it by showing you can do what the title requires. Because of this, earned titles can be trusted in a way that bestowed titles can't. And rightly so; you wouldn't want to be operated on by Doctor Let's-Try-You-In-Surgery-And-See-How-You-Go.
It seems to me that the business world is a bit behind in this sense. If promotions were earned based on a well-known set of testable criteria, more like certifications than honorary titles, it would be much easier to have confidence in what they mean, both for other people's titles and your own. Maybe that would even lead to a system where instead of one title, you earn many different titles depending on your skillset. So no more Senior Engineer, more like Database 3, Programming 3, Ops 4, Tech Lead 2, Design 2, Management 1. You'd have a clear mapping between titles and pay, you'd know exactly what your colleagues can do, and it would always be clear which skills to work on if you want to progress.