It sounds like it is time to evaluate the evaluation system. If its objective is to increase productivity, it is definitely failing.
Many studies have found that feedback on performance can in fact be motivational. There can be an improvement in motivation and productivity when employees learn about the areas in which they may need improvement, followed by some constructive feedback and guidance. In this context, even feedback from one's peers can be quite valuable.
However, in your company, the feedback is not feedback at all. It is simply a form of bullying. For that reason, you should discuss the situation with your human resources director or senior management.
Since the company has adopted a peer review system, perhaps you should suggest that the company go all the way and implement a 360 degree feedback program. With this system, employees are evaluated not only by their peers and superiors, but by their subordinates as well. With some training for all involved, this can be quite motivational.
At the very least, it can be a productive way to provide your managers with some constructive feedback regarding their destructive feedback.
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