The Situation:
As someone who developed and ran my own MUD for 7 years (god, I hate how that shows my age): too many mods is a bad thing. Each mod/admin/whatever brings in their own personal experiences, biases, and opinions. This means the one situation can be handled in many different ways, so you have an issue with interpretations of rulings and issues and inconsistency. This is why in most sports they try to make the rules black and white instead of interpretation, but you STILL see rulings in each game get argued to the nth degree (from elementary school sports to professional).
And when it gets stressful, it is hard to determine how someone will handle it when you only communicate via technology instead of in person or at least over a phone. Someone 'cracking' or two mods fighting can cause damage that ruins the entire game/site/whatever.
Remember the Spiderman quote (with a twist): "With [mod] power comes great responsibility." Some people can handle power, some cannot. To be able to pick people that can handle it with great success? Good luck. We've been trying to do that with leaders on this world for centuries, and corruption still happens, even in modern times (see dictatorships, corrupt governments, etc...)!!