Is it usual to use endowed chairs to support deans' administrative duties, rather than faculty's academic work?
I only know how these things work in the natural sciences at R1 institutions, so my experiences might not be helpful for your institution.  

However, at my university, both the current and former deans of natural sciences were given endowed chairs when they arrived: the (former) dean Daniel Carson (see here) is the Schlumberger Chair of Advanced Studies and Research and Professor of BioSciences, and the current dean Peter Rossky (see here) is the Harry C. &amp; Olga K. Wiess Chair of Chemistry.  As you can see from his webpage, Carson continued to run a lab and churn out great research while dean (he finished his position in the spring of 2014), and I expect that the same will be true for Rossky (he just arrived and doesn't have much of a web presence at Rice, but here is his former webpage).  So it is not necessarily nefarious -- to hire really top-notch scientists into administrative positions, you have to offer them things.

But of course I have no idea what is going on at your university, and it could very well be a power play by the administration.