I think to call it incorrect is overstating it.
We tend to use nouns, in the singular, to modify other nouns instead of making them possessive.
Shoe store
Faculty lounge
Table leg
Car door
Company picnic
However, there are times when the phrase "company's picnic" would not only be okay, it would be preferable, such as when several people are comparing their experiences at the picnics held by their respective companies.