Presumably the best application of a bonus in business is to reward good performances. If you are the CEO of a company and you meet the bonus requirements, then it qualifies as a good incentive. The problem with this instance is, as Mr E says, the bonuses are actually built-in to the contract. i.e. they're not bonuses in any way, just an addition to the salary. Obviously, the problem is that in the corporate world all boards offer huge bonuses as contractual and not based on performance, so if you don't offer it on the grounds that it isn't a realistic incentive, you simply won't attract the best candidates.
As coqauvin pointed out, some executives simply might not care or be motivated by their reputation. Why? Because the combination of salary and bonus ensures that even if you're completely incompetent when you reach the top, you're still financially very well-set. There is no financial incentive to drive the performance of your company if you're already very wealthy.
Are the best candidates motivated by other means? How big a factor is reputation? I won't pretend to know what these high-profile failures are thinking when they get their golden parachutes, but I'd hesitate to label all of them as entirely lazy and only interested in a bonus payment that'll sort them and their family out for life.
Obviously government can't step in and tell companies how to run their businesses, that would be ridiculous. If they want to ruin their company by pampering the very people responsible for running it then that's their prerogative, but I would think that after this, a) the heads of failed banks and companies won't find getting another job so easy, and b) I *hope* good business practice will compel boards to offer financial incentives that actually are incentives, not just gimmes that only amount to a larger salary.
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