IIRC, the Soviet Union had a policy rather like this, referred to as something like the Vertical Stroke, where anytime there was a screw-up at a low level, they would fire the screw-up-ee's manager, and manager's manager, and so on, up to a very high level. The practical result was a drastic decrease in innovation and risk-taking. CEOs and others at that level usually aren't close enough to the guys actually doing direct work to supervise them all closely enough to ensure they don't make mistakes. All they can do is create a culture where there's a book of rules, and you don't deviate from the rules ever, for any reason, no matter what. So that's what they do, and that's the resulting culture and economy that you get.

Maybe we shouldn't rush to judge either sysadmins or CEOs, but instead figure out who, if anyone, actually did something malicious, and let everyone else take the lessons they've already learned from what happened.