Ok so, as I'd expect, "self-preservation" is a motivator. Getting fired, replaced, demoted, or losing your license would all have financial implications among others. You didn’t answer my question, but I’m guessing that better engineers in your firm are more likely to get larger increases and are more likely to be promoted, as they are in most firms without severe issues of corruption.
I see from another thread that you also claim an economics degree, so you should understand the importance of incentives in economic decision making. When you pay more for something (quality) you get more of that thing.
Now move this out of your world and put it into Apple’s. I’d guess the number of licensed PEs working on their software is between few and none. The regulators in this case are the security researchers. Unit and regression testing, field and beta testing are roughly the equivalent of your “unplug one, blow up the second, freeze the third” testing. Failing inspection and field failures have similar consequences.
When you say tying your pay to the quality of your work would put “self” above the public, how does the economist in you explain that? Quality in this case means less failure, failures that you claim will kill lots of people. Quality is in the public interest, and tying your pay to the quality of your work means quality is in your interest as well.
When you say “bugs happen”, you’re disincetivising quality control in favor of other priorities. When you pay bug bounties, you are incentivizing researchers to find bugs but not incentivizing your engineers to avoid them. If you make the financially incentivize the arms race between developers and researchers then you’re leveraging competition and providing balanced incentives for prevention and detection.