Butt, along with fast bowlers Mohammad Asif and Mohammad Aamer, were all suspended by the International Cricket Council (ICC) earlier this week for their roles in spot-fixing during last year's Test against England at Lord's.
The left-handed batsman received a 10-year ban with five years suspended, while Asif was banned for seven years with two suspended and Amir was slapped with a straight five-year ban.
And while Waugh says he has some sympathy for 18-year-old Amir, he was in no doubt about how Butt had disgraced his role as the nation's captain.
"That's a major deterrent. To get five years, for most players, that's your career over,'' Waugh said at the Laureus Sports Awards in Abu Dhabi.
"And rightly so for someone like a captain of a team who is responsible for the culture and character of the team and influences younger players. The left-handed batsman received a 10-year ban with five years suspended, while Asif was banned for seven years with two suspended and Amir was slapped with a straight five-year ban.
And while Waugh says he has some sympathy for 18-year-old Amir, he was in no doubt about how Butt had disgraced his role as the nation's captain.
"That's a major deterrent. To get five years, for most players, that's your career over,'' Waugh said at the Laureus Sports Awards in Abu Dhabi.
"The worst possible sin you can commit as a captain is to do something like that.
"I feel a little bit, I guess, of compassion for the young guy because he would have seen it happening with the other players.
"Butt, I don't have any sympathy for him and Mohammad Asif has sort of been a serial offender in a lot of areas. At some stage someone's got to take a stand.
"There's no point pussy-footing around and making a half-hearted decision. You've got to have a serious deterrent out there to stop people doing it. We'd be very naive to think they're the only ones doing it.''
Waugh, who suggested the ICC should use Amir as a `poster-boy' for how you can ruin a promising career by getting involved with corrupt practices, said he hoped the verdicts were timely ahead of the World Cup on the
subcontinent.
"It sinks into the players that this is serious now,'' Waugh said.
"If they are involved or are contemplating it, you're really risking your reputation, you're selling your country out.
"There's so much stuff that's bad about what they're doing, let's hope they take notice of what's happened.''
Waugh also hoped the decision showed the ICC was truly committed to fighting corruption in international cricket.
"I don't know, I assume they are,'' he said.
"If they're not, why are the running the game?
"There's a big issue out there and it's got to be tackled. Someone had to take a step.''
