Being publicly hung out to dry can be quite a motivator.

More or less, yes. It's more like "Having what you've done be made public so that others who see will know what you've done" (and if it's shameful, then everyone knows it).

Kind of like "airing your dirty laundry."

Hi,
This was all front page news in The Wall Street Journal today, and because of that, I'm guessing, by late this afternoon Mr. Thain came to his senses and withdrew his bonus request.
Being publicly hung out to dry can be quite a motivator.

Does this mean 'being publicly critisized can be quite a motivator'?

Yes. But there is also a slightly different meaning to

Yes, that's what it means. It's sort of an extreme case. There are other laundry metaphors, eg., "doing your dirty laundry in public." When you're hung out to dry you're exposed to public scrutiny and the elements for a substantial time (with no mercy), until you've been thoroughly "dried."

Edit. Clive's point about the scapegoat aspect is very important. It emphasizes the trasitiv

Thanks, GG, Clive, and Avangi.
One day I hope to be explaining what you all have said as smoothly as you did.