There is a critical problem in your proposal:

It would motivate the generals whose reputation is at stake to push harder and harder, again and again for some more Friedman unit in order to avoid punishment.

What you're proposing is essentially a bonus system, after all: The pensions turn into a bonus system the moment the general becomes responsible for the war. High performance - high bonus. Failure - no bonus.

I know a governmental agency tasked to support high tech start-ups with equity capital for loans or economic policy purposes.
Its management board also gets bonuses.
Some of the start-ups supported are zombies. They keep getting fresh money in order to avoid that the management board needs to write off previous investments in these failures.



I wrote reputation on top because they wouldn't necessarily lose money. Many flag rank officers (especially those who really lead a campaign) will later 'earn' money with books, speeches, 'consulting' or from the arms industry directly.