Milne was fined $3000 by the club after an AFL investigation found he'd made a homophobic comment to Collingwood's Harry O'Brien during the Saints' six-point loss on Saturday night.
Although saying the standard of on-field behaviour modern-day players must reach is "almost impossible" to achieve all the time, Watters said Milne had to be accountable.
"The players are under enormous pressures, but you do still have a choice on what you say and how you react," Watters said on Friday morning.
"So Stephen's choice of vocab was poor.
"You need to be disciplined, you need to be controlled, and it's not about laying blame at the doorstep of someone else."
Asked if he felt the AFL had taken political correctness too far, Watters said it was important to maintain perspective.
"I'm not going to enter into that debate, but one thing I check myself on all the time is … trying to put myself in a player's shoes," he said.
"He (Milne) is a player that cops an enormous amount of criticism and taunts from opposition supporters, who probably hadn't received a couple of free kicks to that point that he though he might, all those pressures that players are under.
"Keep a perspective on that, but still ultimately you have a choice on how you respond, and good athletes and good teams … their discipline is outstanding.
"So regardless of whether you think it's political correctness gone made or whatever, you control that as an individual."
Watters also hinted that he felt Milne was more harshly judged than other players.
"I have an opinion on that, but I'll keep that to myself, and I'll allow others to speculate," he said.
"Some players are probably judged a little differently to others, but that's life."
And Watters said it was "pleasing" that O'Brien had not lodged the complaint about the taunt.
"I worked really closely with Harry and he's a friend of my family, and of my kids, and pleasingly he was in no way, shape or form upset, nor lodged any complaint," he said.
"But umpire Dean Margetts was within his right to report [Milne]."
Watters also confirmed the Saints had received an apology from the AFL umpiring department over some decisions from Saturday night's loss.
Milne was controversially penalised for chopping O'Brien's arm in a marking contest with the Saints six points down and only 20 seconds remaining in the game.
St Kilda had heavily outnumbered the Magpies at the contest and would have almost certainly kicked a goal to level the scores had the free kick not been paid.
"But I don't really need an apology, and nor does the club," Watters said.
"We're not looking to put responsibility for a result based upon some umpiring decisions.
"It's not what we're about.
"We need to be good enough to absorb those sorts of things that will occur in a game.
"If you become strong enough as a club, good enough in your execution, sharp enough under pressure, we won't be having these conversations."
Watters said veteran Jason Blake would make his return from an ankle injury with Sandringham this weekend, and forward Adam Schneider is a week away with a hamstring injury.
