Martin Winterkorn, faced with the company's widening crisis over its rigging of emissions tests, announced his resignation as CEO of Volkswagen Group Wednesday. He is likely to leave with a pension valued around $32 million, and possibly with many millions more, depending on what the board decides regarding his severance payment.
According to the company's most recent annual report, Winterkorn had amassed a pension worth €28.6 million ($32 million) at the end of last year. And despite the scandal enveloping the German auto giant over its admission that it cheated on its diesel emissions data, compensation experts predict he'll receive it.
"Any high-level departure in an iconic company is going to get plenty of scrutiny," said David Wise, the U.S. market leader for the human resources consultancy Hay Group. "But the pension is the pension, and it's not new compensation for the CEO. It's been earned and accrued over a long time period. It's essentially already been paid for."
Winterkorn could also be eligible for a lofty severance payment, though it's not clear yet what he'll receive—if anything. The company's annual report says unless an executive is terminated "for a reason for which the Board of Management member is responsible," those with employment contracts dating since late 2009 may receive severance payments that equal up to twice their total remuneration.
In Winterkorn's case, that could mean a big payday. He was among the highest-paid CEOs in Germany last year, receiving a total package valued at €15.9 million. Under the above calculation, that means it's possible he could receive severance pay worth more than €30 million, bringing his total exit package to roughly €60 million (or about $67 million).
Two things are not clear. His contract could precede 2009, meaning a prior employment agreement would be grandfathered in, according to the annual report. (Company spokesman Claus-Peter Tiemann declined via email to comment or answer questions on Winterkorn's exit pay and contract.) Moreover, the annual report says that if the board decides he left due to something for which he was responsible, he could forfeit any severance pay.
Paul Hodgson, a partner at compensation research firm BHJ Partners, says the events so far make that scenario unlikely. The supervisory board's statement on Wednesday not only noted that Winterkorn himself offered to resign, but praised his work and made a point to say he "had no knowledge of the manipulation of emissions data."
Hodgson said: "That smells like a termination without cause to me," meaning Winterkorn could receive the severance payout.
If Winterkorn does end up with an exit package worth all those millions, shareholders will probably be unhappy and could call for it to be "clawed back" from him after the fact, Hodgson said. An amount like $67 million, he noted, would rank relatively high among past exit packages seen for CEOs in the United States.
Amid the uncertainty surrounding his severance package, there is at least one perk that Winterkorn will almost certainly get upon leaving. Volkswagen's pension benefit, naturally, includes the use of company cars for departing executives. "Let's hope it's not a diesel," Hodgson said.