Golden parachutes over Germany: Why failed managers rake in millions and the people pay for it

24 million euros for being fired? Retirement at 67? Not a chance! The lifetime luxury pensions of former CEOs are absurdly high

Germany is undergoing a period of economic upheaval. Traditional corporations are cutting tens of thousands of jobs, industry is shrinking, and citizens are feeling the far-reaching consequences of neglected infrastructure in their daily lives – most notably at the chronically ailing Deutsche Bahn (German Rail). But while ordinary workers fear for their livelihoods, have to accept pay freezes, or lose their jobs immediately for any transgression, an almost obscene parallel world flourishes in the boardrooms of the nation. Those who fail here don't fall far, but rather extremely softly: on a "golden parachute." Whether at Volkswagen, where former CEOs pocket tens of millions for mere consulting work or simply doing nothing, or at Deutsche Bahn, where taxpayers involuntarily gild the slates of fired executives for their mismanagement – ​​the reality at the top of German corporations defies any principle of merit. This comprehensive analysis exposes how the perfidious system of exorbitant executive severance packages works, why legal control mechanisms consistently fail, and why this practice massively jeopardizes trust in the social market economy and social cohesion.

When failure becomes the best-paid achievement and responsibility is just a word in the employment contract of ordinary people

Industrial production is shrinking, traditional corporations are cutting tens of thousands of jobs, and the recession is wreaking havoc on the once-dominant export powerhouse. Yet, amidst this crisis, a parallel world exists where economic laws apparently don't apply: the boardrooms of the nation. There, managers who, under their responsibility, have amassed billions in losses, driven strategies into the ground, and maneuvered companies into existential crises are being slapped with severance packages in the tens of millions. What is being sold as a contractual given is, in reality, a systemic scandal that undermines trust in the social market economy and calls into question the legitimacy of corporate elites.

The recent cases at Deutsche Bahn and Volkswagen have reignited the debate. But these are not isolated incidents; rather, they are symptoms of a profound governance failure that has plagued the German corporate landscape for decades. This analysis examines the most prominent cases, deciphers the business logic behind the golden parachutes, and demonstrates why neither the German Corporate Governance Code nor political outrage has yet brought about any substantial change.

Governance – more precisely, corporate governance – refers to the entire legal and factual framework for the management and supervision of a company. Specifically, this includes:

• Rules, laws and codes according to which a company is managed (e.g. the German Corporate Governance Code)
• The control and supervisory function of the supervisory board and the management board – i.e., who decides, who controls, and how responsibility is distributed
• Transparency, risk management and balancing of interests between all stakeholders (shareholders, employees, taxpayers, etc.)

In the context of the Deutsche Bahn and VW cases, "governance failure" means that precisely these control mechanisms failed: Supervisory boards did not critically examine personnel decisions, owners (the federal government in the case of Deutsche Bahn) did not adequately fulfill their control function, and executive boards were able to act largely unchecked – with costly consequences for taxpayers and employees.

The railway disaster: 11.3 million euros for the end of an era of failure

Deutsche Bahn is perhaps the most visible manifestation of Germany's infrastructure woes. In 2024, only 62.5 percent of long-distance trains were considered punctual, a historic low. The tracks are dilapidated, digitalization has been delayed, and the company is posting billions in losses. Faced with this situation, the new federal government opted for a radical overhaul: In August 2025, CEO Richard Lutz was dismissed after eight years at the helm. Federal Transport Minister Patrick Schnieder spoke of a necessary structural and personnel reorganization.

What followed was a personnel merry-go-round that proved costly for taxpayers. According to information from the Bild newspaper in March 2026, the severance payments for four dismissed board members totaled approximately €11.3 million. The highest-paid member was former CEO Richard Lutz himself, who received around €3.4 million after his dismissal. Former Chief Digital Officer Daniela Gerd tom Markotten reportedly received about €2.9 million after her entire department was dissolved. Former Head of Freight Transport Sigrid Nikutta and former Infrastructure Director Berthold Huber each received approximately €2.5 million.

The case of CFO Karin Dohm is particularly noteworthy. She took office on December 1, 2025, and left just three months later. She had alienated employees, politicians, and the works council and is reportedly entitled to up to two full years' salary as severance pay. Given the significant increase in base salaries under the new Deutsche Bahn compensation system starting in 2024, this payment alone could amount to more than one million euros. The new system had considerably driven up the base salaries of board members: Daniela Gerd tom Markotten already received 746,000 euros in base pay in 2024, Evelyn Palla, then head of regional operations, 700,000 euros, and former CEO Lutz topped the list with 1.42 million euros.

Legally, the payments are based on existing service contracts, some of which were dated until 2027. In the event of early termination, managers are legally entitled to compensation. The railway's compensation report states unequivocally that board members are entitled to appropriate severance pay if their appointment is terminated before the contractually agreed date, provided there is no compelling reason attributable to them. The severance payment is based on the remaining term of the contract, the agreed target salary, and any pension entitlements already payable during the remaining term. In accordance with the recommendations of the Public Corporate Governance Code, all service contracts include a severance cap that limits payments to the value of two annual salaries, including variable components.

But even if this upper limit is observed, the resulting sums are difficult to comprehend for the millions of commuters who experience the chaos daily. Particularly galling is the fact that, as the sole owner of the railway, the state, and therefore the taxpayer, bears the full cost of these compensation payments.

Volkswagen: A chronicle of gilded farewells

No company in Germany illustrates the phenomenon of excessive executive severance packages as vividly as Volkswagen. For years, the Wolfsburg-based corporation has established a veritable system of golden parachutes that was never questioned, even during the most severe crises.

The most recent and perhaps most absurd case concerns Herbert Diess, who was ousted as CEO in 2022. His contract had been extended in 2021, just one year before his dismissal, and continued unabated until his 67th birthday on October 24, 2025. During these three years following his removal, Diess continued to receive his full executive salary. In 2024, his compensation amounted to nearly €11.2 million, including pension contributions and variable pay. Paradoxically, this made the ousted former CEO the highest-paid manager in the company, even earning more than his successor, Oliver Blume, who received just over €10.3 million. In total, Diess received approximately €24 million for roughly two years without operational responsibility.

Officially, Diess was supposed to work as a consultant for the company after his dismissal. However, little of this was noticeable. Instead, in 2023 he took over as chairman of the supervisory board at chip manufacturer Infineon and became involved with several startups. In Spain, he runs a small hotel, complete with a cattle farm and pear orchard. While he enjoyed these pursuits, his successor, Blume, along with the other active board members, agreed to forgo five percent of their base salary in 2024 and even eleven percent in 2025 and 2026 to participate in the cost-cutting program. Former board member Diess, on the other hand, did not face any reductions.

According to the compensation report, Diess received approximately €9 million for the 2025 fiscal year, broken down into a base salary of around €2.2 million, an annual bonus of €3.258 million, a long-term bonus of €2.275 million, and pension payments and benefits exceeding €1 million. In contrast, the current VW CEO, Blume, earned only €7.42 million instead of the maximum possible salary of €15 million. Thus, a retiree earned €1.5 million more than the man who had to steer the company through its most severe crisis.

But the Diess case is just one in a long line. Martin Winterkorn, who as CEO was responsible for the biggest corporate scandal in postwar German history, has enjoyed a company pension of around €3,100 per day since his resignation in the fall of 2015. This equates to roughly €93,000 to €110,000 per month, or around €1.1 to €1.33 million per year. According to his contract, the manager is entitled to 70 percent of his last base salary, and this sum is paid for life, in addition to a company car for life. By comparison, a typical VW employee receives around €700 per month in company pension payments. Furthermore, Winterkorn received his full contract payment until the end of 2016, including a bonus of €1.7 million, even though he had already resigned in September 2015. While his former board colleagues pledged to forgo 30 percent of their bonuses until at least 2019, Winterkorn did not participate in this waiver.

Matthias Müller, who succeeded Winterkorn and also failed to lead the company out of its crisis, received a severance package of €17.8 million upon his departure in 2018. This is supplemented by a VW pension of approximately €2,700 per day, amounting to roughly €80,000 per month. Christine Hohmann-Dennhardt, a former constitutional judge who was brought to Wolfsburg in 2016 specifically to investigate the diesel scandal, left the company after just 13 months with a total payout of around €12 to €13 million. She had already received a welcome bonus of €6.3 million upon her arrival and now receives an immediate pension of €8,000 per month. The reason for her departure was simply differing opinions regarding responsibilities and operational structures. Reportedly, she lost an internal power struggle against Chief Legal Officer Manfred Döss, who enjoyed the trust of the Porsche and Piëch families, the owners of the company. An alternative explanation is that the former constitutional judge wanted to investigate too thoroughly.

In 2015 alone, Volkswagen paid out a total of €41.1 million in severance packages to four departing board members. In fiscal year 2018, four more board members received severance packages totaling €41.6 million. These figures must be viewed in the context of VW's plan to cut approximately 35,000 jobs at its German locations by 2030, while simultaneously setting aside around €900 million for termination agreements with regular employees. For salaried employees, severance payments start at €17,700, and in the highest pay grade, after more than 20 years of service, they can reach a maximum of just over €400,000. The disparity could hardly be greater.

Related to this:

• Volkswagen | Billions burned, bosses rake in the cash: The bitter truth behind the VW crash – a systemic failure that was entirely predictable

The gallery of golden farewells: More cases from Germany Inc

This phenomenon is by no means limited to the railway or Volkswagen. Examples can be found throughout the entire German corporate landscape that sound like fairy tales from a land of plenty, to use the words of compensation expert Heinz Evers.

The record is still held by Wendelin Wiedeking, the former Porsche CEO, who in 2009 received the most spectacular severance package in German business history: 50 million euros. Wiedeking's attempt to stage a hostile takeover of the much larger Volkswagen Group had failed. Instead of swallowing VW, Wiedeking drove Porsche to the brink of collapse with reckless speculative deals and was forced to let the family business take refuge under the VW umbrella. Initially, Chairman of the Supervisory Board Wolfgang Porsche himself had even promised him 140 million euros in severance pay, but the employee representatives on the Supervisory Board blocked this sum. Wiedeking did, however, announce that he would contribute half of the 50 million euros to a foundation for the benefit of Porsche employees. The Social Democratic Party (SPD) nevertheless spoke of millions being wasted on mismanagement, and the Left Party calculated that 25 million euros could have bought 250 Porsche 911 models.

Hardly less disturbing is the case of Karl-Gerhard Eick, who took over as CEO of the already terminally ill retail group Arcandor in 2009 and was dismissed after exactly six months with a five-year contract worth €15 million, guaranteed by the bank Sal. Oppenheim even in the event of insolvency. Even Chancellor Angela Merkel declared at the time that she had absolutely no understanding for such a sum. Eick defended himself, saying, "I'm not greedy, but I'm not stupid either." He claimed to have given up a secure job at Deutsche Telekom for a significantly riskier one. He did, however, donate a third of his severance package to mitigate the social impact of the insolvency on the employees.

Peter Löscher left Siemens in 2013 after six years as CEO, receiving a severance package of approximately €17 million. With generous stock options, the total sum could have reached around €30 million. Ironically, Löscher himself had criticized high signing bonuses and severance payments for managers without corresponding services upon taking office, stating that they rewarded failure rather than success. He had said that managers must not lose touch with reality. Just a few years later, he himself was enjoying the benefits of that very system.

At Deutsche Bank, John Cryan received a severance payment of €8.7 million for his involuntary departure after almost three years as CEO, plus compensation of €1.9 million for his final months in office and a non-compete payment of €2.2 million, totaling €12.8 million for 2018 alone. Over his entire tenure from 2015 to 2018, he had received a total of almost €22 million, equivalent to approximately €21,600 per day in office. During the same period, the bank's roughly 90,000 employees received a total of €1.9 billion in bonuses, and the management board had waived its bonus for three years.

In 2006, Clemens Börsig received a severance payment of €14.7 million from Deutsche Bank, not even for leaving the company, but simply for moving from the executive board to the supervisory board. Thomas Middelhoff left Bertelsmann in 2002 with €25 million and was later sentenced to prison for breach of trust and tax evasion. In 2008, Klaus Zumwinkel had his pension entitlements from Deutsche Post, amounting to €20 million, paid out before receiving a suspended sentence for tax evasion. And in 2023, Frank Appel departed after 15 years as CEO of Deutsche Post with a one-time payment of approximately €38.5 million, having his entire pension commitments paid out in a single transaction.

In the Mannesmann case, the matter even became a criminal matter. After the takeover by Vodafone in 2000, former CEO Klaus Esser received a severance package and bonus totaling approximately €30 million. The Federal Court of Justice overturned the initial acquittals and remanded the case for retrial. The Mannesmann board of directors had decided to distribute voluntary bonuses, with Esser alone receiving around €16 million and four other board members receiving a total of over €5 million, in addition to their contractual salaries and severance payments. The trial ultimately ended with fines: Esser had to pay €1.5 million.

In 2012, three ThyssenKrupp board members received severance packages totaling eleven to twelve million euros after billions of euros in costly misjudgments in the overseas steel business and allegations of unethical business practices came to light. Without a prior contract amendment, the payments would have amounted to nearly 20 million euros.

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The chasm between top and bottom: The pay gap in numbers

Factor 95: This is how extreme the salary gap between managers and employees really is

The severance payments are just the tip of the iceberg. Even the regular salaries of board members are in a relationship with the compensation of ordinary employees that has steadily worsened over the past two decades.

According to the DSW Executive Compensation Study 2025, the average total compensation of a board member in a DAX-listed company was approximately €3.759 million in fiscal year 2024, an increase of three percent compared to the previous year. CEOs in DAX companies earned an average of €3.7 million, representing a 16 percent increase compared to 2023. On average, DAX board members earned 41 times the salary of their employees. At Adidas, this factor is 95, while at Siemens Energy it is only 13.

At the absolute top of the list in 2024 was SAP CEO Christian Klein, who received compensation of nearly €19 million thanks to the soaring SAP share price – a 165 percent increase compared to the previous year, when he earned around €7.2 million. It is one of the highest salaries ever paid in German business. His compensation for 2025 fell to over €16 million, as the share price had recently declined somewhat.

A historical comparison reveals a clear trend: in 2005, a board member in a DAX company earned on average 42 times the salary of an employee; in 2011, the ratio reached a provisional peak of 62 times the salary. Although the figure declined slightly in the interim, the gap between top managers and ordinary employees has widened significantly over the entire period.

At the same time, DAX-listed companies are investing billions in job cuts. In the first nine months of 2025, DAX companies spent around six billion euros on restructuring measures. Since the beginning of 2024, these costs have totaled 16 billion euros. This money is primarily being used for staff reductions, such as early retirement schemes and severance packages for regular employees. In 2025 alone, Mercedes invested 1.4 billion euros in restructuring, Volkswagen 900 million euros, and Siemens and Commerzbank each around 500 million euros. The pharmaceutical company Bayer is offering managers severance packages of up to 52.5 months' salary, which, at a salary of 8,000 euros, equates to around 420,000 euros. That's a lot of money for a regular employee, but a fraction of what board members take with them when they leave.

The business logic: Why the system works, how it works

Public outrage over executive severance packages is understandable, but the answer to why the system works this way is more complex than moral indignation alone suggests. There are indeed business arguments that at least partially explain the phenomenon, even if they don't fully justify it.

First, the job market for top managers operates according to different rules than that for regular employees. The number of people who can and want to lead a DAX-listed company with hundreds of thousands of employees and billions in revenue is extremely limited. To attract such candidates, companies must put together attractive packages that also provide safeguards in case of failure. No sensible person would take on such a high-risk role without a safety net, as Arcandor CEO Eick once argued. The CEO position is a hot seat; the average tenure of a DAX CEO is only four to five years, and the end often comes abruptly and is determined by external factors.

Secondly, severance payments are contractual entitlements, not gifts. The board member concluded their employment contract under specific conditions, and unless there is a compelling reason as defined in Section 626 of the German Civil Code (BGB), i.e., a serious breach of duty, the contract cannot be unilaterally terminated. If the board member in question refuses to agree to the termination because the offered severance payment is too low, the contract remains in effect unchanged. The alternative to severance pay would therefore be the continued payment of the full salary until the end of the contract, which in many cases would be even more expensive. In Diess's case, VW chose precisely this option, which ultimately cost around 24 million euros.

Thirdly, severance packages fulfill an important function within corporate governance: they enable a swift and clean transition at the top of the company, without protracted legal disputes. A board member who knows they are financially secure will be more willing to vacate their position without a public battle. Furthermore, departing board members possess highly sensitive insider information. A generous severance agreement can prevent this knowledge from being offered to a competitor. This is a perfectly understandable business consideration.

Fourth, in compensation economics there is the so-called tournament effect: The prospect of extremely high compensation at the top level is intended to motivate managers at all lower levels to achieve peak performance. This incentive system functions according to the logic of a tournament where the winner takes everything. High executive compensation is therefore not only payment for current performance, but also an incentive mechanism for all future managers.

Where logic fails: Market failure in the manager market

However understandable some individual arguments may be, the system's weaknesses are obvious. The thesis of a functioning labor market for top managers does not stand up to critical scrutiny. As Wirtschaftswoche put it succinctly: the unbridled excesses can be explained precisely by the fact that a functioning labor market does not exist in this field of top management. At the very least, the market only inadequately regulates compensation in this area.

The problem lies in the power structures of German corporations. Supervisory board members, who determine executive salaries and severance packages, are often part of the same network as the executive boards themselves. There are personal connections, mutual dependencies, and a culture of mutual favoritism. Compensation expert Heinz Evers criticizes the supervisory boards in particular: The public has largely accepted the multi-million-euro salaries of top managers. However, shareholders should not accept the multi-million-euro payments that managers receive simply for doing nothing for their companies. The supervisory boards are too generous at the expense of the shareholders.

The German Corporate Governance Code was intended to address this problem. Since 2007, it has recommended that severance payments for early termination should not exceed two years' salary. However, this recommendation is not legally binding. Most companies simply incorporate the code provision verbatim into their contracts, which does not change the fact that the management board retains the right to either accept the termination in exchange for a severance payment of two years' salary or to allow the contract to continue. Simply adopting the provision verbatim merely results in a non-binding declaration of intent.

In practice, it turns out that despite the seemingly clear regulations of the code, severance payments often exceed the upper limit. This is because companies make additional payments besides the actual severance payment, for example, for outstanding bonuses, pension entitlements, non-compete clauses, or consulting fees. Herbert Diess did not receive a formal severance payment, but rather his contractual salary for more than two years, which amounted to the same thing. Christine Hohmann-Dennhardt received not only severance pay but also compensation for claims she had relinquished with her previous employer, Daimler. There are virtually no limits to the creativity used to circumvent these upper limits.

The situation is particularly problematic for state-owned companies like Deutsche Bahn. Here, there are no shareholders who could exert pressure at the annual general meeting. The sole owner is the federal government, represented by the supervisory board, which is politically appointed. Politicians rubber-stamp the contracts, and when the public expresses outrage, all parties involved point the finger at each other. The motto seems to be: better to buy peace at great expense than to ask uncomfortable questions.

Between morality and the market: The social dimension

The debate surrounding executive severance packages is far more than a purely business-related issue. It touches upon the core of social cohesion and the sense of justice felt by broad segments of the population. When a VW worker who has spent 35 years on the assembly line has to fear for his job, while the ousted former CEO receives a pension of €2,700 per day, then something is fundamentally wrong with the logic of distribution.

The political class recognized the problem early on but never addressed it effectively. As early as 2007, SPD leader Kurt Beck said: "If managers are sent home with millions in severance packages even after a massive bankruptcy, I can understand people's anger." Angela Merkel also asked at the CDU party conference in Hanover: "Why should someone be showered with money who has failed across the board?" Yet little of substance has happened since. The proposal to legally cap executive salaries has consistently been deemed constitutionally problematic. Instead, politicians are relying on transparency and self-regulation—precisely the mechanisms that have failed so far.

The CDU argues that the owner of a company should decide how much to pay their employees. While this is consistent with sound economic policy principles, it ignores two crucial points: First, the owners, i.e., the shareholders, are often unable to effectively control compensation because the supervisory boards essentially negotiate the contracts amongst themselves. Second, this argument does not apply to state-owned enterprises, whose owners are taxpayers.

The Swedish model shows that there's another way. There, executive contracts have no fixed terms. CEOs can be dismissed overnight. Severance payments are capped at a maximum of two years' salary. This works exceptionally well, reports former MAN CEO Håkan Samuelsson. The crucial difference: In Sweden, this limitation isn't just a suggestion, but standard practice.

The price of the parallel world: Long-term consequences for the economic order

The damage caused by severance pay practices goes far beyond the mere costs. Excessive severance packages undermine the merit principle that forms the basis of any market economy. If the person who drives a company into the ground is financially just as well off as the person who leads it to success, then there is no longer any economic incentive to take responsibility seriously.

Furthermore, these generous severance packages are poisoning the working atmosphere. When VW is cutting 35,000 jobs and at the same time the ousted former CEO pockets €24 million for doing nothing, it's naive to believe this won't affect the motivation and loyalty of the workforce. During the 2024 wage dispute, VW's works council chairwoman, Daniela Cavallo, rightly insisted that top management also had to contribute to the cost-cutting measures. That was a minimal concession. It doesn't change the fundamental asymmetry.

Ultimately, severance practices reinforce the societal perception of a two-tier system of justice: For ordinary employees, the rule is strict: those who underperform are out – no bonus, no golden handshake. In the executive suites, however, a completely different set of rules prevails, where golden parachutes are negotiated that kick in even in the event of disastrous results. This perception is not populist, but empirically grounded. It undermines trust in the fairness of the economic system and fosters an alienation between elites and the population, which also has long-term political consequences.

What needs to change: regulation, transparency, and cultural change

The solution does not lie in a single measure, but in a bundle of reforms that must be implemented at different levels.

First, there needs to be a binding legal limit on executive severance payments, at least for companies with government participation. The Federal Government's Public Corporate Governance Code should not merely be a recommendation, but should be legally enforceable. For Deutsche Bahn, which is wholly owned by the Federal Government, there is no reasonable justification for not having a clear upper limit on severance payments that is actually enforced.

Secondly, the say-on-pay procedure, in which the general meeting votes on executive compensation, should be strengthened. In its current form, this instrument is toothless because the vote is only advisory. A binding vote on severance packages above a certain amount would strengthen shareholder power and force supervisory boards to exercise greater restraint.

Thirdly, transparency must be improved. The obligation to disclose the so-called pay ratio, i.e., the relationship between executive compensation and the average employee salary, should be legally mandated, following the American model. If every shareholder and every citizen can see at a glance that the CEO earns 95 times the salary of a typical employee, public pressure will be generated that is more effective than any code recommendation.

Fourth, a cultural shift is needed within the supervisory boards themselves. As long as a culture of mutual generosity prevails, in which former board members decide on the compensation of their successors, little will change in the fundamental structures. Greater independence for the compensation committees and a limit on the number of supervisory board mandates would be important steps.

The question of whether severance pay practices reflect a lack of morals, insensitivity, or sound business logic cannot be definitively answered. They are a bit of everything. The business logic exists, but it is exploited by a power cartel that prioritizes its own interests over those of companies and their employees. Morality is not entirely absent, but it is neutralized beyond recognition by contractual clauses and legal constructs. And sensitivity diminishes to the extent that boardrooms operate within a social bubble where tens of millions of euros are considered normal. As long as these fundamental conditions remain unchanged, golden parachutes will continue to open over Germany while, on the ground, trains are delayed and factories close their gates.

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