Fonterra paid its former chief executive, Andrew Ferrier, an $8.2 million "golden goodbye" when he left the cooperative last year, according to Fonterra's annual result.
Chairman Sir Henry van der Heyden said the payment represented the "washup" of the Canadian's performance incentive schemes.
"I know it's lost of money - it is a lot of money," van der Heyden, who will step down as chairman in December, said.
"The fundemental core of our payment system to management is based on performance, so this is the washup of Andrew's long-term incentives, and his short term-incentives," van der Heyden said at Fonterra's results presentation.
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Ferrier's replacement, Theo Spierings, has been in the job for exactly one year.
Earlier, Fonterra said its net profit fell by 19 per cent to $624 million in the 2011-12 year, mostly due to the unavailability of tax credits.
The farmgate milk price for the 2011-12 season just passed was set at $6.08 per kg of milksolids, down from $7.60 per kg last year.