Dean Foods recently disclosed its new employment agreement with Greg Engles, who served as CEO for more than twenty years before stepping down in October to take the CEO role at Dean Foods’ majority-owned and newly public subsidiary—WhiteWave. Dean sold 23 million Class A shares of WhiteWave Foods (which contains Dean’s former soy and dairy businesses) at $17 each, while retaining 86.7% of the economic interest and, because the Class A shares have a reduced voting power in WhiteWave’s dual class capital structure, approximately 98.5% of the total votes. Dean intends to spin-off its remaining shares in WhiteWave to shareholders, but a timeframe for the divestment has not been announced.

Since the IPO, WhiteWave shares have traded below $16 on average.

Perhaps most notable about Mr. Engles’ new contract is an expansion of the definition of “good leaving” which will allow him to quit after two years (provided Dean Foods still controls WhiteWave) without forfeiting a cash severance payment worth two times the sum of his base salary and target bonus, and another cash payment equal to the value of any equity awards that would vest if he had remained employed for another three years.

In the SEC filing the company states that “The purpose of this clause is to acknowledge that, if WhiteWave continues to be a controlled subsidiary of Dean Foods for two years after the IPO, Mr. Engles should be treated as having incurred a diminution of his duties and responsibilities by accepting a position with WhiteWave.”

Mr. Engles, who remains non-executive chairman of Dean Foods, will also receive these benefits if he quits after Dean spins out its WhiteWave stock and WhiteWave’s board then decreases his change-in-control benefits. (A spin-off by Dean Foods does not trigger the change-in-control clause.)

For 2013, Mr. Engles’ base salary is $1.12 million, his target bonus opportunity is 150% of base salary, and his target equity award is $4.2 million. In addition, he gets a one-time grant of options and restricted stock valued at $8.4 million. The employment contract has a term of three years.

Gregg Tanner, who is replacing Mr. Engles as CEO of Dean Foods and who previously served as Dean’s president and chief supply chain officer, will get $1.0 million in base salary, a bonus target opportunity of 130% of base salary, and equity awards with a target value of $3.72 million. In connection with his promotion, the board also awarded to Mr. Tanner restricted stock units valued at approximately $1.4 million.

Thus, if target levels of performance are achieved in 2013, Dean Foods and WhiteWave shareholders will have paid an aggregate of more than $20 million in cash and stock (including the one-time grants) for the services of Messrs. Engles and Tanner. In 2011, their aggregate compensation was approximately $11 million.

And whether or not Dean Foods decides to spin off its controlling stake in WhiteWave, due to the additional definitions of “good leaving” in Mr. Engle’s employment contract, he will be entitled to a generous severance package.

That the Dean Foods board has given Mr. Engle yet another large payday should not surprise long-term shareholders. From 2006 through 2011, Dean Foods has received a grade of “D” or “F” in Glass Lewis’ Pay-for-Performance analysis in all but one year. A recent New York Times article, which detailed Dean Foods’ long-running antitrust lawsuits, states that Mr. Engles has averaged $20 million in compensation over the past six years, including a package valued at $65 million in 2006.

But the spin-off of WhiteWave has helped push DF shares up more than 50% in 2012, so Dean’s long-suffering shareholders (the shares are down over 35% since the start of 2008) may overlook these latest payouts. Nevertheless, the compensation arrangements at Dean Foods and WhiteWave serve to remind shareholders that when a company with a track record of poor compensation decisions chooses to “unlock value” through a spin-off, executive pay may increase disproportionately.