Firing Craig Conway will cost PeopleSoft at least $3.2m (£1.8m).
This is in payment for salary and bonuses Conway would have earned over the next two years, the company said.
Conway was fired as chief executive officer (CEO) earlier this month by PeopleSoft's board, which said it had lost confidence in his ability to lead the company as it fights difficult market conditions and a hostile takeover campaign by rival Oracle.
Conway was fired without cause, making him eligible for continued salary payments and accelerated stock option vesting.
In addition to the $3.2m lump-sum payment, Conway and his family will received healthcare coverage for two years or until he has a new job with similar benefits, whichever comes first.
Conway will also receive cash compensation for the value of vested portions of two restricted stock grants, one for 500,000 shares and another for 150,000 shares, and will have his vesting accelerated on stock options that would have vested over the next two years if he had remained employed by PeopleSoft.
PeopleSoft's new CEO, co-founder David Duffield, currently receives a salary of $1 per year.
PeopleSoft will also be paying severance fees to Ram Gupta, the former products and technology head whose departure PeopleSoft announced last week.
Gupta will receive $825,000, along with $124,000 in lieu of accelerated vesting on shares of restricted stock that would have vested in October and November. He will also receive an addition year of service credit toward stock options vesting.
To replace Gupta, PeopleSoft hired Stanley Swete, a returning employee who was granted 75,000 shares of restricted stock and additional stock options.
Stacy Cowley writes for IDG News Service