Rivian CEO RJ Scaringe Receives Up to $5 Billion Pay Package

Rivian CEO Receives New Performance-Based Stock Award

A recent filing reveals that Rivian has granted its founder and Chief Executive Officer, RJ Scaringe, a new stock award structured around performance metrics. Should all objectives be achieved, the award’s ultimate value could reach approximately $5 billion.

Salary Increase and Spinout Stake

In addition to the stock award, Scaringe’s annual salary is being increased to $2 million. He has also been allocated a 10% ownership stake in Mind Robotics, Rivian’s recently established spinout company, as detailed in the filing.

Following Tesla’s Lead

This announcement arrives shortly after Tesla stockholders approved a substantial compensation package for their CEO, Elon Musk, potentially valued at $1 trillion – a record in corporate history.

Award Structure and Shareholder Approval

Unlike the Musk compensation plan, Scaringe’s award does not require shareholder approval. Rivian’s board’s compensation committee has rescinded a similarly valued performance award issued to Scaringe in 2021, which was part of a pre-approved company-wide equity incentive program.

Cancellation of the 2021 Award

The decision to cancel the 2021 award stemmed from the perceived improbability of Scaringe attaining the stipulated goals. This prior award comprised 20,355,946 stock options, vesting incrementally based on increases in the company’s stock price.

Stock Price Hurdles and Vesting

Specifically, if Rivian’s share price surpassed $110, $150, $220, and $295 within six years of the grant date, Scaringe would have been able to acquire the stock options in stages at a price of $21.72 per share.

Recent Stock Performance

Rivian’s stock experienced an initial surge to around $129 following its IPO in November 2021. However, it subsequently declined to approximately $30 within six months, and has generally traded between $10 and $20 in recent years. This fluctuation hindered Scaringe’s ability to realize any portion of the 2021 award, which had a potential value of around $6 billion.

Incentive Concerns and New Award

Rivian acknowledged a “lack of incentive” resulting from the difficulty in achieving the 2021 award’s targets. Consequently, the compensation committee opted to replace the previous award with the newly structured one.

Company Statement on Compensation

“Following a review, and input from an independent compensation consultant, the Compensation Committee cancelled our CEO’s 2021 Performance Grant and issued a new performance stock option and increased our CEO’s base salary,” Rivian stated to TechCrunch. “This new award is designed to retain and incentivize RJ to execute on the Company’s critical next phase as it progresses its technology roadmap and launches R2.”

Value Creation and Milestones

Echoing Tesla’s rationale for its Musk award, Rivian emphasized that Scaringe’s performance grant is designed to only vest upon the delivery of substantial value to shareholders. The company projects that Scaringe will not realize any benefit from the award until he contributes to a $32 billion increase in Rivian’s value, with potential shareholder value creation reaching $153 billion upon full milestone achievement.

Award Details and Ownership

The maximum number of shares available to Scaringe under the new performance award is 36,500,000. He has a decade to meet the milestones that unlock the full amount, which would increase his ownership in the company by an additional 3%. Currently, Scaringe owns approximately 1% of Rivian, reduced from around 2% earlier this year due to a transfer of holdings to his former spouse as part of a divorce settlement.

Stock Price-Based Options

The majority of these stock options – 22 million – are tied to specific stock price targets. Scaringe will receive 2 million shares when Rivian’s stock reaches $40, and an additional 2 million shares for each subsequent $10 increase, up to a stock price of $140.

Operating Income and Cash Flow Targets

The remaining 14,500,000 stock options are contingent upon Rivian achieving certain adjusted operating income and cash flow goals. Exercising these options would require Scaringe to pay a strike price of $15.22 per share, potentially totaling around $555 million.