Rivian Awards CEO RJ Scaringe Pay Package Valued at $5 Billion
Rivian, the electric vehicle manufacturer, has announced a substantial new compensation package for its CEO, RJ Scaringe. This performance-based stock award could be valued at approximately $5 billion, contingent upon the achievement of specific business goals. Alongside this award, Scaringe’s annual salary will increase from $1 million to $2 million.
Details of the New Pay Package
As part of his compensation, Scaringe will receive a 10% ownership stake in Rivian’s new spinout, Mind Robotics. This move follows a decision by Rivian’s compensation committee to cancel an earlier performance award from 2021. The previous award was deemed unlikely to achieve its intended goals, and it consisted of over 20 million stock options that had been tied to Rivian’s stock price milestones.
Market Context
This announcement comes shortly after Tesla shareholders approved a massive compensation package for CEO Elon Musk, which could be worth up to $1 trillion. Unlike Musk’s package, Scaringe’s new award does not require shareholder approval. Rivian’s compensation committee has expressed that the previous performance award failed to provide adequate incentives for Scaringe, partly due to Rivian’s fluctuating stock prices since its IPO.
Stock Performance and Future Goals
- Rivian shares peaked at around $129 in November 2021 after the IPO.
- Since then, the stock price has significantly declined, typically trading between $10 and $20.
- Scaringe’s previous stock options were structured to vest based on substantial increases in stock price, making access to them challenging.
The new performance grant covers 36.5 million shares, with Scaringe having ten years to meet the milestones that unlock the full value. If successful, he could increase his ownership from about 1% to 4% of Rivian.
Incentives and Performance Conditions
The structure of the new performance award is designed to ensure that Scaringe will not benefit unless Rivian meets specific financial targets. Scaringe must help the company create around $32 billion in shareholder value. Meeting these targets could lead to approximately $153 billion in total value creation for Rivian’s investors.
- Scaringe earns 2 million shares when Rivian’s stock hits $40.
- After that, he earns an additional 2 million for every $10 increase up to $140.
- The remaining options relate to specific operating income and cash flow targets.
To exercise his options, Scaringe will need to pay a strike price of $15.22 per share, amounting to a potential total of around $555 million. The new pay package reflects Rivian’s strategy to align leadership incentives with company performance and shareholder interests.
