Rivian CEO RJ Scaringe Receives New $5 Billion Performance-Based Stock Award
Rivian, the electric vehicle company, has recently granted its founder and CEO, RJ Scaringe, a new performance-based stock award that could potentially be worth around $5 billion if all specified goals are achieved. This move comes in light of a filing submitted by the company to the Securities and Exchange Commission.
As part of this new award, Scaringe’s annual salary has been doubled to $2 million. Additionally, he has been allocated a 10% stake in Rivian’s latest spinout, Mind Robotics, as outlined in the filing.
This announcement follows closely on the heels of Tesla’s shareholders approving a compensation package for CEO Elon Musk that could reach a staggering $1 trillion, marking it as the largest in corporate history.
Unlike Musk’s compensation package, Scaringe’s award does not require a shareholder vote. The decision to cancel a similar-sized performance award granted to Scaringe in 2021 was made by the compensation committee on Rivian’s board of directors. The new award is a part of the already approved 2021 equity incentive plan.
The cancellation of the 2021 performance award was influenced by doubts regarding Scaringe’s ability to meet the set goals. The previous award consisted of stock options that vested based on stock price increases over a six-year period, with specific price targets to be met for each tranche to become available for purchase by Scaringe.
Following Rivian’s IPO in November 2021, the stock price surged but later experienced a decline, leading to challenges in accessing the 2021 award’s full value. Consequently, the compensation committee opted to replace the old award with the new performance-based stock option.
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Rivian stated, “Following a review and input from an independent compensation consultant, the Compensation Committee canceled our CEO’s 2021 Performance Grant and issued a new performance stock option, increasing our CEO’s base salary. This new award aims to retain and incentivize RJ to lead the Company’s next critical phase as it advances its technology roadmap and launches R2.”
Similar to Tesla’s approach with Musk, Rivian emphasized that Scaringe’s performance grant is structured to ensure that the options only vest upon delivering significant value to shareholders. Scaringe will not receive any benefits from the award until he contributes $32 billion in value to Rivian, with shareholders potentially gaining $153 billion in value creation if all milestones are met.
Under the new performance award, Scaringe could potentially acquire up to 36,500,000 shares over a 10-year period, representing an additional 3% ownership in the company. The award includes stock options tied to stock price hurdles and specific operating income and cash flow targets.
Most of the stock options are linked to stock price milestones, with Scaringe earning shares as Rivian’s stock price reaches predetermined levels. The remaining options are contingent on meeting adjusted operating income and cash flow targets, with a strike price set at $15.22 per share.
