According to a recent filing, Rivian has granted its founder and CEO, RJ Scaringe, a new stock award based on performance that could potentially reach a value of approximately $5 billion if all the specified goals are achieved.
The filing also reveals that Scaringe’s annual salary is being increased to $2 million, and he has been given a 10% equity stake in Rivian’s newly formed spinout, Mind Robotics.
This announcement follows just a day after Tesla’s shareholders approved a compensation package for their CEO, Elon Musk, which could amount to $1 trillion, making it the largest in corporate history.
Unlike Musk’s compensation, Scaringe’s does not require a shareholder vote. Rivian’s board of directors’ compensation committee has rescinded a similar performance award granted to Scaringe in 2021 as part of an equity incentive plan implemented company-wide that year. The new award is being issued under the same 2021 equity incentive plan, which has already been approved.
The committee’s decision to cancel the 2021 performance award was partly due to the perceived “unlikeliness” of Scaringe achieving the set objectives. The 2021 award comprised 20,355,946 stock options that vested partially based on stock price appreciation. If Rivian’s share price exceeded $110, $150, $220, and $295 within six years of the grant date, Scaringe would have the option to purchase the stock options in corresponding tranches for just $21.72.
Following its IPO in November 2021, Rivian’s stock price initially surged to around $129. However, it declined to approximately $30 over the subsequent six months and has generally traded between $10 and $20 in recent years. This has made it more challenging for Scaringe to access even a portion of the 2021 award, let alone its total value of approximately $6 billion, according to the company. (Scaringe was also granted an additional 6.8 million stock options in the 2021 award that vest over time and are not contingent on performance, and the company states that these have not been canceled.)
Rivian stated in the filing that this situation created a “lack of incentive.” As a result, the compensation committee decided to replace the previous award with the new one.
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In a statement to TechCrunch, Rivian said, “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. 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.”
Similar to Tesla’s rationale for Musk’s new award, Rivian also stated that the performance grant for Scaringe is “structured in such a way that ensures the options only vest should the company deliver significant value to its shareholders.” The company emphasized that Scaringe will not benefit financially from the award until he helps Rivian increase its value by $32 billion, and shareholders will see “$153 billion of value creation” if he achieves all milestones.
The maximum number of shares Scaringe can receive under the new performance award is 36,500,000. He has a 10-year period to reach the milestones necessary to unlock the full amount, and if he succeeds, he would own an additional 3% of the company. (Scaringe currently holds approximately 1% of Rivian, a decrease from around 2% earlier in the year after he transferred a portion of his holdings to his former wife as part of their divorce settlement, as initially reported by TechCrunch.)
The majority of these stock options, specifically 22 million, are contingent upon achieving new stock price targets. Scaringe will earn 2 million shares once Rivian’s stock reaches $40, and then an additional 2 million shares for each $10 increase up to a stock price of $140.
The remaining 14,500,000 stock options are contingent upon Rivian achieving specific adjusted operating income and cash flow targets. To exercise these options, Scaringe will need to pay a strike price of $15.22 per share, potentially totaling around $555 million.
