According to a recent filing, Rivian has granted its founder and CEO, RJ Scaringe, a new performance-based stock package that could be valued at approximately $5 billion if all performance targets are achieved.
The filing also reveals that Scaringe’s annual salary has been raised to $2 million, doubling his previous pay, and he has received a 10% ownership interest in Rivian’s latest spin-off, Mind Robotics.
This news comes just a day after Tesla shareholders approved a compensation plan for CEO Elon Musk that could reach $1 trillion, marking the largest such package in corporate history.
In contrast to Musk’s arrangement, Scaringe’s compensation does not require a shareholder vote. Rivian’s board compensation committee has rescinded a similarly sized performance award that was granted to Scaringe in 2021 as part of a company-wide equity incentive plan established that year. The new grant is being issued under the same 2021 equity incentive plan, which has already received approval.
The committee opted to revoke the 2021 performance grant in part because it was deemed unlikely that Scaringe would meet the required targets. That 2021 package included 20,355,946 stock options, with vesting tied in part to increases in Rivian’s share price. If, within six years of the grant, Rivian’s stock price surpassed $110, $150, $220, and $295, Scaringe could purchase corresponding tranches of options at $21.72 per share.
Following Rivian’s IPO in November 2021, the stock price surged to about $129. However, it dropped to around $30 within six months and has generally traded between $10 and $20 in the years since. This decline has made it difficult for Scaringe to benefit from the 2021 award, let alone realize its full estimated value of $6 billion, according to the company. (Scaringe also received an additional 6.8 million stock options in 2021 that vest over time and are not performance-based; the company states these remain in place.)
Rivian stated in the filing that this situation resulted in a “lack of incentive,” prompting the compensation committee to introduce a new award in place of the old one.
“After a review and with input from an independent compensation advisor, the Compensation Committee canceled our CEO’s 2021 Performance Grant and issued a new performance-based stock option, along with an increase in our CEO’s base salary,” Rivian said in a statement to TechCrunch. “This new package is intended to retain and motivate RJ as he leads the company through its next critical phase, advancing our technology and launching R2.”
Much like Tesla’s approach with Musk’s new package, Rivian emphasized that Scaringe’s performance grant is “structured so that the options only vest if the company delivers substantial value to shareholders.” The company noted that Scaringe will not receive any payout from the award unless he helps generate $32 billion in added value for Rivian, and that shareholders could see “$153 billion in value creation” if all targets are met.
Under the new performance award, Scaringe could receive up to 36,500,000 shares. He has a ten-year window to achieve the necessary milestones to unlock the full amount, and if successful, his ownership stake in the company would increase by 3%. (Currently, Scaringe owns roughly 1% of Rivian, down from about 2% earlier this year after transferring some shares to his ex-wife as part of their divorce, as first reported by TechCrunch.)
Of the total stock options, 22 million are linked to new share price milestones. Scaringe will receive 2 million shares when Rivian’s stock reaches $40, and an additional 2 million shares for every $10 increase up to a share price of $140.
The remaining 14,500,000 options will only become available if Rivian achieves specific adjusted operating income and cash flow goals. To exercise these options, Scaringe must pay a strike price of $15.22 per share, which could amount to roughly $555 million in total.
