Rivian has given its founder and CEO RJ Scaringe a new performance-based stock award that could ultimately be worth about $5 billion if all underlying targets are met, according to a new filing.
Scaringe’s salary is also being doubled to $2 million a year, and he was given a 10% stake in Rivian’s newest spinout Mind Robotics, the filing shows.
The announcement comes just a day after Tesla shareholders voted to approve a compensation package for its CEO Elon Musk that could be worth $1 trillion — the largest in the company’s history.
Unlike Musk’s pay package, Scaringe’s is not subject to a shareholder vote. The compensation committee of Rivian’s board of directors has canceled a performance award of a similar size given to Scaringe in 2021 as part of a company-wide equity incentive plan adopted that year. The new award is issued under the same already approved 2021 equity incentive plan.
The committee decided to cancel the 2021 performance award in part because of the “unlikely” that Scaringe could meet the required targets. The 2021 award consisted of 20,355,946 stock options that vested in part based on stock price appreciation. Six years after the grant date, if Rivian’s share price passed $110, $150, $220 and $295, Scaringe would be able to purchase the stock options in corresponding tranches for just $21.72.
Rivian’s stock rose to about $129 after its IPO in November 2021. But it fell to about $30 over the next six months, and has spent the past few years typically trading between $10 and $20. This has made it harder for Scaringe to access even a fraction of the 2021 prize, let alone the total value of about $6 billion, according to the company. (Scaringe was awarded an additional 6.8 million stock options that simply vest over time in the 2021 award, which were not tied to performance, and the company says they have not been canceled.)
In the filing, Rivian wrote that this created a “missing incentive.” So the compensation committee decided to replace the old award with this new one.
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“After 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 and increased our CEO’s base salary,” Rivian said in a statement to TechCrunch. “This new award is designed to retain and incentivize RJ to execute on the company’s critical next phase as it develops its technology roadmap and launches R2.”
Similar to how Tesla presented its new award to Musk, Rivian also said the performance grant to Scaringe is “structured in such a way as to ensure that the options vest only if the company delivers significant value to our shareholders.” The company pointed out that Scaringe won’t see $1 off the award until he helps add $32 billion in value to Rivian, and that shareholders will see “$153 billion in value creation” if he hits all milestones.
The maximum number of shares available to Scaringe under new performance award is 36,500,000. He has 10 years to reach milestones that unlock the full amount, and if he does, he would own an additional 3% of the company. (Scaringe currently owns about 1% of Rivian, down from about 2% earlier this year, after he transferred some of his holdings to his ex-wife as part of their divorce settlement, as TechCrunch first reported.)
A majority of these stock options – 22 million – are tied to new stock price hurdles. Scaringe will earn 2 million shares when Rivian’s stock reaches $40, and then another 2 million shares for every $10 increase up to a share price of $140.
The remaining 14,500,000 stock options are locked away until Rivian reaches certain adjusted operating income and cash flow targets. Scaringe must pay a strike price of $15.22 per share to exercise these options – a total of about $555 million.