Rivian gives RJ Scaringe a new pay package worth up to $5B

Rivian, the electric vehicle manufacturer, has announced a new performance-based stock award for its founder and CEO RJ Scaringe, which could be valued at up to $5 billion contingent on meeting specific performance targets. Alongside this, Scaringe's annual salary is set to double to $2 million, and he has been granted a 10% stake in Rivian's latest spinout, Mind Robotics, as detailed in a recent filing. This announcement follows closely on the heels of a significant compensation package approved for Tesla's CEO Elon Musk, which could reach a staggering $1 trillion, marking it as the largest in corporate history. However, unlike Musk's arrangement, Scaringe's new pay package does not require shareholder approval. The Rivian board's compensation committee has decided to cancel a previous performance award granted to Scaringe in 2021, which was part of a broader equity incentive plan. The decision to replace this award was partly due to doubts about Scaringe's ability to achieve the associated goals. The canceled 2021 award consisted of over 20 million stock options that were contingent on Rivian's stock price increasing to various thresholds over a six-year period. Following a strong IPO in November 2021, Rivian's stock peaked at approximately $129 but subsequently declined to an average trading range of $10 to $20, significantly impacting Scaringe's ability to capitalize on the previous award. In its filing, Rivian noted that the previous arrangement lacked sufficient incentive for Scaringe, prompting the board to develop a new stock option plan. According to Rivian, this new performance grant is designed to not only retain Scaringe but also to motivate him to oversee critical advancements in the company's technology and the launch of its R2 model. Similar to Tesla's rationale for Musk's compensation, Rivian emphasized that Scaringe's new award is structured to ensure he only benefits once significant value is created for shareholders. Specifically, Scaringe will not gain any financial reward until he contributes to an increase in Rivian's value by $32 billion, with the potential for shareholders to realize $153 billion if all performance milestones are met. The new stock award allows Scaringe access to a maximum of 36.5 million shares over a decade, with 22 million of those tied to stock price increases. He will earn 2 million shares when Rivian's stock reaches $40, with additional shares awarded for every $10 increment up to $140. The remaining stock options are contingent upon meeting certain operational income and cash flow targets, which will require Scaringe to pay a strike price of $15.22 per share to exercise these options, potentially totaling around $555 million.