Rivian is giving founder and CEO RJ Scaringe a new performance-based stock award that could ultimately be worth about $5 billion if all underlying goals are met, according to a new filing.
Mr. Scaringe's salary also doubled to $2 million a year, and he was also given a 10% stake in Mr. Rivian's latest spinout, Mind Robotics, the filing shows.
The announcement came just one day after Tesla shareholders voted to approve CEO Elon Musk's compensation package worth $1 trillion, the largest in company history.
Unlike Mr. Musk's compensation package, Mr. Scaringe's compensation is not subject to a shareholder vote. Rivian's board of directors' compensation committee rescinded a performance award of the same size awarded to Scaringe in 2021 as part of a companywide equity incentive plan adopted that year. This new award will be issued under the same 2021 equity incentive plan that has already been approved.
The committee decided to rescind the 2021 achievement award, in part because it was “unlikely” that Scaringe would be able to meet the required goals. The 2021 award consisted of 20,355,946 stock options vested in part based on stock price appreciation. Six years after the grant date, if Rivian's stock price exceeds $110, $150, $220, or $295, Scaringe will be able to purchase stock options in the corresponding tranche for as little as $21.72.
Rivian stock soared to about $129 after its IPO in November 2021, but fell to about $30 in the next six months, and has typically traded between $10 and $20 in recent years. The company said this made it difficult for Scaringe to access even a portion of its 2021 award, let alone the roughly $6 billion in total. (Mr. Scaringe was granted stock options for an additional 6.8 million shares, which are simply long-term rights that are not tied to 2021 results, and the company says they have not been canceled.)
Rivian wrote in his filing that this created a “lack of incentive.” The remuneration committee has therefore decided to replace the old award with this new award.
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“After review and input from an independent compensation consultant, our compensation committee has rescinded our CEO's 2021 performance grant, issued new performance stock options, and increased our CEO's base salary,” Rivian said in a statement to TechCrunch. “This new award aims to retain and encourage RJ to execute on important next steps for the company as we advance our technology roadmap and launch R2.”
Similar to Tesla's proposed new award to Musk, Rivian said Scaringe's performance subsidy is “structured so that options are only granted if the company delivers significant value to shareholders.” The company noted that Mr. Scaringe will not receive a single dollar in prize money until he increases Rivian's value by $32 billion, and that if all milestones are met, shareholders will see “$153 billion in value creation.”
The maximum number of shares that Scaringe may acquire under the new performance award is 36,500,000 shares. It will take 10 years to reach the milestone of releasing the full amount, but if it does, they will own an additional 3% stake. (As TechCrunch first reported, Scaringe currently owns about 1% of Rivian stock, down from about 2% earlier this year after he transferred some of his stake to his ex-wife as part of a divorce settlement.)
The majority of these stock options (22 million) are tied to new stock price hurdles. Mr. Scaringe would receive 2 million shares when Rivian's stock price reached $40, and an additional 2 million shares for every $10 increase thereafter until Rivian's stock price reached $140.
The remaining 14,500,000 stock options will be locked until Rivian reaches certain adjusted operating income and cash flow targets. To exercise these options, Scaringe will be required to pay an exercise price of $15.22 per share, which could result in a total consideration of approximately $555 million.