Rivian has given its founder and CEO RJ Scarring 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.
Scaringe’s salary is also being doubled to $2 million per year, and he has been given a 10% stake in Rivian’s new 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 as much as $1 trillion — the largest in corporate history.
Unlike Musk’s pay package, Scaringe’s is not subject to a shareholder vote. The compensation committee of Rivian’s board of directors canceled a similarly sized performance award given to Scaringe in 2021 as part of a company-wide equity incentive plan adopted that year. The new award is being issued under the same, already approved 2021 Equity Incentive Plan.
The committee decided to cancel the 2021 performance award because of the “unlikely” that Scaringe could reach the required targets. The 2021 award consists of 20,355,946 stock options that vest in part based on stock price appreciation. Six years prior to the grant date, if Rivian’s share price exceeds $110, $150, $220, and $295, Scaringe will only be able to purchase stock options in the respective tranches for $21.72.
Rivian gives RJ Scaringe
Rivian’s stock has risen to around $129 since its IPO in November 2021. But it fell to about $30 over the next six months and has typically traded between $10 and $20 over the past few years. That makes it difficult for Scarring to access even part of the 2021 prize, let alone a total value of about $6 billion, according to the company. (Scarring was granted another 6.8 million stock options that only vest over time in 2021 awards that were not tied to performance, and the company says they have not been canceled.)
In the filing, Rivian wrote that this created a “lack of incentive.” Therefore, the Compensation Committee has decided to replace the old award with this new award.
“After a review and input from an independent compensation consultant, the compensation committee has terminated 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 advance the company’s technology roadmap and execute on the company’s critical next phase as we launch R2.
As Tesla gave Musk its new award, Rivian also said the performance grant to Scaringe was “structured in such a way that the options ensure that only the company delivers significant value to our shareholders.” The company noted that Scaringe won’t see $1 from the award before helping Rivian add $32 billion in value, and that shareholders could see “$153 billion in value creation” if he hits all the milestones.
The maximum amount of shares available to Scaringe under the new performance awards is 36,500,000. He has 10 years to hit milestones that unlock the full amount, and if he does, he’ll own an additional 3% of the company. (Scarring currently owns about 1% of Rivian, down from about 2% earlier this year when he transferred it 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 barriers. Scaringe will earn 2 million shares if Rivian’s stock hits $40, and then another 2 million shares for every $10 increase, up to a stock price of $140.
The remaining 14,500,000 stock options are locked until Rivian reaches certain adjusted operating income and cash flow goals. Exercising these options requires Scaringe to pay a strike price of $15.22 per share – a potential total of $555 million.