Get ready for a bold move in the world of electric vehicles! Rivian, the EV maker, has just unveiled a pay package for its CEO, RJ Scaringe, that could be worth a staggering $4.6 billion over the next decade. But here's where it gets controversial... this deal is modeled after Tesla's record-breaking package for Elon Musk, and it's all about hitting new profit targets and reduced share price milestones.
The Rivian board's decision shows that Tesla's approach to CEO compensation could become the new standard for fast-growing companies. Scaringe's potential earnings, depending on performance, could make this one of the richest CEO pay packages in history.
The new compensation plan is a clear signal of Rivian's commitment to retaining its founder and keeping him focused on growth and profitability. With the upcoming launch of their smaller, more affordable R2 SUV, Rivian is gearing up for competition with Tesla's popular Model Y crossover.
Tesla shareholders recently approved a $1 trillion pay package for Elon Musk, based on operational and valuation milestones over 10 years. Yonat Assayag, a partner at ClearBridge Compensation Group, notes, "While Rivian may not be a direct copycat, there are definitely Elon Musk characteristics that are similar."
Under the new plan, Scaringe has been granted options to purchase up to 36.5 million shares of Rivian's Class A stock, with an exercise price of $15.22 each. However, these options will only vest if Rivian achieves reduced stock-price milestones ranging from $40 to $140 per share over 10 years, along with new operating income and cash flow targets over the next seven years.
The previous pay package, awarded in 2021, was linked to a share price of $110 and went up to $295, but Rivian canceled it, stating that those targets were unlikely to be met. Rivian shares closed at $15.22 on Thursday, and the one-year median price target stands at around $14.
"The rigorous milestones associated with this award ensure that the options only vest if the company delivers significant value to shareholders," a Rivian spokesperson stated.
If Rivian hits all the milestones, Scaringe could receive up to $4.6 billion, including the costs of exercising options, according to Reuters' calculations. Rivian claims that shareholders will gain $153 billion in value if these milestones are achieved.
The potential $4.6 billion payout is equivalent to roughly a quarter of Rivian's market value and slightly higher than its cash balance at the end of September.
In addition to the stock options, Rivian's board has doubled Scaringe's base salary to $2 million, stating that these changes were made with input from an independent compensation consultant and are designed to better align pay with shareholder returns.
Scaringe has also been granted 1 million common units in Mind Robotics, a Rivian spinoff developing industrial AI technology. This grant gives him up to a 10% economic interest once the business profit exceeds a certain threshold.
So, what do you think about this bold move by Rivian? Is it a smart strategy to keep their CEO motivated and focused on growth, or does it raise concerns about executive compensation? Share your thoughts in the comments below!
