The electric pickup and SUV manufacturer Rivian (RIVN.O) said Friday that it would give CEO RJ Scaringe a compensation package worth up to $4.6 billion over the following ten years. Although it has new profit targets and lower share price milestones, the plan is similar to Tesla’s record-breaking deal for CEO Elon Musk.
The Rivian board introduced the new strategy to motivate and retain its founder while aligning his priorities with the company’s growth and financial goals. The carmaker, which is well-known for its R1S SUVs and R1T pickups, intends to directly compete with Tesla’s Model Y crossover next year with the smaller and less expensive R2 SUV.
Rivian CEO pay package is worth over $4 billion
This new plan, which includes more achievable growth goals, replaced Rivian’s previous pay structure, which the board considered unrealistic. Yonat Assayag, a partner at ClearBridge Compensation Group, stated that although Rivian might not be an exact replica, there are undoubtedly similarities to Elon Musk. Rivian’s offer, she continued, shows how other businesses are copying Tesla’s strategy of linking sizable CEO compensation to notable market gains. “It’s not to keep up with Musk, but inspired by Musk’s award,” she said.
According to a filing with the U.S. Securities and Exchange Commission, the updated plan grants Scaringe options to buy up to 36.5 million shares of Rivian’s Class A stock, which is roughly 16 million more than the previous grant, at an exercise price of $15.22 per share. If Rivian meets new operating income and cash flow goals within seven years, as well as stock price milestones between $40 and $140 per share over a ten-year period, these awards will vest. The specifics of those targets were not made public by the company.
Scaringe’s previous pay plan
The board canceled Scaringe’s previous pay plan, which required Rivian’s stock to reach between $110 and $295 per share, because it determined the targets were unlikely to be met. The new package comes as Rivian faces challenges from the elimination of key EV tax credits, which analysts predict will hurt sales through the end of the year. As a result, the business has drastically reduced expenses, firing about 600 workers, or 4.5% of its total workforce.
Tesla shareholders approved Elon Musk’s $1 trillion compensation plan—based on ten years of operational and valuation milestones—just one day before Rivian took action. To further strengthen its sway over other automakers, the Tesla board had threatened to fire Musk if shareholders rejected the deal.
Featured Image Credit: Kindel Media; Pexels: Thank you!
