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Electric pickup and SUV maker Rivian RIVN.O said Friday it will give its CEO a pay plan worth up to $4.6 billion over the next 10 years. This is similar to the record package for Tesla Inc TSLA.O CEO Elon Musk, which is linked to new profit targets and lower stock price milestones than in the previous agreement.
The move by Rivian’s board shows that Mr. Musk’s Tesla plan could serve as a model for companies looking to grow rapidly. Rivian CEO RJ Scaringe’s pay package could be one of the richest in history, depending on what performance goals the company meets.
Rivian said the plan will retain the founders and keep them focused on growth and profitability as the automaker known for the R1S SUV and R1T pickup prepares to launch a smaller, more affordable R2 SUV next year that will compete with Tesla’s best-selling Model Y crossover.
The Rivian plan replaces a plan that the board said was unlikely to be achieved, and the new plan sets lower goals in terms of stock price growth.
The repeal of the key EV tax credit is expected to reduce sales through the remainder of this year. Rivian has doubled down on cost cuts and recently laid off about 600 employees, representing 4.5% of its workforce.
Tesla shareholders on Thursday approved a record $1 trillion compensation package for CEO Elon Musk based on a combination of operating and evaluation milestones over 10 years, after the board said he could step down if the plan is not passed.
“Rivian may not be a direct copycat, but it definitely has some similarities to Elon Musk’s characteristics,” said Yonat Assayag, a partner at ClearBridge Compensation Group, a compensation consulting firm.
She added that the proposal shows how other companies are following Tesla’s model of trying to link CEOs’ big paychecks to big potential market gains, and some have reached out to her own company for similar executive pay designs. “I was inspired by Musk’s award, not to catch up with him.”
Amit Batish, a director at research firm Equilar, said pay structures with ambitious targets sound appealing, but they don’t always work well for corporate leaders, many of whom struggle to meet their targets due to years of policy changes and economic headwinds.
revised plan
Under the new plan, CEO Scaringe will receive an option to purchase up to 36.5 million shares of Rivian’s Class A stock at an exercise price of $15.22 per share, about 16 million more than the previous grant, according to documents filed by the company with the U.S. Securities and Exchange Commission.
The award will be given if Rivian achieves a stock price reduction milestone of $40 to $140 per share over the next 10 years, as well as new operating income and cash flow targets over the next seven years. The company did not provide details on what those goals include.
The reduction in equity milestones is compared to the previous salary package granted in 2021, which was related to Rivian’s stock price reaching between $110 and $295 per share. Rivian canceled the grant, saying it was unlikely that the goals associated with the grant would be met.
Rivian stock closed Thursday at $15.22.
The new package includes an approximately 3% stake in Rivian. Vitaly Golomb, a managing partner at Mavka Capital and an investor in Rivian, said Scaringe owns about 2% of the company and approved the plan. “RJ’s starting point makes this package much more streamlined than Musk’s,” he said. Musk owns about 13% of Tesla stock, but he has 15% voting power, which could rise to 25% under the new pay structure.
If Rivian hits all milestones as part of the package, it could earn up to $4.6 billion, including option exercise costs, according to Reuters calculations, but Rivian said shareholders would receive a value of $153 billion.
Rivian’s board also doubled Mr. Scaringe’s base salary to $2 million, saying the change was made with input from an independent compensation consultant and is intended to better align pay with shareholder interests.
Separately, Mr. Scaringe was granted 1 million common units in Mind Robotics, a newly formed Rivian spin-off company with external funding to develop industrial AI technology, with up to a 10% economic return if the business’ profits exceed certain thresholds.
Mr. Scaringe serves as chairman of Mind Robotics’ board of directors, and Mr. Rivian announced earlier this week that he is a shareholder in the company.
Reporting by Abhirup Roy in San Francisco, Akash Sriram in Bengaluru and Ross Carver in Boston. Editing: Peter Henderson and Alan Barona
