by New Rivian Executive Compensation Deal
Rivian CEO RJ Scaringe has signed a new compensation agreement that is entirely dependent on his performance results. According to the new terms, his base salary doubles and now amounts to $2 million. The total value of the compensation package could reach $4.6 billion if all set goals are achieved.
Comparison with Elon Musk’s Deal
Last week, Tesla CEO Elon Musk received a deal that could potentially bring him a trillion dollars over the next decade. The Rivian CEO also received a similar package based on achieving certain metrics, although the amounts in his case are significantly more modest.
The company will not pay Scaringe in cash but will grant him stock options. He will receive the right to purchase up to 36.5 million Class A shares at a price of $15.22 per share. However, this compensation will depend on whether the company can achieve target stock price levels ranging from $40 to $140 over the next 10 years.
Terms of Receiving Compensation
Currently, Rivian’s stock price is around $15, although after the initial public offering in 2021 it reached $129. Therefore, fulfilling the terms of the agreement will not be easy. In addition, Scaringe must achieve high operating income and cash flow indicators.
Unlike the deal with Elon Musk, this agreement did not require shareholder approval. The decision was made by Rivian’s board of directors, which aims to keep Scaringe focused on company development and the successful launch of the R2 model, which is intended to become a competitor to the Tesla Model Y.
Previous Deals and Current Challenges
This is not Scaringe’s first performance-based deal. In 2021, he already received similar compensation that depended on the stock price reaching $110-$295. However, the new agreement takes into account that achieving even the minimum price targets from the previous deal was practically impossible.
Currently, Rivian is facing a number of difficulties, including the loss of federal electric vehicle tax incentives and the layoff of 600 employees as part of cost-cutting measures. Under such conditions, the new agreement is designed to motivate the CEO to achieve significant success in the company’s development.
Similar agreements between automaker executives and shareholders are becoming increasingly common, especially in the context of fierce competition in the electric vehicle market. They allow companies to attract and retain talented leaders while ensuring their interest in the long-term success of the business. However, such agreements also spark public discussions about the fairness of reward distribution between management and ordinary employees.
