Electric vehicle maker Rivian announced on Friday a new pay plan for CEO RJ Scaringe valued at up to $4.6 billion over the next decade, similar in structure to Tesla’s record compensation package for Elon Musk. The plan ties pay to profit targets and stock price milestones, highlighting Rivian’s effort to retain its founder and focus on growth as it prepares to launch its smaller, more affordable R2 SUV next year to compete with Tesla’s Model Y.

Details of the Compensation Package

• Scaringe will receive options to purchase 36.5 million shares of Rivian’s Class A stock at an exercise price of $15.22 per share, about 16 million more than his previous grant.
• The award vests only if Rivian achieves stock-price milestones ranging from $40 to $140 over 10 years, along with operating income and cash flow targets over seven years.
• The previous 2021 package, tied to a $110 share price target, was canceled as the milestones were deemed unlikely to be met.

A Rivian spokesperson stated, “The rigorous and challenging milestones associated with this option award are structured in such a way that ensures the options only vest should the company deliver significant value to our shareholders.”

Financial Implications

• If all targets are met, Scaringe could receive up to $4.6 billion, including the cost of exercising options.
• The payout represents roughly a quarter of Rivian’s $18.7 billion market value and slightly exceeds the company’s cash balance of $4.4 billion as of September.
• Rivian shareholders could gain $153 billion in value if the milestones are achieved.
• Scaringe’s base salary was doubled to $2 million, aligning executive pay with shareholder returns.

Additional Ventures
Scaringe was also granted 1 million common units in Mind Robotics, a Rivian spinoff focused on industrial AI, giving him up to a 10% economic interest once profitability thresholds are met. He will serve as chairman of Mind Robotics’ board, with Rivian as a shareholder.

Market Reaction
Rivian shares closed at $15.22, with a one-year median price target of approximately $14, according to LSEG data. Analysts note the plan mirrors Tesla’s strategy of tying executive compensation to ambitious long-term growth, potentially setting a model for other high-growth companies.

This move underscores Rivian’s commitment to retaining Scaringe and driving the company’s growth as it navigates an increasingly competitive EV market.