New compensation for Rivian founder and CEO RJ Scaringe could top out at $5 billion if aggressive market and operating targets are reached, the EV startup disclosed in a fresh securities filing. The board’s salary committee also raised Scaringe’s base to $2 million and awarded him a 10% stake in Rivian’s new spin-out, Mind Robotics.
The move replaces a previous, largely unworkable award made in 2021 and reflects Rivian’s attempt to closely tie executive pay to long-term value creation at a moment when the company is pushing close to profitability while preparing its next wave of electric vehicles.
How the New Stock Option Award for Scaringe Works
It is structured around two tranches of stock options that vest only if Rivian crosses high hurdles. The first installment, consisting of 22 million options, will be based on share-price targets. Should Rivian stock hit $40, Scaringe is granted 2 million options, and another 2 million for each subsequent $10 increase until it reaches up to $140. Should Scaringe achieve those goals, long-term shareholders will have seen significant appreciation before he can realize value.
The 14.5 million options left are subject to targets for adjusted operating income and cash flow — benchmarks investors have begun to more forcefully demand of electric vehicle makers following years of capital-intensive expansion.
These options have an exercise price of $15.22 — meaning Scaringe would need to pony up something on the order of $555 million to acquire all the performance-based portion that is linked to financial targets.
Rivian stressed in its filing that Scaringe does not see anything from the new award until at least $32 billion worth of incremental value is generated. If all of those targets are met, the company forecasts shareholder value creation of around $153 billion.
Why Rivian Rewrote the 2021 CEO Performance Grant
The board nullified Scaringe’s previous 2021 performance award after determining it was unlikely to be paid out. That package consisted of 20,355,946 options with a $21.72 strike that would vest in four tranches on the stock price ranging from above $110 to more than $295 over six years. Although shares briefly leapt to roughly around $129 after the IPO, they fell back and, for much of recent years, have traded between the low double digits and high single digits — hammering many or most over their original thresholds.
Rivian said that this had resulted in a “lack of incentive,” and would explain the reset under the same shareholder-approved 2021 equity plan. Time-based options granted to Scaringe in 2021 were not terminated.
Governance stakes, shareholder vote, and dilution
That stood in contrast to a high-profile CEO package at another company in the EV sector that was recently put to a vote of shareholders; Rivian’s full board gave Mastronardi his sweetened deal within an already authorized equity plan, thereby sidestepping a separate shareholder vote.
Governance experts will want to review the structure, but it aligns with current best practices: extensive reliance on performance vesting, transparent benchmarks and a far-off payout.
If fully earned and exercised, the options could represent single-digit dilution based on recent tallies of Rivian’s shares outstanding disclosed in company filings. That potential dilution stands in contrast to a stated pledge to link vesting to both stock appreciation and hard financial outcomes, consistent with the advice of organizations such as the Council of Institutional Investors and “pay-for-performance” frameworks supported by investors such as ISS and Glass Lewis.
For context, the typical S&P 500 CEO’s compensation is in the mid-teens of millions annually, according to analyses by Equilar and large business publications. It’s unusual to have a package of the size in the billions and shows that someone is betting on transformational value generation rather than incremental progress.
What the New Award Signals for Rivian’s Strategy and Focus
To make a big slice of compensation contingent on adjusted operating income and cash flow sends a clear signal that Rivian is focusing on scale with discipline. The company said it had been working to improve manufacturing efficiency at its Normal, Illinois facility and that next-generation models would feature vehicles and platforms that would be easier — and cheaper — to build. Aligning incentives with profitability ought to strengthen those values on all levels of the organization.
The 10% holding in Mind Robotics, however, opens up a different front. Though details are still scarce, a spin-out structure could signal Rivian believes it holds strategic value to remain focused on development around robotics and autonomy-adjacent tech that could potentially be deployed across future vehicles, factory automation processes, or in logistical applications. It also broadens Scaringe’s incentives beyond the core auto business, without diluting the performance link at Rivian.
Key Performance Metrics Investors Should Watch Next
Investors will follow the cadence of stock-price milestones, but the more meaningful signals may come from operating line items:
- Gross margin trajectory
- Unit economics on newer models
- Adjusted operating profit
- Free cash flow
Progress on those fronts will determine whether the financial-performance options vest, and — more important — whether Rivian can fund its growth in a capital-intensive industry.
By resetting the award, the board was, in a sense, admitting past stumbles and setting an aggressive goal for future execution. Should Scaringe and Rivian actually execute, the construct ensures shareholders would get paid first — and sets a new benchmark for how EV makers link leadership pay reinforcements to lasting value creation.
