The chief executives of electric-vehicle startups
Lucid
LCID -0.99%
Group Inc. and
Rivian
RIVN 2.55%
Automotive Inc. each received pay packages last year valued at over $400 million, as both companies raced to public markets and increased production in the growing EV market.
Equity accounted for the bulk of the nearly $566 million in compensation for Lucid CEO
Peter Rawlinson
and $422 million for Rivian chief
RJ Scaringe.
The reported pay is a steep raise from 2020 and reflects, in part, the companies’ ambitions for growth. What executives ultimately receive will rise or fall with the companies’ stock prices, and some of the equity awards could expire worthless if targets aren’t met or they depart.
One key difference between the companies is how soon their leaders can generate cash from the equity awards. Mr. Rawlinson has already received full access to some of his stock-based pay, shares now worth about $300 million, while Mr. Scaringe can’t start to get full title to much of his equity award until early 2027, when Rivian is scheduled to begin evaluating performance metrics for it.
Equity accounted for the bulk of Lucid CEO Peter Rawlinson’s nearly $566 million compensation package in 2021.
Photo:
Ash Ponders for The Wall Street Journal
The size and structure of both compensation plans reflect the high expectations of investors and boards in the race to transition the automotive industry away from vehicles with internal-combustion engines. The pay packages are valued at more than 14 times those of leaders of larger auto makers such as
Ford Motor Co.
and
General Motors Co.
They also rank among the biggest for any CEOs in the Russell 3000 index, according to data from MyLogIQ.
Both auto makers said in their securities filings that the equity awards were intended to motivate the executives to meet strategic and market goals and to align their interests with those of shareholders generally. Lucid also cited Mr. Rawlinson’s technical leadership in explaining his pay.
Rivian said shareholders approved its executive pay plan in an advisory vote at Monday’s annual meeting, without disclosing numbers. Lucid faces a similar vote at its shareholder meeting Thursday.
Energized pay
What the heads of electric-vehicle companies Lucid and Rivian were paid last year
Stock or options based on time
Peter Rawlinson, Lucid Group CEO
About 19% of the
14M shares vested
in December 2021,
March and June 2022.
About 87% of the
16M shares vested
with stock price run-up
through early this year.
Stock or options based on time
Peter Rawlinson, Lucid Group CEO
About 19% of the
14M shares vested
in December 2021,
March and June 2022.
About 87% of the
16M shares vested
with stock price run-up
through early this year.
Stock or options based on time
Peter Rawlinson, Lucid Group CEO
About 19% of the
14M shares vested
in December 2021,
March and June 2022.
About 87% of the
16M shares vested
with stock price run-up
through early this year.
The equity awards reflect a broader trend across the biggest U.S. companies, where the median compensation for CEOs set a sixth-straight annual record last year. More companies are also giving CEOs a significantly larger than usual upfront grant of stock options or restricted stock—with strings attached.
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Companies often set performance goals they deem ambitious, allowing several years to achieve them: Stock prices may have to double or triple for executives’ equity awards to fully vest, and in some cases annual profit or revenue targets must be met as well.
The securities can expire worthless if the targets aren’t met. Hitting the goals can bump up CEO pay as options become exercisable or restricted stock converts into ordinary shares that executives can sell or hold. Executives can also reap benefits from stock awards sooner if the company is sold or they leave their roles in some cases. For disclosure purposes, companies value stock-based pay at the time of grant.
Lucid and Rivian shares rose sharply late last year, reflecting investors’ enthusiasm for electric-vehicle startups. As the broader market for tech shares pulled back this year, the companies have fared worse: Lucid shares are down about 50%, and Rivian shares are down about 70%. The tech heavy Nasdaq Composite Index is down about 23%.
Nearly all of Mr. Rawlinson’s pay consisted of restricted stock awards, about half of which vest in quarterly installments over four years as long as he keeps his job.
The other half was designed to vest only if the company’s market capitalization meets certain milestones within five years. In March, Lucid’s board concluded that the company had met four of five market-cap targets, meaning 87% of Mr. Rawlinson’s performance-based grant had vested—shares valued at more than $320 million at the time.
“Mr. Rawlinson hasn’t sold this recently vested stock and will see no cash benefit” from a recent disposal of shares to cover his tax liability at vesting, a Lucid spokeswoman said.
Rivian CEO RJ Scaringe’s $422 million 2021 pay package marks a steep raise from the previous year, reflecting the EV maker’s growth ambitions, among other factors.
Photo:
Jamie Kelter Davis/Bloomberg News
More than half of Mr. Scaringe’s compensation from Rivian consisted of a special equity award. It included $152 million in options that begin to vest only if Rivian’s share price stays above $110 for long enough, and another $89 million in options that vest over six years. None have vested yet.
The big equity awards came during a year when both companies delivered their first vehicles to customers and posted much wider losses in their pursuit of growth. Lucid went public through a merger with a special-purpose acquisition company in July last year, and Rivian completed an initial public offering last November, the largest U.S. IPO in years.
Lucid reported a net loss of $4.7 billion, after preferred dividends, in 2021. Rivian also reported a net loss of $4.7 billion and has encountered manufacturing snags in its line of electric trucks, halving its production forecast for this year.
Ford reported paying
Jim Farley
$22.8 million last year, his first full year as CEO, while GM said it paid
Mary Barra
$29.1 million. In both cases, the pay included significant equity compensation. Both companies reported robust annual profits of about $18 billion and $10 billion, respectively.
A Rivian assembly line in Normal, Ill.
Photo:
KAMIL KRZACZYNSKI/REUTERS
Tesla Inc.
turned the spotlight on compensation packages with outsize equity offerings in 2018. That year, it granted CEO
Elon Musk
options that became exercisable if the company hit a series of market capitalization and financial measures over 10 years.
At the time, his award was valued at $2.3 billion. As Tesla’s share price and sales have soared, Mr. Musk has so far received full title to all but one of 12 tranches of options, with a combined exercise value of about $59 billion at recent prices.
Beyond the equity awards, Lucid’s Mr. Rawlinson received roughly $529,000 in salary last year, about $2.4 million in bonuses, mostly tied to taking the company public, and $6.6 million in discounts on preferred shares he purchased. In 2020, Mr. Rawlinson received $678,000, all in salary and cash bonus.
Mr. Scaringe, at Rivian, made $650,000 in salary, plus about $121,000 in security services. Another $181 million of his total pay figure reflected changes made to earlier option awards, letting them vest on his departure from the company under certain circumstances. His 2020 pay consisted of $1.3 million in salary and cash bonus.
Write to Theo Francis at [email protected]
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