The stocks of many start-up electric vehicle (EV) companies are difficult to analyze, value and trade. Indeed, many EV OEMs exploded higher in the early fall of 2021 and have fallen just as hard since. It appears that their Board compensation committees are even tougher to understand — and indifferent to the goals and interests of their shareholders.
For example, Rivian Automotive, Inc.’s (NASDAQ: RIVN) CEO RJ Scaringe was awarded a 2021 pay package of US$422 million despite:
- 1) the company’s recording a nearly US$5 billion loss in 2021; and
- 2) the stock’s 64% decline since its November 10, 2021 IPO price of US$78 to its June 10, 2022 closing price of US$28.36.
Even more remarkable, Mr. Scaringe’s pay equates to 1.67% of Rivian’s total stock market value.
2021 Pay Packages for Selected Auto Company CEOs
|Lucid Group||Rivian Automotive||Canoo Inc||General Motors||Ford Motor Co||Stellantis|
|(in thousands of US dollars)||CEO Peter Rawlinson||CEO RJ Scaringe||Chair and CEO Tony Aquila||Chair and CEO Mary Barra||CEO Jim Farley||CEO Carlos Taveres|
|Value of Stock or Options||$284,000 (A)||$421,000||$43,295||$18,600||$16,000|
|Performance-Based Pay||$272,000 (B)||$7,600||$3,700||$14,500|
|Stock Market Capitalization||$30,271,000||$25,327,000||$783,327||$51,618,000||$50,605,000||$42,919,000|
|2021 CEO Pay as a % of Stock Market Capitalization||1.87%||1.67%||5.62%||0.06%||0.05%||0.05%|
|Company’s 2021 Net Income||($4,747,093)||($4,688,000)||($346,768)||$10,019,000||$17,937,000||$15,200,000|
|2021 CEO Pay as a % of 2021 Net Income||N.M.||N.M.||N.M.||0.29%||0.13%||0.14%|
|December 31, 2020 Closing Share Price||$22.88||$15.07||$50.68||$10.35||$12.00|
|June 10, 2022 Closing Share Price||$18.02||$28.36||$3.05||$35.01||$12.75||$13.64|
|Percentage Change in Share Price||-21%||-64% (C)||-80%||-31%||23%||14%|
The 2021 pay packages for the CEOs of the nascent EV makers Lucid Group, Inc. (NASDAQ: LCID) and Canoo Inc. (NASDAQ: GOEV) look similarly egregious in relation to the companies’ market values and stock price performances. Most notably, Lucid CEO Peter Rawlinson and Canoo CEO Tony Aquila received 2021 pay equivalent to 1.87% and 5.62%, respectively, of their money-losing companies’ stock market capitalizations.
The compensation paid to the EV start-up CEOs is particularly difficult to comprehend when compared with the generous, but not otherworldly, amounts paid to the CEOs of large and profitable automakers — which are diversifying quickly into the EV business. For instance, General Motors Company (NYSE: GM) paid Chair and CEO Mary Barra around US$29 million for her performance in 2021. That represents about 5% of Lucid CEO Peter Rawlinson’s 2021 compensation (US$566 million). Ms. Barra’s pay approximates 0.06% of GM’s market value.
The absolute and relative stock performances of the EV companies likewise do not seem to justify the 2021 pay packages of their CEOs. The shares of Lucid, Rivian and Canoo have fallen between 21% and 80% since year-end 2020, while Ford Motor Company (NYSE: F) (up 23%) and Stellantis N.V. (NYSE: STLA) (up 14%) have risen over that period. Stellantis is the parent company of Fiat Chrysler and the French PSA Group. The S&P 500 Index is up 7% since December 31, 2020.
Excessive CEO pay has been well chronicled by many financial publications. However, the gap between the compensation paid to leaders of EV start-ups and complex legacy automakers which are rapidly moving into the EV space looks hard to justify. Investors considering EV OEMs may want to weigh the (excessive) generosity of CEO compensation when evaluating these companies.
Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.