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TABLE OF CONTENTS
TABLE OF CONTENTS 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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ý | Definitive Proxy Statement | |
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o | Soliciting Material under §240.14a-12 | |
| W.W. Grainger, Inc. | ||||
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| W.W. GRAINGER, INC. 100 GRAINGER PARKWAY LAKE FOREST, ILLINOIS 60045-5201 (847) 535-1000 |
March 15, 201818, 2021
Dear Grainger Shareholders:
We are pleased to invite you to attend virtually the 20182021 annual meeting of shareholders of W.W. Grainger, Inc. on Wednesday, April 25, 2018,28, 2021, at 10 a.m. Central Daylight Time. This year's annual meeting will be held at our headquarters located at 100 Grainger Parkway in Lake Forest, Illinois.as a virtual meeting with no in-person attendance.
At the meeting, we will report on our operations and other matters of current interest. Shareholders will also vote on the matters described in the accompanying Notice of Virtual Annual Meeting and Proxy Statement and any other matters properly brought before the meeting.
As in prior years, we have elected to deliver our proxy materials to the majority of our shareholders over the Internet. This delivery process allows us to provide shareholders with the information they need, while at the same time conserving natural resources and lowering the cost of delivery. The Notice of Virtual Annual Meeting of Shareholders on the following page contains instructions on how to:
Please take the time to carefully read the Notice of Virtual Annual Meeting and Proxy Statement that follow. Whether or not you plan to attend the meeting, please ensure that your shares are represented by giving us your proxy. You can do so by telephone, by Internet, or by signing and dating the enclosed proxy form and returning it promptly in the envelope provided.
We look forward to seeing you atyour participation in the meeting.
| Sincerely, | ||
 | ||
D.G. Macpherson Chairman of the Board and Chief Executive Officer |
NOTICE OF VIRTUAL ANNUAL MEETING
OF SHAREHOLDERS
| | Proposal | Board Recommendation | For more information | | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | |
| 1. | to elect | FOR (all nominees) | Page | |||||||
2. | to ratify the appointment of Ernst & Young LLP as independent auditor for the year ending December 31, | FOR | Page | |||||||
3. | to | FOR | Page | |||||||
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We will also consider any other matters that may properly be brought before the Meetingmeeting (and any postponements or adjournments of the Meeting)meeting). As of the date of this proxy statement, we have not received notice of any such matters.
Shareholders of W.W. Grainger, Inc. (Grainger or the Company), as of the record date, are entitled to vote, as follows:
 |  |  | ||||
| Internet | Telephone | |||||
| www.proxyvote.com April 27, 2021 During the Meeting: www.virtualshareholdermeeting.com/GWW2021 | 1-800-690-6903 | Mark, sign and date your proxy card and return it in the pre-addressed postage-paid envelope we have provided or return it to: | ||||
Vote Processing c/o Broadridge 51 Mercedes Way Edgewood, NY 11717 |
Regardless of whether you plan to attend the virtual annual meeting, we hope you will vote as soon as possible. You may vote your shares in person,during the virtual annual meeting, over the Internet or via a toll-free telephone number. If you received a paper copy of a proxy or voting instruction card by mail, you also may submit your proxy or voting instruction card forbefore the annual meeting by completing, signing, dating and returning your proxy or voting instruction card in the pre-addressed envelope provided.For specific instructions on voting, please refer to the section, Questions and Answers—Voting Information / page 7985.
Proxy MaterialsVIRTUAL MEETING
Due to the public health impact of the COVID-19 pandemic, the 2021 annual meeting will be a virtual meeting without in-person attendance. To virtually attend the annual meeting at www.virtualshareholdermeeting.com/GWW2021 (the "Annual Meeting Website"), you must enter the 16-digit control number found on your proxy card or voting instruction form (the "Control Number"). You may vote your shares and submit your questions during the virtual annual meeting by entering your Control Number and following the instructions also available on the Annual Meeting Website.
Whether or not you plan to virtually attend the annual meeting, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described in the proxy materials for the annual meeting. Shareholders who have sent in proxies or voted via telephone or internet do not need to take any further action. As always, we encourage you to vote your shares prior to the annual meeting.
This Notice of Virtual Annual Meeting, Proxy Statement and Form of Proxy are beingwere first distributed andor made available aroundto shareholders on or about March 15, 2018.18, 2021.
By order of the Board of Directors.
Hugo Dubovoy, Jr.
Vice President, Corporate Secretary
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 25, 201828, 2021
OurThis Notice of Virtual Annual Meeting, Proxy Statement and Form of Proxy and our 2020 Annual Report on Form 10-K are available under "Financials" in the 2018 Annual Shareholder Meeting/Proxy InformationInvestor Relations section of Grainger'sour website athttp://www.grainger.com/investorinvest.grainger.com/, and also may be obtained free of charge on written request to the Corporate Secretary at Grainger's headquarters, 100 Grainger Parkway, Lake Forest, Illinois 60045-5201.
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THE ROLE OF THE BOARD
The Board of Directors of the Company (the Board) acts as the steward of the Company for the benefit of the Company's shareholders.Company. Our Directors bring to the Board a wealth of business experience and a track record of good business judgment in various situations relevant to the Company's operations. Our Directors exercise their business judgment in the best interests of the Company consistent with their fiduciary duties,operations and in alignment with shareholder value.strategy.
OurThe Board recognizes the importance of ensuring that our overall business strategy is designed to create sustainable long-term value for Grainger's shareholders.shareholders and other stakeholders. The Board maintains an active role in formulating, planning and overseeing the implementation of Grainger's strategy. Itstrategy as to operational, financial, regulatory and environmental, social and governance (ESG) matters.
The Board has a robust annual strategic planning process during which key elements of our business and financial plans, strategies and near-near-term and long-term initiatives are developed and reviewed. This process culminates with a full-day Board session with our senior leadership team to review Grainger's overall strategy, opportunities, challenges and capabilities, andcapabilities. The annual strategy process also helps shape the strategic content presented atin our communications with the Company's annual Analyst Meeting.investment community. In addition to business strategy, the Board reviews Grainger's short-term and long-term financial plans, which serve as the basis for the annual operating and capital plans for the upcoming year. The Board evaluates progress made as well as related challenges and risks with respect to our strategy and plans throughout the year. In addition, through its Committees, the Board oversees Grainger's approach to ESG.
Operating Principles of the Board of Directors
The Board recognizes that defining its role underCOVID-19 Pandemic
As part of the Company's operating principlesBoard's strategic guidance and oversight, it has engaged with management to make sure the Company is able to successfully adjust to changing environments during the COVID-19 pandemic. Throughout the pandemic, Grainger has been an evolving process. In 1995,essential business supporting hospitals, governments, first responders, food manufacturers, distribution companies and other customers who depend on our products and services to combat the Board establishedvirus on the W.W. Grainger, Inc. Operating Principles for the Board of Directors (the Operating Principles). The principles are not intended to cover all issues that may arise, but rather to provide a general framework of reference to assist the Board in the performance of its dutiesfront lines and responsibilities. Each year, the Board reviewskeep their businesses up and revises the Operating Principles, as appropriate, to address emerging needs and practices.The Operating Principles may be found in the Governance section of our website athttp://www.grainger.com/investor.
Our Board of Directors is committed to excellence in its governance practices, including Board composition. Of our Board, 10 of 11 Directors are independent.running. The Board has adopted "categorical standards"closely monitored and helped ensure that Grainger's management processes and financial resources have been effectively deployed to assist it in making independence determinations of director nominees. fulfill our purpose—"We Keep the World Working"—and to remain the go-to-partner for people who build and run safe, sustainable and productive operations. With health as the primary focus, we established three priorities during this challenge:
Board Actions
The categorical standards are intendedBoard believes that a diverse, experienced and vibrant board significantly contributes to the broad-based thinking needed to reach the sound decisions that drive shareholder value and helps ensure that the Board is prepared to help for example,the Company meet both current challenges and future needs. The 2021 Board slate consists of 13 Director nominees of varying experience and background, including five non-employee Directors newly appointed since July 2014 and one new independent nominee, Katherine D. Jaspon (the New Nominee). These additions to the Board determine whether certain relationships between nomineesdemonstrate its commitment to gaining the benefits of different perspectives and Grainger are "material relationships" for purposes of the New York Stock Exchange (the NYSE) independence standards. The categorical standards adopted by the Board have more restrictive thresholds than the NYSE's bright line revenue test for non-independence.The categorical standards adopted by the Board are set forth in Appendix A to this proxy statement and are also available in the Governance section of Grainger's website athttp://www.grainger.com/investor.
Grainger's Board has 10 independent Directors and one management Director. The Board considered a variety of factors, including related party transactions and charitable donations, in assessing thediversity.
Proxy Statement 
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independence ofThe Board's various experiences and viewpoints benefit the Directors involved against the NYSE's independence standards and Grainger's categorical standards. In addition to ordinary course business transactions and charitable donations by the Company the Board considered two contributions directed under the Company's matching charitable gift program to a tax-exempt organization where a Director serves as an officer and board member. The Board determined that none of the Directors had any direct or indirect material interest in any transactions or donations. Similar transactions and donations are likely to occur in the future and are not expected to impair the independence of the directors involved. Mr. Macpherson is a Grainger employee and, accordingly, is not considered "independent." However, the Board has determined that each of Mses. Hailey and Perez, and Messrs. Adkins, Anderson, Levenick, Novich, Roberts, Santi, Slavik, and Watson has no material relationship with Grainger within the meaning of the NYSE independence standards and Grainger's categorical standards and is, therefore, independent.
BOARD QUALIFICATIONS, ATTRIBUTES, SKILLS AND BACKGROUND
In addition to independence, the Board and its Board Affairs and Nominating Committee believe that a diverse, experienced and vibrant board also is of utmost importance for reaching sound decisions that drive shareholder value. As evidence of this commitment to a diversity of perspectives, our Board is currently comprised of 11 directors of varying experience and background, including two new directors appointed in 2017.
We determined that Board experience and diversity benefit us most when they are aligned with our global business needs, reflective of our strong corporate governance practices and consistent with our corporate social responsibilityESG goals. As a result of the Board's ongoing refreshment efforts, we have added directorsDirectors with expertise in the technology and digital space as well as in leading corporate social responsibilityESG initiatives for a global business. Our threefive newest directors,non-employee Directors, Rodney C. Adkins, Beatriz R. Perez, Susan Slavik Williams, Lucas E. Watson and Lucas Watson, have enhancedSteven A. White, and Katherine D. Jaspon as the New Nominee, bring valuable perspectives and experiences in addition to enhancing the diversity of our Board.
Corporate Culture: The Grainger Edge
The Board strongly believes that the Company's culture must be strongly aligned with business strategy to create value. To that end, the Board is actively engaged with senior management in additioncultivating Grainger's culture. The Board believes that a purpose-driven culture has been an asset of the Company that creates a sustainable competitive advantage. Building on the Company's strong foundation while evolving a framework to bringingaddress future challenges is critical to Grainger's continued success.
In 2019, the Company introduced the Grainger Edge, a new strategic framework that defines who Grainger is, why Grainger exists, and how team members work together to achieve Grainger's objectives.
The Grainger Edge includes a set of principles that defines the behaviors expected from team members as they work with each other, customers and suppliers. They support the Company's commitment to having an inclusive culture where all team members operate with the highest ethics in and outside of the Company's industry. The Board fully endorses these principles and believes that alignment to them creates value for shareholders.
The Grainger Edge also is the foundational structure for the Company's business strategy, which is to consistently gain share through two distinct business models that allow it to leverage its scale and supply chain to support customers with different needs.
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The Company's pay for performance compensation philosophy aligns with the Grainger Edge and helps further the Company's strategy and long-term value creation.
The Board is committed to helping the Company make the Grainger Edge a successful foundational framework for Grainger and its employees as the Company works to consistently serve customers and gain share. The Board understands that top talent is necessary to achieve these goals and supports the Company's commitment to providing employees with resources designed to help them succeed. Grainger's culture and principles advance the Board's priority of ensuring that the Company attracts, retains, motivates and develops top diverse talent across the Company. The Board routinely conducts in-depth reviews of senior leaders and their valuable perspectivesdevelopment. This engagement gives the Board insight into the Company's talent and experiences.succession plans.
A breadthThe Board believes a culture of Board perspectives supports ourethical behavior is essential to meeting the Company's goals and has adopted Business Conduct Guidelines that use plain language to make expectations more understandable and encourage a "speak up" culture for early issue identification. The Business Conduct Guidelines apply to all Directors, officers and employees.
Delivering business asresults and creating a broad line, business-to-business distributor of maintenance, repair and operating (MRO) supplies and other related products and services. Grainger's management operates itssustainable business through a network of highly integrated websites, distribution centers and branches with nearly 25,000 employees primarilythat does the right thing has guided the Company for more than 90 years. The continuing commitment to these objectives is seen in the United StatesCompany's ESG initiatives. The Board believes that a thoughtfully articulated ESG approach can help build resilient processes, keep employees more engaged and Canada,enable quicker decision-making. Our commitment to ESG has served us well in the COVID-19 pandemic. Safety has been one of our key guiding pillars, and withthe investments we have made over time in building a presencesustainable supply chain have allowed us to continue to serve our customers well. Please see the section Environmental, Social and Governance / page 30.
Proxy Statement 3
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Collectively, the activities of the Board and its Committees in Europe, Asiareviewing strategy, ESG, culture, talent and Latin America. More than 5,000 suppliers provideethical behavior enable Grainger with less than 1.7 million products stocked in Grainger's distribution centers and branches worldwide. Approximately 3.5 million businesses and institutionsto help millions of customers worldwide rely on Grainger to keep their operations running and their people safe.
Corporate Governance Practices
Grainger has a history of strong corporate governance. A key priority of the Board is to set the "tone at the top." This is reflected in the Board's commitment to governance policies and practices that serve the interests of the Company and its shareholders. Key aspects include:
Operating Principles of the Board of Directors
The Board recognizes that defining its role is an evolving process and has established Operating Principles for the Board of Directors (the Operating Principles) that provide a general framework to assist the Board in fulfilling its duties and responsibilities. Each year, the Board reviews and revises the Operating Principles, as appropriate, to address emerging needs and practices. The Operating Principles are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.
Our Board of Directors is committed to excellence in its governance practices, including director independence and Board composition. Of our current Director nominees, 12 of 13 Director nominees are independent. The Board has adopted "categorical standards" to assist it in making independence determinations of Director nominees. The categorical standards are intended to help the Board
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determine, for example, whether certain relationships between nominees and Grainger are "material relationships" for purposes of the New York Stock Exchange (NYSE) independence standards. The categorical standards adopted by the Board have more restrictive thresholds than the NYSE's bright line revenue test for independence. The categorical standards adopted by the Board are set forth in Appendix A to this proxy statement and are also available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.
The Board considered a variety of factors, including any related party transactions, in assessing the independence of our Directors and the New Nominee against the NYSE's independence standards and Grainger's categorical standards. The Board also considered ordinary course business transactions and charitable donations by the Company where a Director or the New Nominee serves as an officer and/or a board member. The Board has made an affirmative determination that all 11 of our non-employee Directors and the New Nominee have no direct or indirect material relationship with Grainger within the meaning of the NYSE independence standards and Grainger's categorical standards and, accordingly, meet the applicable requirements for "independence" set forth in the NYSE's listing standards.
BOARD QUALIFICATIONS, ATTRIBUTES, SKILLS AND BACKGROUND
We determined that the Board's various experiences and viewpoints benefit us most when they are aligned with our global business needs, our strong corporate governance practices and our ESG goals. As a result of the Board's ongoing refreshment efforts, in recent years, we added Directors with expertise in technology, digital commerce and ESG. Four of our newest Directors, Rodney C. Adkins, Beatriz R. Perez, Susan Slavik Williams and Steven A. White, and the New Nominee, Katherine D. Jaspon, also enhance the diversity of our Board in addition to bringing their valuable perspectives and experiences.
The Board's varied perspectives support our business as a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with 2020 sales of approximately $11.8 billion. Grainger operates through its distribution centers, eCommerce platform, contact centers, branches and sales and service representatives with approximately 23,100 employees primarily in North America, Japan and Europe. Approximately 5,000 suppliers provide Grainger with approximately 1.5 million products stocked in Grainger's distribution centers and branches worldwide. Approximately 5 million customers worldwide rely on Grainger.
The following table highlights specific experience, qualifications, attributes, skills, and background information that the Board considered for each director.Director nominee. A particular directorDirector nominee may possess additional experience, qualifications, attributes, or skills, even if not expressly indicated below.
Proxy Statement 5
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Director Nominee Qualifications, Attributes, Skills and Background Matrix
| Director Nominee Qualifications, Attributes and Skills |   |   |   |   |   |   |   |   |   |   |   |  |  | |||||||||||||
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| Experience developing and implementing operating plans and business strategy | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ |
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| Experience in supply chain management encompassing the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities | | ✓ | | ✓ | ||||||||||||||||||||||
| | | | ✓ | | ✓ | | ✓ | | | ✓ | | | | ✓ | | ✓ | ||||||||||
| Marketing/Sales & Brand Management | | | | | | | | | | | | | | |||||||||||||
| Experience managing a marketing/sales function, and in increasing the perceived value of a product line or brand over time in the market | | ✓ | | | | | | | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ |
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| Experience | | ✓ | | | | | ✓ | | ✓ | | | ✓ | | ✓ | | ✓ | | | ✓ | | ||||||
| Real Estate | | | | | | | | | | | | | | |||||||||||||
| Experience overseeing complex real estate matters that are integral to a business | | ✓ | | ✓ | | | | ✓ | | | | | | | | | | ✓ | | | | ✓ | | | | ✓ |
| Finance/Capital Allocation | | | | | | | | | | | | | | |||||||||||||
| Knowledge of finance or financial reporting; experience with debt and capital market transactions and/or mergers and acquisitions | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | |
| Public Company/Leadership | | |||||||||||||||||||||||||
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| "C-Suite" experience with a public | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ |
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| Director Nominee Qualifications, Attributes and Skills | | | | | | | | | | | | | | |||||||||||||
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| Corporate Governance/Public Company Experience | | | | | | | | | | | | | | |||||||||||||
| Experience serving as a public company director; demonstrated understanding of current corporate governance standards and best practices in public companies | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ |
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| Experience overseeing complex risk management matters | | ✓ | ||||||||||||||||||||||||
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| ✓ | | | | | | ✓ | | ✓ | | | | ✓ |
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| Government/Public Policy | | | | | | | | | | | | | | ||||||||||||||||
| Experience overseeing complex regulatory matters that are integral to a business | | ✓ | | | | | ✓ | | ✓ | | | ✓ | | ✓ | | ✓ | | | ✓ | | ✓ | ||||||||
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| Experience | | ✓ | | | | ✓ | | | | ✓ | | ✓ | | | | ✓ | | | | | | | | ✓ | | ||||
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| Experience implementing technology strategies and managing/mitigating cybersecurity risks | | ✓ | | | | | | ✓ | | ✓ | | | | ✓ | | | ✓ | | ✓ | ||||||||||
| Human Resources/Compensation | | | | | | | | | | | | | | ||||||||||||||||
| Experience managing a human resources/compensation function; experience with executive compensation and broad-based incentive planning | | ✓ | | ✓ | | | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | | | ✓ | |||
| Business Ethics Track record of integrity, uncompromising moral principles and strength of | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ |
| Director Tenure, Gender, Age and Race/Ethnicity | ||||||||||||||||||||||
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| Board Tenure | ||||||||||||||||||||||
| Years | 4 | 19 | 12 | 12 | 2 | 19 | 1 | 12 | 8 | 31 | 0 | |||||||||||
| Gender | ||||||||||||||||||||||
| Male | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||
| Female | ✓ | ✓ | ||||||||||||||||||||
| Age | ||||||||||||||||||||||
| Years Old | 59 | 67 | 67 | 65 | 50 | 63 | 48 | 67 | 56 | 65 | 47 | |||||||||||
| Race/Ethnicity | ||||||||||||||||||||||
| African American/Black | ✓ | ✓ | ||||||||||||||||||||
| Asian, Hawaiian, or Pacific Islander | ||||||||||||||||||||||
| Caucasian /White | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||
| Hispanic/Latino | ✓ | |||||||||||||||||||||
| Native American | ||||||||||||||||||||||
| Other | ||||||||||||||||||||||
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The Board believes that a fully engaged Board is a strategic asset of the Company, and fresh viewpoints and perspectives are important for informed decision-making. At the same time, the Company believes that directors develop a deeper understanding of the Company over time, which provides significant shareholder value, and that year-over-year director continuity is beneficial to shareholders.
Even before Board vacancies arise, the Board periodically evaluates whether its Directors collectively has the right mix of skills, experience, attributes and diverse viewpoints necessary for it to be a good steward for the Company's shareholders. The results of these evaluations are used to identify desirable skill sets for potential Board nominees and to screen director candidates. In 2017, the Board codified this practice into the Board Affairs and Nominating Committee's charter.
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Informed on company issues related to ESG while monitoring emerging issues potentially affecting the reputation of the business |
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✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ |
Also part of the planning for Board refreshment and director succession, the Board Affairs and Nominating Committee periodically considers potential director candidates. As a result of these ongoing reviews, in the last four years, the Board appointed four new directors.
The Board previously disclosed its membership expectations in the Company's Criteria for Membership on the Board of Directors (the Criteria). The Board's Criteria list the various factors that the Board Affairs and Nominating Committee should consider in reviewing candidates for the Board. For example, the Criteria insures turnover by generally prescribing a retirement age of 72 for non-employee director candidates. Within the last two years, two of our Directors did not stand for re-election based on retirement age. Separately, a third Director, the Company's former Chairman, retired in October 2017.
Age | 0-50 | 51-59 | 60+ | |||
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Number of Directors | 3 | 2 | 6 |
The Board believes that it has the appropriate mix of relatively new directors and those with longer service to and financial interest in the Company. One longstanding director, Mr. Slavik, is the beneficial owner of approximately 6.6% of the Company's shares as of March 5, 2018. Mr. Slavik's beneficial ownership of Company shares pre-dates Grainger's initial public offering in 1967.
As a group, the average tenure of the 2018 nominees for election to Grainger's Board of Directors is approximately 11 years, with 40% of the non-employee nominees having Board tenure of less than five years.See Board Qualifications, Attributes, Skills and Background / pages 3-4 of this proxy statement for a matrix reflecting tenure for each nominee.
Years of Service | 0-5 | 6-10 | 10+ | |||
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Number of Directors | 4 | 1 | 6 |
In addition to relevant business experience, qualifications, attributes, skills, and the willingness to become involved with Grainger, the Board's Criteria also enumerate personal characteristics that the Board should consider, including reputation for ethics and integrity, common sense and judgment, independent and objective thought, and the consideration of diverse opinions.
Regarding diversity, the Criteria specify that consideration shall be given to candidates without regard to race, color, religion, gender or national origin. To ensure that the Board benefits from diverse perspectives, it proactively seeks qualified nominees from a variety of backgrounds, including candidates of gender, age, and racial diversity. In any retained search for Board candidates, Grainger specifies that the Board is seeking candidates with gender and racial diversity. We have established a standing relationship with a nationally recognized third party search firm to assist us in identifying potential new directors. In all searches, we specify that we will entertain a slate that includes only gender and racially diverse candidates. Our Board's diversity is set forth, below.
Gender | Female | Male | ||
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Number of Directors | 2 | 9 |
Race/Ethnicity | | African American/Black | | Caucasian / White | | Hispanic/Latino | | Other | |||||
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Number of Directors | 2 | 8 | 1 | — |
Proxy Statement 57
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| Director Nominee Qualifications, Attributes and Skills | | | | | | | | | | | | | | |||||||||||||
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| Director Nominee Tenure, Gender, Age and Race/Ethnicity | | | | | | | | | | | | | | |||||||||||||
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| Years | | 7 | | 22 | | 15 | | 0 | | 15 | | 4 | | 22 | | 4 | | 15 | | 11 | | 1 | | 3 | | <1 |
| Gender | | | | | | | | | | | | | | |||||||||||||
| Male | | ✓ | | ✓ | | | | ✓ | | ✓ | | ✓ | | | ✓ | | ✓ | | | ✓ | | ✓ | ||||
| Female | | | | ✓ | | ✓ | | | | | ✓ | | | | ✓ | | | |||||||||
| Age | | | | | | | | | | | | | | |||||||||||||
| Years Old | | 62 | | 70 | | 70 | | 44 | | 68 | | 53 | | 66 | | 51 | | 70 | | 59 | | 52 | | 50 | | 60 |
| Race/Ethnicity | | | | | | | | | | | | | | |||||||||||||
| African American/Black | | ✓ | | ✓ | | | | | | | | | | | | ✓ | ||||||||||
| Asian, Hawaiian, or Pacific Islander | | | | | | | | | | | | | | |||||||||||||
| Caucasian /White | | | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | | ✓ | | ✓ | | ✓ | | ✓ | | ||||
| Hispanic/Latino | | | | | | | | | ✓ | | | | | | ||||||||||||
| Native American | | | | | | | | | | | | | | |||||||||||||
| Other | | | | | | | | | | | | | | |||||||||||||
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Grainger's directors are elected each year at the annual meetingThe following age, Board tenure, gender and race/ethnicity information of shareholders. As set forth in the Operating Principles for the Board nominees is current as of Directors, Grainger expects all directors and nominees to attend annual meetings. At the 2017 annual meeting, all of the persons serving as directors at the time were in attendance. In addition, during 2017, all directors attended at least 75% of Board and Committee meetings.March 18, 2021:
Eleven directors, all current Board members, have been nominated by the Board for election at this year's annual meeting of shareholders. All directors are elected for a one-year term. Each director will, therefore, serve until the 2019 annual meeting of shareholders.
As required under Illinois law, majority voting and cumulative voting apply to all Grainger director elections. Under our majority voting standard, directors are elected by the votes of a majority of the shares of Grainger common stock represented in person or by proxy at the meeting and entitled to vote. Under cumulative voting, shareholders have the right to cumulate their votes in the election of directors. This means that you have a number of votes in the election equal to the number of shares you own multiplied by the number of directors being elected. You can cast those votes for the nominees as you choose. For example, you may cast all your votes for one nominee or you may apportion your votes among two or more nominees. In any matter other than the election of directors, each of your shares is entitled to one vote.
A shareholder directing to withhold authority for re-election of a director will have the same effect as votes against the election of that director. Assuming a quorum is present, broker non-votes will not affect the outcome of the vote. If any of the nominees for director mentioned below should be unavailable for election, a circumstance that is not expected, the person or persons voting your proxy may exercise discretion to vote for a substitute nominee selected by the Board.
CANDIDATES FOR BOARD MEMBERSHIPBoard Refreshment Process
The Board Affairs and Nominating Committee (the Committee) recommends to thebelieves that a fully engaged Board candidates for Board and committee membership.
Before recommending candidates to the Board, the Committee reviews the resultsis a strategic asset of the Company, and fresh viewpoints and perspectives are important for informed decision-making. At the same time, the Company believes that Directors develop a deeper understanding of the Company over time, which provides significant shareholder value, and that year-over-year Director continuity is beneficial to shareholders.
The Board evaluation processplans for vacancies well before they arise and periodically evaluates whether its skills matrix in determining the desired skill set for potential new candidates. The Committee then determines the position description for potential Board nominees by periodically evaluating whether the Board membersDirectors collectively have the right mix of experience, qualifications, attributes, skills, experience, attributesbackgrounds and diverse viewpoints necessary for the Boardit to be a good steward for the Company's shareholders.
The results of these evaluations are used to identify desirable skill sets for potential Board nominees and to screen Director candidates. The Board codified this skills matrix evaluation practice into the charter of the Board Affairs and Nominating Committee screensof the Board candidates based on a number of criteria, including ethical standards, judgment, independence and objectivity, strategic perspective, record of accomplishment, business knowledge, experience applicable to Grainger's goals, and diversity.
The Committee is assisted with its recruitment efforts by a nationally recognized third party search firm, which helps identify candidates that satisfy the Board's criteria. In addition to Board candidates(the BANC) in 2017.
68 www.grainger.com
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In planning for Board refreshment and Director succession, the BANC periodically considers potential Director candidates. As a result of these ongoing reviews, in the last four years, four new independent Directors have been elected.
The Board has established principles for selecting directors in the Company's Criteria for Membership on the Board of Directors (the Criteria). The Criteria list the various factors that the BANC should consider in reviewing candidates for the Board. For example, the Criteria ensures turnover by generally prescribing a retirement age of 72 for non-employee Director candidates. Within the last five years, two of our Directors did not stand for re-election based on retirement age.
As a group, the average Board tenure of the 2021 nominees for election to Grainger's Board of Directors is approximately nine years, with 46% of the non-employee nominees having tenure of less than five years. See Board Qualifications, Attributes, Skills and Background / pages 5-8 of this proxy statement for a matrix reflecting tenure for each nominee.
In addition to stating the desired relevant business experience, qualifications, attributes and skills for Directors, the Board's Criteria also enumerate personal characteristics that should be considered, including reputation for ethics and integrity, common sense and judgment, independent and objective thought, and respect for diverse opinions.
Regarding diversity, the Criteria specify that consideration will be given to candidates without regard to race, color, religion, gender or national origin. To ensure that the Board benefits from diverse perspectives, it proactively seeks qualified nominees from a variety of backgrounds, including candidates of gender, age, and racial diversity. We have established a long-standing relationship with Russell Reynolds Associates, Inc., a nationally recognized third-party search firm, that has assisted us over the years in identifying potential new Directors. In any retained search for Board candidates, the Board seeks candidates with gender and racial diversity and will only consider and interview slates that include both gender and racially diverse candidates.
ATTENDANCE OF DIRECTORS AT MEETINGS
As set forth in the Operating Principles, Grainger expects all Directors to attend the annual meeting of shareholders, Board and Committee meetings, and to spend the time needed to properly discharge their duties. All Directors attended the 2020 virtual annual meeting. In addition, during 2020, no Director attended fewer than 75% of the total number of meetings of the Board and of the Committees on which he or she served.
Grainger's Directors are elected for a one-year term each year at the annual meeting of shareholders. Thirteen Director nominees, 12 current Board members and the New Nominee, have been nominated by the Board for election. Each nominee will, therefore, serve until the 2022 annual meeting of shareholders if elected.
As required under Illinois law, majority voting and cumulative voting apply to all Director elections. Under our majority voting standard, Directors are elected by vote of a majority of the shares of
Proxy Statement 9
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| | | Corporate Governance |
Grainger common stock present or represented by proxy and entitled to vote at the annual meeting. Under cumulative voting, shareholders have the right to cumulate their votes in the election of Directors. This means that shareholders have a number of votes in the election equal to the number of shares owned multiplied by the number of Directors being elected. Shareholders may cast those votes for the nominees as they choose. For example, all votes may be cast for one nominee, or may be apportioned among two or more nominees. For all other matters beside the election of Directors, each share is entitled to one vote.
A shareholder directing to withhold authority for re-election of a Director will have the same effect as votes against the election of that Director. Assuming a quorum is present, broker non-votes will not affect the outcome of the vote. If any of the nominees for Director mentioned below should be unavailable for election, a circumstance that is not expected, the person or persons voting your proxy may exercise discretion to vote for a substitute nominee selected by the Board.
CANDIDATES FOR BOARD MEMBERSHIP
The BANC recommends to the Board candidates for Board membership.
Before recommending candidates to the Board, the BANC reviews the results of the annual Board evaluation process and its skills matrix in determining the desired skill set for potential new candidates. The BANC then determines the preferred qualities and characteristics for potential Board nominees by periodically evaluating whether the Board members collectively have the right mix of experience, qualifications, attributes, skills, backgrounds and diverse viewpoints necessary for the Board to be a good steward for the Company's shareholders.
The BANC screens Board candidates based on a number of criteria, including ethical standards, judgment, independence and objectivity, strategic perspective, record of accomplishment, business knowledge, experience applicable to Grainger's goals, and diversity.
The BANC is assisted with its evaluation, recruitment and screening efforts by our nationally recognized third-party search firm, which helps identify candidates that satisfy the Board's criteria. In addition to Board candidates recommended by the Committee,BANC, suggestions as to nominees are received from employees, search firms, shareholders, and others.
10 www.grainger.com
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The proxy access provisions of our By-laws permit a qualifying shareholder or group of up to 20 qualifying shareholders who have maintained continuous qualifying ownership of 3% or more of our outstanding common stock for at least the previous three years to nominate and include in our proxy materials qualifying directorDirector nominees constituting up to the greater of two directorsDirectors or 20% of the directorsDirectors then serving on the Board at the time of the nomination, providedpresuming that the shareholder(s) and nominee(s) satisfy the requirements specified in our By-laws.
Any shareholder who would like the CommitteeBANC to consider a candidate for Board membership should send a letter of recommendation containing the name and address of the proposing shareholder and of the proposed candidate and setting forth the business, professional and educational background of the proposed candidate, as well as a description of any agreement or relationship between the proposing shareholder and proposed candidate. A written consent of the proposed candidate to be identified as a nominee and to serve as a directorDirector if elected must also be provided. The communication should be sent by mail or other delivery service to the attention of the Corporate Secretary at Grainger's headquarters.See Questions and Answers / pages 84-88 of this proxy statement for more information.
NOMINEES AND DIRECTOR NOMINEES' EXPERIENCE AND QUALIFICATIONS
The nominees have provided the following information about themselves, including their ages as of March 15, 2018. Each nominee has provided information on18, 2021, and his or her relevant background, that includes the nominee'sincluding experience for at least the past five years.
Grainger's directors and nominees have varied experience, qualifications, attributes, skills, and backgrounds that assist them in providing guidance and oversight to Grainger's management as it operates the business through a network of highly integrated websites, distribution centers and branches with nearly 25,000 employees primarily in the United States and Canada, and with a presence in Europe, Asia, and Latin America. Businesses and institutions worldwide rely on our Company, a broad line distributor of maintenance, repair and operating (MRO) supplies and other related products and services, with 2017 sales of $10.4 billion, to keep their operations running and their people safe.management.
The Board has identified experience, qualifications, attributes, skills, and backgrounds that, in light of Grainger's business, structure and challenges, are relevant to service on the Board of Directors. The Board considers nominees who have demonstrated integrity and accomplishment in their business and professional careers and who possess the necessary experience and background to contribute to the Board and Grainger. In addition, the nominees have engaged in continuing education and other programs to remain current in their particular areas of expertise, to further their understanding of corporate governance, and in other matters relevant to Grainger.
Proxy Statement 7
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The Board believes each of the current nominees qualifies for service on the Board of Directors. Moreover, each of the current nominees has significant leadership experience in large, multifaceted organizations. This leadership experience includes developing and executing corporate strategy, overseeing operations, and managing risks in organizations similar in size or complexity to Grainger.
The summaries provided below are not a comprehensive statement of each nominee's background, but are provided to describe the primary experience, qualifications, attributes, skills, and background that led the Board to nominate each individual.
8Proxy Statement 11
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| Rodney C. Adkins Former Senior Vice President of IBM; President of 3RAM Group LLC
Independent Director Age: 62 Years on Grainger's Board: 6 Director Since: 2014 Grainger Board Committees: BANC Chair, CCOB | | Qualifications, Attributes and Skills • Operational/Strategy • Supply Chain/Logistics • Marketing/Sales & Brand Management • International • Real Estate • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Government/Public Policy • Digital/eCommerce • Technology/Cybersecurity • Human Resources/Compensation • Business Ethics • Environmental, Social and Governance (ESG) Other Current Public Company Boards • Avnet, Inc. (Chairman of the Board; compensation committee; corporate governance committee) • PayPal Holdings, Inc. (audit committee; risk and compliance committee; corporate governance and nominating committee) • United Parcel Service, Inc. (Chair, risk committee; compensation committee) Prior Public Company Boards • PPL Corporation (2014-2019) (audit committee; finance committee) • Pitney Bowes Inc. (2007-2013) (audit committee; executive compensation committee) Business and Other Experience • 3RAM Group LLC (2015-present), a privately held company specializing in capital investments, business consulting services and property management, where Mr. Adkins serves as President. • International Business Machines Corporation (IBM), a globally integrated technology and consulting company, where Mr. Adkins held numerous development and management roles, including Senior Vice President of Corporate Strategy (2013-2014); Senior Vice President of Systems and Technology Group (2009-2013); Senior Vice President of Development & Manufacturing (2007-2009); and Vice President of Development of IBM Systems and Technology Group (2003-2007). Mr. Adkins served as a Senior Vice President at IBM, where he held various senior roles, including heading Corporate Strategy. Over the course of his 30-year career with IBM, he developed a broad range of experience, including extensive experience in emerging technologies, global business operations, product development, and brand management. He also gained significant experience managing and understanding corporate finance, financial statements and accounting through his many operational roles with IBM. Additionally, Mr. Adkins managed IBM's supply chain and procurement, giving him direct insight into global trade and supply chains, and the role of distributors in those efforts. Mr. Adkins has extensive experience in corporate governance matters, is a recognized leader in technology and technology strategy, and serves as a director of other publicly traded companies with additional responsibilities, including one board chairmanship, and two compensation committee and one audit committee assignments. | ||||||
12 www.grainger.com
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| Brian P. Anderson Former Chief Financial Officer of OfficeMax Incorporated and Baxter International Inc.
Independent Director Age: 70 Years on Grainger's Board: 22 Director Since: 1999 Grainger Board Committees: Audit BANC | | |
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Independent DirectorAge: 59Director Since: 2014Grainger Board Committees:BANCCCOB
President of 3RAM Group LLC, a privately held company specializing in capital investments, business consulting services and property management
| Operational/Strategy • Supply Chain/Logistics • Real Estate • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Human Resources/Compensation • Business Ethics • Environmental, Social and Governance (ESG) Other Current Public Company Boards |
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• A.M. Castle & Co. (2005-2016) (Chairman of the Board; Chair, audit committee) • James Hardie Industries plc (2006-2020) (Chair, audit committee; remuneration committee)
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• OfficeMax Incorporated (2004-2005), a distributor of business to business and retail office products, where Mr. Anderson served as Senior Vice President • Baxter International • Deloitte LLP (formerly, Deloitte & |
Mr. As a result, Mr. Anderson has in-depth knowledge of accounting and Mr. |
| V. Ann Hailey Former Executive Vice President and Chief Financial Officer of L Brands, Inc. (formerly, Limited Brands, Inc.)
Independent Director Age: 70 Years on Grainger's Board: 15 Director Since: 2006 Grainger Board Committees: Chair, Audit BANC | | Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Digital/eCommerce • Business Ethics • Environmental, Social and Governance (ESG) Other Current Public Company Boards • Realogy Holdings Corp. (Chair, audit committee; nominating and corporate governance Prior Public Company Boards • TD Ameritrade Holdings, Inc. (2016-2020) (audit committee; risk committee; outside independent director's committee) • Avon Products, Inc. (2008-2016) (audit committee; finance committee) • L Brands, Inc. (formerly, Limited Brands, Inc.) (2001-2006) Business and Other Experience • Famous Yard Sale, Inc. (2012-2014), an online marketplace, where Ms. Hailey served as President, Chief Executive Officer and Chief Financial Officer. • Gilt Groupe, Inc. (2009-2010), an online shopping and lifestyle company, where Ms. Hailey served as Chief Financial Officer. • L Brands, Inc., a retail apparel, personal care and beauty products company, where Ms. Hailey served as Executive Vice President and Chief Financial Officer (1997-2006); Executive Vice President, Corporate Development (2006-2007); and as a board member (2001-2006). • Federal Reserve Bank of Cleveland (2004-2009) (audit committee) • PepsiCo, Inc. (1977-1990), a global food and beverage company, where Ms. Hailey served in various leadership roles, including Vice President, Headquarters Finance, Pepsi Cola Company; and Vice President, Finance and Chief Financial Officer of Pepsi Cola Fountain Beverage and USA Divisions, as well as holding positions in the marketing and human resources functions. • Pillsbury Company (1994-1997), a manufacturer and marketer of branded consumer foods. • RJR Nabisco Foods, Inc. (1992-1994), a diversified manufacturer of consumer products. Ms. Hailey has spent her career in consumer businesses and brings key financial and operations experience to the Company. In particular, Ms. Hailey possesses broad expertise in finance, strategic planning, branding and marketing, retailing, and sales and distribution on a global scale. Ms. Hailey's positions as chief financial officer, her current and prior service as audit committee chair at other companies and the Cleveland Federal Reserve Bank, and her accounting and financial knowledge provide significant expertise to the Board, including an understanding of financial statements, accounting and internal controls, corporate finance and capital markets. Through her experiences at Gilt Groupe and Famous Yard Sale, Ms. Hailey has experience in internet site development and selling as well as new venture management and funding. Ms. Hailey is an audit committee financial expert for purposes of the SEC's rules. |
Proxy Statement 913
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| Katherine D. Jaspon Chief Financial Officer, Dunkin' & Baskin Robbins at Inspire Brands
Director Nominee Age: 44 Director Since: New Nominee | | |
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Independent DirectorAge: 67Director Since: 1999Grainger Board Committees:AuditBANC
Former Executive Vice President of Finance and Chief Financial Officer of OfficeMax Incorporated, a distributor of business to business and retail office products, having served in that position until January 2005
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• Risk Assessment & Risk Management • Human Resources/Compensation • Business Ethics • Environmental, Social and Governance (ESG)
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• Dunkin' & Baskin Robbins at Inspire Brands, formerly known as Dunkin' Brands Group, Inc. (2005-present), a quick service restaurant franchisor (Dunkin' Brands), where Ms. Jaspon has held various roles, including Senior Vice President, Chief Financial Officer (2017-present), Vice President, Finance and Treasury (2014-2017), Vice President, Controller and Corporate Treasurer (2010-2014), and Director, Assistant Controller (2005-2010). In December 2020, Dunkin' Brands was acquired by Inspire Brands. • KPMG LLP (1997-2005), a global audit, tax and advisory services firm, where Ms. Jaspon held various roles, including Senior Manager. Ms. Jaspon is currently the Chief Financial Officer of |
Ms. Jaspon is a certified public accountant and |
| Stuart L. Levenick Former Group President of Caterpillar Inc.
Independent Director Lead Director Age: 68 Years on Grainger's Board: 15 Director Since: 2005 Lead Director Since: 2014 Grainger Board Committees: Audit Chair, BANC | | |
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Independent DirectorAge: 67Director Since: 2006Grainger Board Committees:AuditBANC
Former Executive Vice President and Chief Financial Officer of L Brands, Inc. (formerly, Limited Brands, Inc.) (1997-2006), a retail apparel, personal care and beauty products company
| Operational/Strategy • Supply Chain/Logistics • Marketing/Sales & Brand Management • International • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Government/Public Policy • Digital/eCommerce • Human Resources/Compensation • Business Ethics • Environmental, Social and Governance (ESG) Other Current Public Company Boards |
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1014 www.grainger.com
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| D.G. Macpherson Chairman of the Board and Chief Executive Officer of W.W. Grainger, Inc.
Chairman of the Board Age: 53 Years on Grainger's Board: 4 Director Since: 2016 | | |
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Retired Group President of Caterpillar Inc., a manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines
| Operational/Strategy • Supply Chain/Logistics • Marketing/Sales & Brand Management • International • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Government/Public Policy • Digital/eCommerce • Technology/Cybersecurity • Human Resources/Compensation • Business Ethics • Environmental, Social and Governance (ESG) Other Current Public Company Boards |
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Chairman of the BoardAge: 50Director Since: 2016
Chairman (2017-present) and Chief Executive Officer (2016-present) of W.W. Grainger, Inc.
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• The Boston Consulting Group, Partner and Managing Director (2002-2008). |
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| Neil S. Novich Former Chairman of the Board, President and Chief Executive Officer of Ryerson Inc.
Independent Director Age: 66 Years on Grainger's Board: 22 Director Since: 1999 Grainger Board Committees: Audit BANC | | Qualifications, Attributes and Skills • Operational/Strategy • Supply Chain/Logistics • Marketing/Sales & Brand Management • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Technology/Cybersecurity • Human Resources/Compensation • Business Ethics • Environmental, Social and Governance (ESG) Other Current Public Company Boards • Beacon Roofing Supply, Inc. (Chair, compensation committee; former Chair, audit committee) • Hillenbrand, Inc. (Chair, audit committee; mergers and acquisitions committee; nominating and corporate governance committee; former Chair, compensation committee) Prior Public Company Boards • Analog Devices, Inc. (2008-2020) (audit committee; former Chair, compensation committee) • Ryerson Inc., Chairman of the Board (1999-2007) Business and Other Experience • Ryerson, Inc. (1994-2007), a global metal distributor and fabricator, where Mr. Novich joined in 1994 as Chief Operating Officer, was named President and CEO in 1996, and was additionally appointed Chairman in 1999. He remained Chairman and CEO until 2007, when the company was sold. • Bain & Company (1981-1994), an international management consulting firm, where Mr. Novich spent several years as a partner and led the firm's Distribution and Logistics Practice. Mr. Novich served as the Chairman of the Board, President and Chief Executive Officer of a global public company where he was deeply engaged in its distribution operations on a domestic and international basis, and also on leadership development and human resources functions. He also spent 13 years with a major management consulting firm, where he was a partner and led the firm's Distribution and Logistics Practice. As a result, Mr. Novich has in-depth operational experience in supply chain, distribution and logistics and experience in developing strategy across a variety of industries. Mr. Novich also has extensive experience in corporate governance matters and serves as a director of other publicly traded companies with additional responsibilities, including one audit committee chairmanship, one compensation committee chairmanship, and service on various board committees. Mr. Novich is an audit committee financial expert for purposes of the SEC's rules. Mr. Novich is a trustee of the Field Museum of Natural History and a Member of the Dean's Council to the Physical Sciences Division of the University of Chicago. |
Proxy Statement 1115
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| Beatriz R. Perez Senior Vice President and Chief Communications, Sustainability and Strategic Partnerships Officer of The Coca-Cola Company
Independent Director Age: 51 Years on Grainger's Board: 4 Director Since: 2017 Grainger Board Committees: BANC CCOB | | |
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Independent DirectorAge: 63Director Since: 1999Grainger Board Committees:AuditBANC
Former Chairman, President and Chief Executive Officer of Ryerson Inc. (1996-2007), a public multinational metal distributor and fabricator
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Independent DirectorAge: 48Director Since: 2017 Grainger Board Committees:BANCCCOB
Senior Vice President and Chief Public Affairs, Communications and Sustainability Officer of The Coca-Cola Company (March 2017-present), a global beverage company
Primerica, Inc. (compensation committee) |
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Ms. Perez is a Ms. Perez also has experience in corporate governance matters and serves as a director of another publicly traded company, with additional responsibilities, including a compensation committee assignment. Ms. Perez is a strong advocate for community service, serving on various non-profit boards, including The Coca-Cola Foundation. |
| Michael J. Roberts Former Global President and Chief Operating Officer of McDonald's Corporation; Chief Executive Officer and founder of Westside Holdings LLC
Independent Director Age: 70 Years on Grainger's Board: 15 Director Since: 2006 Grainger Board Committees: BANC CCOB | | Qualifications, Attributes and Skills • Operational/Strategy • Supply Chain/Logistics • Marketing/Sales & Brand Management • International • Real Estate • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company Experience • Government/Public Policy • Human Resources/Compensation • Business Ethics • Environmental, Social and Governance (ESG) Other Current Public Company Boards • CenturyLink, Inc. (human resources and compensation committee; nominating and corporate governance committee) Prior Public Company Boards • SP Plus Corporation (formerly, Standard Parking Corporation) (2010-2013) (audit committee; compensation committee; executive committee) • Qwest Communications International, Inc. (prior to its acquisition by CenturyLink) (2009-2011) (compensation and human resources committee) Business and Other Experience • Westside Holdings LLC (2006-present), a marketing and brand development company, where Mr. Roberts is Chief Executive Officer and founder. • McDonald's Corporation (1997-2006), a global food service retailer, where Mr. Roberts held numerous leadership roles, including President and Chief Operating Officer (2004-2006); Chief Executive Officer, McDonald's USA (2004); President, McDonald's USA (2001-2004); and President, West Division, McDonald's USA (1997-2001). Mr. Roberts served as President and Chief Operating Officer of McDonald's Corporation, a public, multinational corporation. In his nearly 30 years with the company, he held key executive roles, including President and Chief Executive Officer of McDonald's USA. In these capacities, he acquired extensive management, and profit and loss responsibilities. He was also responsible for marketing and branding experience, and the international operations of the company. In addition, Mr. Roberts has significant experience in human resources and corporate governance matters and serves as a director of another publicly traded company with additional responsibilities, including service on the human resources and compensation committee. |
1216 www.grainger.com
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| E. Scott Santi Chairman and Chief Executive Officer of Illinois Tool Works Inc.
Independent Director Age: 59 Years on Grainger's Board: 11 Director Since: 2010 Grainger Board Committees: Audit BANC | | |
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Independent DirectorAge: 67Director Since: 2006Grainger Board Committees:BANCChair, CCOB
Former Global President and Chief Operating Officer of McDonald's Corporation (2004-2006), a public multinational food service company
| Operational/Strategy • Marketing/Sales & Brand Management • International • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Government/Public Policy • Technology/Cybersecurity • Human Resources/Compensation • Business Ethics • Environmental, Social and Governance (ESG) Other Current Public Company Boards |
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Independent DirectorAge: 56Director Since: 2010Grainger Board Committees:Chair, AuditBANC
Chairman (2015-present) and Chief Executive Officer (2012-present) of Illinois Tool Works Inc. (ITW), a worldwide manufacturer of engineered components and systems
Illinois Tool Works Inc. |
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Mr. Santi is the Chairman and Chief Executive Officer of ITW, a global public company. In the course of his more than 30 years with ITW, he has served in various management roles for ITW including positions requiring significant operational and financial responsibility. During his tenure he has had extensive international responsibility including operating responsibility for a business with annual international revenues of several billion dollars. Mr. Santi has significant experience with mergers and acquisitions and |
| Susan Slavik Williams President, Four Palms Ventures; Director, Mark IV Capital, Inc.; President, The Donald Slavik Family Foundation
Independent Director Age: 52 Years on Grainger's Board: 11 Director Since: 2020 Grainger Board Committees: BANC CCOB | | Qualifications, Attributes and Skills • Operational/Strategy • Marketing/Sales & Brand Management • Real Estate • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Human Resources/Compensation • Business Ethics • Environmental, Social and Governance (ESG) Business and Other Experience • Four Palms Ventures, a venture capital firm founded by Ms. Slavik Williams focused on investing in early stage agtech and other technology companies, where Ms. Slavik Williams serves as President (2019-present). • The Donald Slavik Family Foundation, a nonprofit organization supporting programs that preserve wildlife and the environment, where Ms. Slavik Williams presently serves as President and a member of its Board of Directors (1995-present). • Mark IV Capital, Inc., a private commercial real estate development and investment company, where Ms. Slavik Williams serves on its Board of Directors and presently chairs its compensation committee (1989-present). • Ernst & Young Consulting (now Capgemini), a global consulting and technology services company, where Ms. Slavik Williams was a Manager (1994-1998). Ms. Slavik Williams is a private investor who has been a long-term significant shareholder of the Company as well as an entrepreneur and environmentalist. She has expansive knowledge in investments, financing, and real estate, including as a result of her 30 years of service on the board of directors of Mark IV Capital, Inc., where she presently chairs the compensation committee. She also has a deep understanding of environmental and social matters, working for 25 years as President and member of the board of directors of a foundation focused on wildlife preservation in the United States, Africa, South America, and Asia. Since 2017, Ms. Slavik Williams has served as a member of the board of directors of iSelect Fund, a venture capital investment firm. For 12 years, Ms. Slavik Williams was a director of the Saint Louis Zoo and currently serves on the conservation committee of its strategic planning group. As a longstanding significant shareholder of the Company, she possesses extensive knowledge of the Company's business, organization, and culture. |
Proxy Statement 1317
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| Lucas E. Watson Senior Vice President, Go To Market at Cruise LLC
Independent Director Age: 50 Years on Grainger's Board: 3 Director Since: 2017 Grainger Board Committees: BANC CCOB | | |
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Independent DirectorAge: 65Director Since: 1987Grainger Board Committees:BANCCCOB
Chairman and a director of Mark IV Capital, Inc. (2003-present), a private commercial real estate development and investment company; in addition, he serves as Chief Executive Officer and President of Emerald Bay Ventures II, LLC, a private investment company which invests in real estate and venture capital
• Supply Chain/Logistics • Marketing/Sales & Brand Management • International • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company |
• Government/Public Policy • Digital/eCommerce • Technology/Cybersecurity • Business Ethics • Environmental, Social and Governance (ESG)
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Executive Vice President and Chief Marketing and Sales Officer of Intuit, Inc. (2016-present), a global provider of business and financial management solutions
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Mr. Watson is currently Senior Vice President, Go To Market at Cruise LLC, an autonomous vehicle technology company owned by General Motors company. Previously, he served as Executive Vice President and Chief Marketing and Sales Officer at Intuit, where he |
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BOARD MEETINGS AND COMMITTEE MEMBERSHIP
The Company's Operating Principles for the Board of Directors (the Operating Principles) provide for the Board's Committees and the process for selecting Committee leadership. The Board Affairs and Nominating Committees' recommendations are considered by the Board following each annual meeting of shareholders. The Committees are appointed by the Board based on recommendations of the Board Affairs and Nominating Committee. As required by each Committee's charter, all members of each Committee must be "independent" directors.
Five meetings of the Board were held in 2017. Committee members have the opportunity to meet in closed session, without management present, during each Committee meeting. Accordingly, each Board meeting included at least one executive session, during which only independent directors were present. The Committees report regularly to the full Board on their activities and actions.
The Board has delegated certain responsibilities and authority to its standing Committees, as described below.
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Each Committee has a charter that it reviews annually and then makes recommendations to our Board for charter revisions that may be needed to reflect evolving best practices.Copies of each Committee charter may be found in the Governance section of our website athttp://www.grainger.com/investor.
Proxy Statement 15
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The Audit Committee of the Board (the Audit Committee) met five times in 2017. The Board has determined that each of the members of the Audit Committee is "independent," as that term is defined in the independence requirements for audit committee members contained in the applicable rules of the U.S. Securities and Exchange Commission (the SEC) and in the listing standards of the NYSE. The Board has determined that each of Mr. Santi, Mr. Anderson, Mr. Novich, and Ms. Hailey is an "audit committee financial expert," as that term is defined in the applicable rules of the SEC. Further, in accordance with applicable NYSE listing standards, the Board has considered Mr. Anderson's simultaneous service on the audit committees of more than three public companies, namely the audit committees of Grainger, PulteGroup Inc., James Hardie Industries plc, and Stericycle, Inc., and has determined that this service will not impair his ability to serve effectively on the Company's Audit Committee.
The Audit Committee assists the Board in its oversight responsibility with respect to the following:
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| Steven A. White
Independent Director Age: 60 Years on Grainger's Board: <1 Director Since: 2020 Grainger Board Committees: BANC CCOB | | • Operational/Strategy • Supply Chain/Logistics • Marketing/Sales & Brand Management • Real Estate • Finance/Capital Allocation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Government/Public Policy • Digital/eCommerce • Technology/Cybersecurity • Human Resources/Compensation • Business Ethics • Environmental, Social and Governance (ESG) Other Current Public Company Boards • Hormel Foods Corporation (compensation committee; governance committee) • Shaw Communications Inc. (human resources and compensation committee) Business and Other Experience • Comcast Corporation, a global media and technology company, where prior to assuming his current position in December 2020, Mr. White held various roles, including President, Comcast West Division (2009-2020), Regional Senior Vice President, Comcast California (2007-2009), and Regional Senior Vice President, Comcast Mid-South Region (2002-2007). • AT&T Broadband, LLC, a leading provider of •
• Colgate-Palmolive Company, a global consumer products company, where Mr. White held various marketing positions (1991 to 1997). Mr. White brings over 30 years of experience in eCommerce, sales, marketing, operations, and general management across multiple industries. Now in his 18th year at Comcast Corporation, a global public company, Mr. White has served in various senior management roles with significant operating and financial responsibility over a number of states, thousands of employees, millions of customers, and billions of dollars in revenue. Before his current role as President, Special Counsel to the CEO, Comcast Cable, Mr. White most recently served for 11 years as President, Comcast West. In that capacity, he was responsible for all Comcast cable operations in 13 states, leading nearly 28,000 employees, serving more than nine million customers, and driving annual revenue of nearly $17 billion. Prior to that, Mr. White was responsible for Comcast's operations in California. Before joining the cable industry, Mr. White held various positions at Colgate-Palmolive, including Marketing Director of Colgate-Palmolive's Toothbrush Products Division. Mr. White also has experience in corporate governance matters and serves as a director of two other public companies, where he serves on various committees. Mr. White also serves on the board of directors of the Comcast Foundation and is a member of the Executive Leadership Council. |
The Board Affairs and Nominating Committee of the Board (the Board Affairs and Nominating Committee) met five times in 2017. The Board has determined that each of the members of the Board Affairs and Nominating Committee is "independent," as defined in the independence requirements for members of nominating committees contained in the applicable listing standards of the NYSE.
The Board Affairs and Nominating Committee assists the Board in its oversight responsibility as follows:
Proxy Statement 1719
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2020 BOARD MEETINGS AND COMMITTEE MEMBERSHIP
The Operating Principles provide for the Board's Committees and the process for selecting Committee leadership. The BANC's recommendations are considered by the Board following each annual meeting of shareholders. The Committees are appointed by the Board based on recommendations of the BANC. As required by each Committee's charter, all members of each Committee must be "independent" Directors.
Five meetings of the Board were held in 2020. Each Board meeting included at least one executive session, during which only independent Directors were present. In total, 18 Committee meetings were held in 2020. During each Committee meeting, Committee members met in closed session, without management present. The Committees report regularly to the full Board on their activities and actions.
The Board has delegated certain responsibilities and authority to its standing Committees, as described below.
Chair 
Member LD Lead Director FE Audit Committee Financial Expert as defined under SEC rules
Each Committee has a charter that it reviews annually and then makes recommendations to our Board for charter revisions that may be needed to reflect evolving best practices. Copies of each Committee charter are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.
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| Members All Independent
V. Ann Hailey (Chair) Brian P. Anderson Katherine D. Jaspon* Stuart L. Levenick Neil S. Novich E. Scott Santi Oversees the Company's accounting, financial reporting processes and audits of financial statements and internal controls. * Subject to election at the annual meeting, will be appointed to the Audit Committee. | | The Audit Committee of the Board (the Audit Committee) met eight times in 2020. The Board has determined that each of the members of the Audit Committee is "independent," as that term is defined in the independence requirements for audit committee members contained in the applicable rules of the U.S. Securities and Exchange Commission (the SEC) and in the listing standards of the NYSE. The Board has determined that each of the members of the Audit Committee is financially literate and that each of Ms. Hailey, Mr. Anderson, Mr. Novich, and Mr. Santi is an "audit committee financial expert," as that term is defined in the applicable rules of the SEC. The Audit Committee assists the Board in its oversight responsibility with respect to the following: • Grainger's financial reporting process; • Grainger's systems of internal accounting, financial, and disclosure controls; • the integrity of Grainger's financial statements; • Grainger's compliance with legal and regulatory requirements; • Grainger's enterprise risk management systems and processes as to business continuity, cybersecurity, privacy, legal and other risks, other than ESG risks, which are also addressed at the meetings of the Board Affairs and Nominating Committee and the Compensation Committee of the Board; • the qualifications and independence, as well as the appointment, compensation, retention, evaluation, and termination, of Grainger's independent auditor, the resolution of disagreements between management and the independent auditor regarding financial reporting, and the selection of the auditor's lead audit partner; • the performance of Grainger's internal audit function and the independent auditor; • the pre-approval of audit and permissible non-audit services and fees to be provided by the independent auditor; • activities and amendments relative to the Company's ERISA plans that involve the investment of funds, subject to coordination with the Compensation Committee where appropriate; • the establishment of procedures for the receipt, retention, and treatment of complaints regarding accounting, internal accounting controls, and auditing matters; and • compliance with Grainger's Business Conduct Guidelines, including reviews of potential violations communicated through the Company's confidential reporting channels. |
Proxy Statement 21
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BOARD AFFAIRS AND NOMINATING COMMITTEE
| Members All Independent
Stuart L. Levenick (Chair) Rodney C. Adkins Brian P. Anderson V. Ann Hailey Katherine D. Jaspon* Neil S. Novich Beatriz R. Perez Michael J. Roberts E. Scott Santi Susan Slavik Williams Lucas E. WatsonSteven A. White Oversees the Company's corporate governance practices and processes and ESG programs and reporting. * Subject to election at the annual meeting, will be appointed to the Board Affairs and Nominating Committee. | | The Board Affairs and Nominating Committee of the Board (the BANC) met five times in 2020. The Board has determined that each of the members of the BANC is "independent," as defined in the independence requirements for members of nominating committees contained in the applicable NYSE listing standards. The BANC assists the Board in its oversight responsibility as follows: Board Composition and Renewal • makes recommendations to the Board regarding the makeup and size of the Board and the types and functions of its Committees and their initial respective charters; • setablishes specific written criteria by which Director nominees shall be qualified; • periodically evaluates whether the Board members collectively have the right mix of experience, qualifications, attributes, skills, backgrounds and diverse viewpoints necessary for the Board to be a good steward for the Company's shareholders; • determines the preferred qualifications and characteristics for potential Board nominees, which are shared with our third-party search firm; • identifies and screens potential nominees, consistent with the Board-approved criteria; Governance • makes recommendations concerning Director and nominee independence, attendance and performance; • reviews transactions between Grainger and related persons; • evaluates in its annual review the overall performance of the Board and its Committees; • oversees corporate governance, including: o making initial assessments regarding corporate governance issues or proposals, o recommending corporate governance guidelines, including annual review of the Committee charters, the Operating Principles for the Board, and the Criteria for Membership on the Board, o recommending the Lead Director, o recommending Board Committee responsibilities, Committee Chairs, and members, o determining policies regarding rotation of Directors among the Committees, o evaluating the Board's corporate governance, including the adequacy of information supplied to the Board, o evaluating the Board's performance of its oversight responsibilities related to Grainger management, and o recommending retirement, compensation, and other policies applicable to Directors; |
| | Environmental, Social and Governance (ESG) • oversees annually the Company's ESG programs and reporting, including environmental and sustainability, social responsibility to its communities, governance, the Company's culture, talent strategy, and diversity, equity and inclusion, and any related enterprise risk management (ERM) reviews (other than human capital management ERM reviews, which are overseen by the Compensation Committee); | |
| | Succession Planning and Management Development • works with the Compensation Committee to annually review senior management organization, career paths, and succession; and • leads the annual review of management's performance, including the CEO to the extent necessary to supplement the Compensation Committee's review of CEO performance relative to CEO compensation goals and objectives. |
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COMPENSATION COMMITTEE OF THE BOARD
| Members All Independent
Rodney C. Adkins (Chair) Beatriz R. Perez Michael J. Roberts Susan Slavik Williams Lucas E. Watson Steven A. White Oversees the Company's compensation philosophy and compensation and human capital management policies and programs. | | The Compensation Committee of the Board (the Compensation Committee) met five times in 2020. The Board has determined that each member of the Compensation Committee is "independent," as defined in the independence requirements for members of compensation committees in the applicable SEC rules, the NYSE listing standards, and under the Internal Revenue Code. The Compensation Committee assists the Board in its oversight responsibility as follows: • oversees the Company's compensation and benefits to ensure that: o the Board appropriately discharges its responsibilities relating to senior management compensation, o the Company maintains a market competitive compensation structure designed to attract, motivate, develop, and retain key talent, o compensation and benefits policies and practices reflect the highest level of transparency and integrity, o compensation is aligned with shareholder value creation and strategic objectives, o senior management compensation is linked to personal and Company performance and provides appropriate incentives to increase shareholder value, o compensation policies and practices for all employees are designed with appropriate incentives that do not encourage unnecessary or excessive risk taking and are administered in a transparent manner, o the interests of shareholders are protected, and o equity-based plans and incentive plans are appropriately designed and administered, including review and approval of performance measures applicable to short-term and long-term incentive plans; • provides independent oversight of the administration of the Company's shareholder-approved equity plans; • annually reviews and approves CEO compensation, as follows: o reviews and approves corporate goals and objectives relevant to CEO compensation, o evaluates CEO performance in light of those corporate financial goals and objectives, with assistance from the Lead Director and the other Board Committees, as appropriate, and o together with the other independent Directors, determines and approves, in its sole discretion, the CEO's total compensation based on the above evaluation, in executive session without members of management present; • reviews and recommends to the Board for approval the compensation paid to the CEO's direct reports, including the other Named Executive Officers (NEOs); o Members of management (including some NEOs and the CEO's other direct reports) assist the Compensation Committee in providing recommendations for Grainger's NEO compensation program design, and for other officers and employees. Management also recommends salary and award levels for the Committee's review and recommendation, except those related to the CEO; • together with the other independent Directors as directed by the Board, determines, in their sole discretion, the appropriate compensation design and level of CEO compensation in executive session without members of management present; • approves annual grants of equity-based compensation awards (including, restricted stock units (RSUs) and performance stock units (PSUs) to NEOs, other officers and employees under approved shareholder plans; • may delegate to management limited authority to grant "off-cycle" equity-based compensation awards of stock options and RSUs to non-officer employees and to CEO direct reports that are new hires; and, awards under this authority are granted pursuant to terms and conditions approved by the Compensation Committee. Management informs the Compensation Committee of the awarded grants at the Compensation Committee's next meeting. The pool of shares available to management under this delegation is approved annually by the Compensation Committee. The Compensation Committee may terminate this delegation of authority at its discretion; • retains, terminates, and approves the compensation for an independent compensation consultant who reports directly to the Compensation Committee; determines the independence of such independent compensation consultant; and, routinely meets in executive session with the independent compensation consultant, without management present; and • oversees the Company's programs and policies for human capital management and assists the BANC in its oversight of the Company's programs and policies with respect to employee engagement and leadership effectiveness, and any related enterprise risk management reviews. |
Proxy Statement 23
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The Board has strong governance structures and processes in place to ensure the independence of the Board. These structures and processes, which are reflected in the Operating Principles and the Committees' charters, allow for the independent Directors to effectively exercise the Board's authority in overseeing critical matters of strategy, operations, enterprise risk management, and financial reporting.
The Board carefully considers its leadership structure and believes that a combined Chairman/CEO position, coupled with an independent Lead Director appointed by the Board, represents the best leadership structure for Grainger. In the Board's view, having a single individual serving as both the Chairman and CEO assists in the timely flow of relevant information, which supports effective Board decision-making and provides a useful connection between the Board and management so that Board actions are appropriately and efficiently executed.
In deciding that a combined Chairman and CEO position is the appropriate leadership structure for Grainger, the Board also recognized the need for independent leadership and oversight. The Lead Director is responsible for facilitating Board involvement in major issues and/or proposals, ensuring that the Board is addressing major strategic and operational initiatives, reviewing meeting agendas and information to be provided to the Board, consulting with Directors, the CEO and management, and presiding at executive sessions of the Board. With the Lead Director performing these important duties, the Board does not believe that separating the role of the Chairman and CEO would result in strengthening Grainger's corporate governance or in creating or enhancing long-term value for our shareholders.
The duties performed by the independent Directors, either collectively or through Committees comprised solely of independent Directors, include selecting the Chairman and CEO and evaluating his or her performance, and setting his or her compensation.
The Board believes that given Grainger's corporate governance structures and processes, a combined Chairman and CEO position in conjunction with an independent Lead Director provides effective oversight of management by the Board and results in a high level of management accountability to shareholders.
Under Grainger's By-Laws and the Operating Principles, the Lead Director is elected by and from the Board's independent Directors. The current Lead Director, Mr. Stuart L. Levenick, was appointed to
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serve in this capacity after the April 2014 annual meeting of shareholders. Among the duties assigned to the Lead Director is the responsibility for:
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| Executive Sessions | • Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent Directors. • Calling meetings of the independent Directors, if appropriate, to review and approve the types of information sent to the Board. • Leading the Board in | |
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• Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent Directors. • Calling meetings of the independent Directors, if appropriate, to review and approve the types of information sent to the Board. | ||
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| Board and Management Evaluations | • Coordinating with the Board Affairs and Nominating Committee and the applicable Board Committee Chairs the annual self-evaluation of the performance and effectiveness of the Board, its Committees and individual Directors. • Leading the Board in its annual review of the Board's and management's performance, including the CEO, to the extent necessary to supplement the Compensation Committee's review of the CEO's performance relative to applicable compensation goals and objectives. | |
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| Director Search | • Coordinating with the BANC the Director recruitment and interview process. | |
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BOARD, COMMITTEE AND DIRECTOR EVALUATIONS
The Compensation CommitteeBoard recognizes that a rigorous, ongoing evaluation process is an essential component of strong corporate governance practices and promoting continuing Board effectiveness. Each year, the Board (the Compensation Committee) met seven times in 2017. The Board has determined that each member of the Compensation Committee is "independent," as defined in the independence requirements for members of compensation committees in the applicable rules of the SEC, the listing standards of the NYSE, and under the Internal Revenue Code.
The Compensation Committee oversees Grainger's compensation and benefits, policies and programs (generally for all employees and specifically with respect to executives), makes decisions on executive compensation, and reviews and recommends other compensation matters to be submitted to the Board and/or shareholders for approval. The general responsibilities of the Compensation Committee are to oversee that:
The Compensation Committee annually reviews and approves CEO compensation, as follows:
The Compensation Committee also reviews and recommends to the Board for approval the compensation paid to the CEO's direct reports, including the other Named Executive Officers.
In overseeing the Company's compensation programs, the Compensation Committee develops programs based on its own deliberations, programs and recommendations from management, and compensation and benefits consultants, including its independent compensation consultant. After a review of the factors prescribed by the SEC and the NYSE rules and regulations, the Compensation Committee determined that Deloitte Consulting LLP is independent and has retained Deloitte Consulting as its independent compensation consultant.
18Proxy Statement 25
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evaluations are useful and that we are implementing best practices, we routinely review the evaluation process with an external governance expert.
Our historic approach had been to ask each Director to respond to written survey questions on how the Board performs. We had also sought written feedback on more open-ended topics, including Board and Committee processes and effectiveness.
In reviewing our approach to evaluation, including the actions that resulted from past surveys, in 2019 we adopted a new approach designed to facilitate conversation focused on the Board's challenges and opportunities. We made the following changes, which also formed the basis of the 2020 evaluations:
We believe that this open-ended question/interview approach helps elicit thoughtful and useful responses that encourage more valuable conversations and actionable insights. Supplementing the annual surveys is a continuous feedback loop that does not rely solely on a single, formal event at the end of the year.
As before, the results of the evaluations/interviews were compiled anonymously. The Lead Director discussed with the Board the results of the Board evaluations, individual Director self-assessments, and the management leadership team feedback, while the Committee Chairs discussed the results of the
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The independent compensation consultant is solely hired by, and reports directly to, the Compensation Committee. The Compensation Committee routinely meets with the independent compensation consultant in executive session, without management present, following each Compensation Committee meeting. The Compensation Committee has sole authority to retain and terminate the independent compensation consultant, including sole authority to approve the consultant's fees. At the Compensation Committee's direction, the independent compensation consultant:
Members of management (including some of the Named Executive Officers) assist the Compensation Committee in providing recommendations for the design of Grainger's compensation program for its Named Executive Officers, other officers, and employees. Management also recommends salary and award levels, except those related to the Chairman of the Board and Chief Executive Officer. Salaries and awards related to the Chairman of the Board and Chief Executive Officer are reviewed by the Compensation Committee, together with the other independent directors (as directed by the Board), in executive session without members of management present. On issues of Chairman and Chief Executive Officer compensation, the independent directors of the Compensation Committee, in their sole discretion, determine the appropriate compensation design and level.
The Compensation Committee approves annual grants of equity awards (including, stock options, restricted stock units (RSUs), and performance shares) to Named Executive Officers, other officers and employees under approved shareholder plans. Also, the Compensation Committee has delegated to management limited authority to grant "off-cycle" awards of stock options and RSUs to non-officer employees. Awards under this authority are granted under terms and conditions approved by the Compensation Committee. The pool of shares available to management under this delegation is refreshed annually by the Compensation Committee. Management informs the Compensation Committee of the awarded grants at the Compensation Committee's next meeting. The Compensation Committee may terminate this delegation of authority at its discretion.
Proxy Statement 19
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The Board carefully considered its leadership structure and believes that a combined Chairman/CEO position represents the best long-term leadership structure for Grainger. In the Board's view, having a single individual serving as both the Chairman and CEO assists in the timely flow of relevant information, which supports effective Board decision-making and provides a useful connection between the Board and management so that Board actions are appropriately and efficiently executed. The Board's Lead Director structure helps assure these functions are properly and timely performed. The Board does not believe that separating the role of the Chairman and CEO would result in strengthening Grainger's corporate governance or in creating or enhancing long-term value for our shareholders.
The Board has strong governance structures and processes in place to ensure the independence of the Board. These established structures and processes, which are reflected in the Operating Principles for the Board of Directors (the Operating Principles) and the Committee charters, allow for the independent directors to effectively exercise the Board's authority in overseeing critical matters of strategy, operations, enterprise risk management, and financial reporting. Duties specifically performed by the independent directors, either collectively or through committees comprised solely of independent directors, include selecting the Chairman and CEO and evaluating his or her performance and setting his or her compensation. In deciding that a combined Chairman and CEO position is the appropriate long-term leadership structure for Grainger, the Board also recognizes the need for independent leadership and oversight. Since 1995, the Operating Principles provide for a leadership role to the independent director serving as Chair of the Board Affairs and Nominating Committee. Over time, this lead director has been responsible for facilitating Board involvement on major issues and/or proposals, reviewing meeting agenda and information to be provided to the Board, consulting with directors, the CEO, and management and presiding at executive sessions of the Board.
The Board believes that given Grainger's corporate governance structures and processes, a combined Chairman and CEO position in conjunction with an independent Lead Director provides effective oversight of management by the Board and results in a high level of management accountability to shareholders.
In 2010, the Board revised its Operating Principles and By-laws to create the leadership position of Lead Director, to be elected by and from the Board's independent directors. The current Lead Director, Mr. Stuart L. Levenick, was appointed to serve in this capacity after the April 2014 annual meeting of shareholders. Among the duties assigned to the Lead Director is the responsibility for:
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BOARD, COMMITTEE AND DIRECTOR EVALUATIONS
The Board recognizes that a rigorous evaluation process is an essential component of strong corporate governance practices and promoting ongoing Board effectiveness. Each year, the Board conducts a three-part evaluation process coordinated by the Lead Director and the Committee Chairs: full Board evaluation, Committee evaluations and director self-assessment. These evaluations, which are annually reviewed by an external corporate governance expert, ask directors to rate how the Board performs and seek feedback on more open-ended topics, including Board and Committee processes and effectiveness, including for example:
Proxy Statement 21
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The results of the evaluations are compiled anonymously and include responses and comments. The results of the completed Board evaluations and individual director self-assessments are furnished to the Lead Director, while the results of the completed evaluations for the Committees are furnished to the corresponding Committee Chairs, and then discussed at the Board and Committee meetings, respectively.with their respective Committees. Below is an overview of the key steps in the annual evaluation process:
The information gained through this process helps shape the content of educational presentations to the Board as well asand identify the skill sets desirable in directorDirector searches conducted by the Board from time-to-time.
As a result of the Board's 2017 evaluation process and related follow up, the Board identified the need for director candidates with proven track records of strategic thinking and experience in eCommerce. In 2017, a new independent director with experience in each of these areas was added to the Board.
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The Board oversees its management to, among other things, encourage management communication with our shareholders, ensure effective succession planning to maximize long-term corporate performance, evaluate management's performance against its goals, to help management assess long-term strategies for, and oversee risk management processes and policies of, the Company, and to evaluate the Company's commitment to social responsibility.
Board's Role in Shareholder Engagement
The Board believes it is important that the Company's strategy is effectively communicated to its shareholders, and that shareholders' perspectives are understood and consideredtime-to-time by the Board. During 2017, the Board's Lead Director met with a variety of institutional investors to explain the Company's corporate governance practices and policies as part of a corporate governance roadshow.
As part of its oversight role, the Board routinely receives reports and briefings from the Company's Investor Relations team. Grainger has a comprehensive shareholder engagement program. Each November, the Company hosts an annual Analyst Meeting where senior management discusses the Company strategy and expectations for the upcoming year. In 2017, more than 90 investors and analysts attended the event, with more than a hundred participating via webcast.
Throughout 2017, management participated in 10 investor conferences and met with over 410 unique firms and more than 650 unique investors. Our investor outreach includes both existing and potential shareholders, and we aim to meet with a majority of our largest investors each year. Grainger's management met with 64% of our top 25 investors, excluding index and exchange-traded funds, between January and April to discuss their perspectives and feedback.
Succession Planning and Management Development
Our Board recognizes that it has an important duty to ensure senior leadership continuity by overseeing the development of executive talent and planning for the efficient succession of the CEO and other key leadership positions. Our Board has delegated primary oversight responsibility for succession planning and management development to the Board Affairs and Nominating Committee. The Committee reports on its activities to the full Board, which routinely addresses succession planning during executive sessions.
Our Board generally conducts, at least once a year, an in-depth review of senior leader development and succession planning, including emergency succession scenarios. This review addresses the Company's management development initiatives, assesses senior management resources, and identifies individuals who should be considered as potential future senior executives. To ensure that the succession planning and management development process supports and enhances Grainger's strategic objectives, the Board and the Board Affairs and Nominating Committee also regularly consult with the Chairman of the Board and CEO on the Company's organizational needs, the leadership potential and related development plans for key managers, and plans for future development and emergency situations.
Proxy Statement 23
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Board's Role in Risk Oversight
The Board has overall responsibility for risk oversight. Its role is to oversee risk assessment and risk management processes and policies used by Grainger to identify, assess, monitor and address potential financial, compensation, operational, strategic and legal risks on an enterprise-wide basis. The risks monitored include threats to information technology systems and other issues of cyber security. Both the Board and the Audit Committee regularly review Grainger's risk assessment and risk management processes and policies, including receiving regular reports from the Company's Chief Information Security Officer, and the members of Grainger's management who are responsible for risk assessment and risk management on the effectiveness of Grainger's Enterprise Risk Management (ERM) initiatives. As part of its oversight responsibility, the Compensation Committee assesses the relationship between potential risk created by Grainger's compensation programs and their impact on long-term shareholder value.
We will continue to engage with our shareholders on a regular basis to understand their perspectives and, as appropriate, incorporate their feedback on our performance, business strategies, executive compensation programs and corporate governance practices.
Corporate Social Responsibility
Grainger is committed to being a responsible corporate citizen and strives to integrate environmental, social and governance (ESG) principles into the daily operation of its business. Grainger's Corporate Social Responsibility (CSR) platform includes our commitment to operating responsibly, valuing our people, serving our communities and sustaining our environment. These commitments shape our focus on corporate citizenship and fuel our determination to make a positive difference today and in the future. In 2017, we participated in the Dow Jones Sustainability Index and established an emissions intensity target in accordance with the Global Reporting Initiative (GRI). The Board receives routine reports on these and other ESG efforts.Grainger publishes an annual CSR report that is periodically updated and, while it is available on our website athttp://www.GraingerCSR.com, it is not being incorporated by reference into this proxy statement.
OTHER COMMUNICATIONS WITH DIRECTORS
Grainger has established a process by which shareholders and other interested parties may communicate with the Board, its Committees, and/or individual directors on matters of interest. Such communications should be sent in writing to:
[Name(s) of director(s)]or[Non-management directors]or[Board of Directors]W.W. Grainger, Inc.P.O. Box 66Lake Forest, Illinois 60045-0066
If the matter is confidential in nature, please mark the correspondence accordingly.Additional information concerning this process is available in the Governance section of Grainger's website athttp://www.grainger.com/investor.
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All the documents below are available to shareholders are available in the Governance section of Grainger's website atwww.grainger.com/investor or in print, free of charge, upon request to the Corporate Secretary at Grainger's headquarters, 100 Grainger Parkway, Lake Forest, Illinois 60045-5201.
Grainger has adopted Business Conduct Guidelines for directors, officers, and employees, which incorporates the Code of Ethics required by the SEC to apply to a company's chief executive officer, chief financial officer, and chief accounting officer or controller. Our Business Conduct Guidelines are postedin the Governance section on our website athttp://www.grainger.com/investor.
Operating Principles for the Board of Directors
Grainger also has adopted Operating Principles for the Board of Directors, which represent its corporate governance guidelines.The Operating Principles are available in the Governance section of Grainger's website athttp://www.grainger.com/investor.
Available in the Governance section of our website athttp://www.grainger.com/investor, are the charters, as amended from time to time, of the Audit Committee, the Board Affairs and Nominating Committee, and the Compensation Committee, which were adopted by the Board.
Corporate Social Responsibility
Grainger publishes an annual CSR report that is periodically updated and, while it isavailable in the Corporate Social Responsibility section of our website athttp://www.GraingerCSR.com, it is not being incorporated by reference into our proxy statement.
Proxy Statement 25
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Grainger's non-employee directors each receive an annual cash retainer of $85,000 and an annual deferred stock grant of $145,000. Directors serving as Committee Chairs receive an additional annual cash retainer.
Grainger's non-employee directors are compensated at a level that approximates median market practice. In benchmarking director pay, Grainger uses the same compensation comparator group that is used to benchmark compensation for Grainger's executives as described in theCompensation Discussion and Analysis / page 47. The Compensation Committee's independent compensation consultant periodically reviews and updates the comparator group as well as comparative compensation information and advises on director compensation.
The directors' compensation program, which was last adjusted in April 2015, consists of the following:
All non-employee directors receive an annual deferred stock unit grant worth $145,000. The number of shares covered by each grant is equal to $145,000 divided by the 200-day average stock price through January 31 (a methodology consistent with the calculation used for equity awards to Grainger executives), rounded up to the next ten-share increment. The deferred stock units are settled in shares upon termination of service as a director. Directors may defer their annual cash retainers, lead director retainer, committee chair retainers (as applicable), and meeting fees into a deferred stock unit account.
Stock ownership guidelines applicable to non-employee directors were established in 1998. These guidelines provide that within five years after election, a director must own Grainger common stock and common stock equivalents having a value of at least five times the annual cash retainer fee for serving on the Board. The pledging of Company shares by directors or executive officers is prohibited by Company policy (seeHedging and Pledging Prohibition / page 55). No directors have pledged any of the shares beneficially owned by them and all directors are currently in compliance with the ownership guidelines.
Grainger matches directors' charitable contributions on a three-to-one basis up to a maximum Company contribution of $7,500 annually and provides discounts on product purchases, both on the same basis as provided to U.S. Grainger employees.
Mr. Macpherson, who is an employee of Grainger, does not receive any compensation for serving as a director.
26 www.grainger.com
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Name | | Fees Earned or Paid in Cash (1) | | Stock Awards (2) | | All Other Compensation (3) | | Total | | |||||||||||
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Rodney C. Adkins | $85,000 | $123,750 | $7,500 | $216,250 | ||||||||||||||||
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| Brian P. Anderson | | $85,000 | | $123,750 | | $750 | | $209,500 | | ||||||||||
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V. Ann Hailey | $85,000 | $123,750 | $0 | $208,750 | ||||||||||||||||
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| Stuart L. Levenick | | $120,000 | | $123,750 | | $0 | | $243,750 | | ||||||||||
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Neil S. Novich | $85,000 | $123,750 | $7,500 | $216,250 | ||||||||||||||||
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| Beatriz R. Perez (4) | | $63,750 | | $80,102 | | $0 | | $143,852 | | ||||||||||
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Michael J. Roberts | $100,000 | $123,750 | $0 | $223,750 | ||||||||||||||||
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| E. Scott Santi | | $105,000 | | $123,750 | | $7,500 | | $236,250 | | ||||||||||
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James D. Slavik | $85,000 | $123,750 | $7,500 | $216,250 | ||||||||||||||||
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| Lucas E. Watson (5) | | $28,305 | | $49,179 | | $0 | | $77,484 | | ||||||||||
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Proxy Statement 27
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OWNERSHIP OF GRAINGER STOCKActions
Among the actions taken as a result of the 2020 Board evaluation processes were an analysis of the desired skill sets and backgrounds for future directors, changes to Board meeting agenda and content format to create more time for in-depth discussions, alignment around guiding principles to help management implement the Grainger Edge more effectively, and giving the Board greater visibility into ERM deep dives conducted by the Audit Committee in relation to areas of the business that may carry more significant risk.
Security Ownership of Certain Beneficial OwnersBOARD OVERSIGHT
The following table sets forth information, as of December 31, 2017, concerning any person known to Grainger to beneficially own more than 5% of Grainger's common stock, as reported on Schedule 13G or Schedule 13G/A. The informationBoard oversees, counsels, and directs management in the tablelong-term interests of the Company and its shareholders. The Board's oversight responsibilities include:
Board's Role in Shareholder Engagement
The Board believes it is important for the related notes is based on statements filedCompany to maintain active engagement with its shareholders in order to effectively communicate the Company strategy and to ensure that shareholders' perspectives are understood and considered by the respective beneficial owners withBoard. On a regular basis, as part of its oversight role, the SEC pursuant to Sections 13(d)Board routinely receives reports and 13(g) under the Securities Exchange Act of 1934, as amended.
Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership (1) | | Percent of Class | ||||
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BlackRock, Inc. | 3,516,122(2) | 6.2% | ||||||
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James D. Slavik | | 3,669,085(3) | | 6.44% | ||||
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State Street Corporation | 3,401,698(4) | 5.97% | ||||||
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Susan Slavik Williams | | 4,822,643(5) | | 8.5% | ||||
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The Vanguard Group | 5,884,588(6) | 10.32% | ||||||
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Grainger has a comprehensive shareholder engagement program to reach a significant cross-section of Grainger's common stock. No one person's interestour shareholder base, including large institutional investors, pension funds, and other investors. Our CEO, CFO and VP, Investor Relations, and other members of our Investor Relations team, maintain regular contact throughout the year with a broad base of shareholders to understand their concerns on various topics, including financial performance, strategy, competitive environment, and ESG and executive compensation matters.
Contact with shareholders includes quarterly earnings calls, the annual meeting of shareholders, investor conferences, individual meetings and other channels of communication. Consistent with prior years, in 2020, the Grainger common stock is more than five percentCompany proactively reached out to shareholders representing over 53% of the totalcurrent shares outstanding common shares. The Schedule 13G/A certifies that the securities were acquired in the ordinary course of business and notmet with the purpose of changing or influencing the control of Grainger.
28 www.grainger.com
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power,
Succession Planning, Talent and shared dispositive power with respectHuman Capital Management
The Board recognizes that it has an important duty to all 3,401,698ensure senior leadership continuity by overseeing the development of executive talent and planning for the efficient succession of the shares.CEO and other key leadership positions. The Schedule 13G certifiesBoard has delegated primary oversight responsibility for management development and leadership succession planning to the BANC. The BANC reports on its activities to the full Board, which routinely addresses planned succession scenarios and also has developed emergency succession plans reviewed annually.
Recruiting, developing, promoting and retaining top diverse talent is a key priority for the Company. The Board annually reviews our talent strategy to ensure we have the right culture and people to support our strategic imperatives well into the future. This strategy has four pillars:
While the BANC has oversight of the Company's talent strategy, including as to diversity, equity and inclusion, the CCOB has oversight of the Company's programs and policies for human capital management and supports the BANC in its oversight of employee engagement and leadership effectiveness.
Consistent with this framework, the BANC routinely conducts in-depth reviews of senior leader development. This review addresses the Company's management development initiatives, assesses senior management resources, and identifies individuals who should be considered as potential future senior executives. To ensure that the securities were acquired insuccession planning and management development process supports and enhances Grainger's strategic objectives, the ordinary course of businessBoard and notthe BANC also regularly consult with the purposeChairman of changing or influencing the control of Grainger.
To supplement these efforts, throughout the year, the senior management team, as of September 30, 2017 on Grainger's report on Form 10-Q filed on October 26, 2017.
Proxy Statement 29
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current and future leaders gives our Directors meaningful insight into our current pool of talent, what attracts and retains our executives, and the Company's culture.
Board's Role in Risk Oversight
The Board has overall responsibility for risk oversight, with its Committees assisting the Board in performing this function based on their respective areas of expertise. The Board's role is to oversee the Company's enterprise risk management (ERM) programs, including risk assessment and risk management processes and policies used by Grainger to identify, assess, monitor and address potential financial, compensation, operational, strategic and legal risks on an enterprise-wide basis.
The risk landscape associated with the COVID-19 pandemic has been, and continues to be, discussed with the full Board as well as each of its Committees through formal and informal updates as needed. Over the course of 2020, management regularly updated the Board on the pandemic's impacts to our business and the related strategic, operational and financial risks. Discussions with the Board and Committees have also included, among other topics, business continuity, employee health and safety, customer demand, operational challenges, financial resources and liquidity, Company strategy, executive compensation, technology, shareholder engagement and succession plans. Management continues to report to the Board and its Committees on its response to the pandemic as appropriate and will seek to identify new risks as they may arise in light of the continuing effects of the COVID-19 pandemic.
As part of its ERM oversight, the Board oversees and reviews the Company's programs and processes for cybersecurity risk, including the Company's framework for preventing, detecting, and addressing cybersecurity incidents. To help inform its approach to devising an appropriate governance framework, cadence, metrics, and reporting to discharge its cybersecurity oversight responsibilities, the Board appointed an Ad Hoc Committee on Cybersecurity constituted of Grainger Directors with technology and cybersecurity experience. The Board's cybersecurity oversight framework—full Board ownership and oversight, with Audit Committee support, and quarterly informational updates and annual briefings—was implemented upon the recommendation of the Ad Hoc Committee, which remains available to provide strategic advice as needed.
Both the Board and the Audit Committee regularly review Grainger's risk assessment and management processes and policies, including receiving regular reports from the Company's Chief Information Security Officer, and the members of Grainger's management who are responsible for the effectiveness of Grainger's ERM program. As an output of these reviews, in 2020 the Board revised Committee Charters to specifically assign ERM reviews of the Company's ESG programs and reporting to the BANC and the Company's human capital management programs and policies to the Compensation Committee. In addition, as part of its existing oversight responsibility, the Compensation Committee assesses the relationship between potential risk created by Grainger's compensation programs and their impact on long-term shareholder value.
Environmental, Social and Governance (ESG)
Grainger is committed to being a responsible corporate citizen and strives to integrate ESG principles into the daily operation of its business. Grainger's ESG strategy includes its commitment to governance, operating sustainably and valuing its people. These commitments shape our focus on corporate citizenship and fuel our determination to make a positive difference today and in the future.
30 www.grainger.com
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Corporate Governance | | | |
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Governance
The Company integrates ESG initiatives into its strategy and daily operations at each level of its business. This begins with general ESG oversight by the BANC, which is comprised of all independent Directors. The BANC annually reviews the Company's ESG programs and reporting, including environmental and sustainability, social responsibility to its communities, governance, the Company's culture, talent strategy, and diversity, equity and inclusion. In turn, the Compensation Committee oversees the Company's programs and policies for human capital management and assists the BANC in its oversight of the Company's programs and policies with respect to employee engagement and leadership effectiveness. The Board includes one Director with expertise in corporate sustainability and one Director with expertise in environmental matters.
ESG Leadership Council
The Company's ESG efforts are led by the Chairman and CEO who chairs management's ESG Leadership Council. The key objectives of the ESG Leadership Council include identifying ways to incorporate the appropriate ESG initiatives into operations and strategy, overseeing the overall ESG program, and making regular reports to the BANC. The ESG Leadership Council is supported by a cross-functional steering committee providing subject matter expertise, implementing day-to-day programs and driving progress toward the success of our strategy. Core initiatives relating to culture and talent, including human capital management and diversity, equity and inclusion, are led by the Grainger Human Resources team in coordination with the ESG Leadership Council.
Sustainability
Grainger incorporates sustainability best practices across the business, improving supply chain efficiency, practicing best-in-class facilities construction and maintenance, and measuring and mitigating climate-related risk. Grainger has set a carbon target to reduce its absolute scope 1 and scope 2 emissions to align with the goal of limiting global warming to well below 2 degrees Celsius. Grainger also provides sustainability solutions for its customers through an environmentally preferred portfolio (EPP) of products and sustainability services offerings.
Supply Chain
To help ensure the products Grainger distributes are manufactured and delivered with high ethical standards, its Supplier Code of Ethics focuses on responsible sourcing along the dimensions of human rights, labor, environment and anti-corruption. Grainger's Human Rights Principles include the company's commitment to providing a safe and fair workplace that upholds and respects international human rights standards. These principles are applicable to all Grainger team members and are approved and monitored regularly by Grainger's senior leadership.
Proxy Statement 31
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Valuing our People
Grainger strives to ensure its team members reflect its increasingly global and diverse customer base. Diversity, equity and inclusion are integral to Grainger's business success. The Company is committed to creating a welcoming culture where all team members can bring their whole selves to work, have opportunities to grow and feel a sense of belonging, regardless of sex, gender, race, color, religion, national origin, age, disability, veteran status, sexual orientation, gender expression or experiences. As of December 31, 2020, within Grainger's U.S. workforce, approximately 38.5% of team members were women and approximately 34.2% of team members were racially and ethnically diverse. Grainger has taken several actions to improve inclusion in its recruiting process, which include how its approaches job postings, develop position requirements, conduct interviews and evaluate candidates in general.
The Company began reporting with reference to the Global Reporting Initiative's Sustainability Reporting Standards in 2016 and, since 2017, has been a member of the Dow Jones Sustainability Index. Grainger also reports to CDP and EcoVadis, with respective A- and silver ratings. Grainger continues to evolve its ESG program in a manner that is beneficial to the Company and its investors.
As part of this commitment, Grainger has aligned its ESG reporting to the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD) frameworks.
Grainger publishes an annual ESG report that is periodically updated and, while it is available under "Corporate Citizenship" in the Investor Relations section of our website at www.GraingerESG.com it is not being incorporated by reference into this proxy statement.
Grainger's Business Conduct Guidelines prohibit the use of Company funds or assets for political purposes, including for contributions to any political party, candidate or committee. In accordance with this policy, we do not maintain a political action committee (PAC). Given a particular issue, it is prudent for the Company to understand the legislative and regulatory environments at both the Federal and State levels. We have, from time-to-time, engaged advisors to assist us in advocacy, mainly related to government procurement. In 2020, Grainger was also a member of three trade associations.
32 www.grainger.com
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OTHER COMMUNICATIONS WITH DIRECTORS
Grainger has established a process by which shareholders and other interested parties may communicate with the Board, its Committees, and/or individual Directors on matters of interest. Such communications should be sent in writing to:
[Name(s) of Director(s)]
or
[Non-management Directors]
or
[Board of Directors]
W.W. Grainger, Inc.
P.O. Box 66
Lake Forest, Illinois 60045-0066
If the matter is confidential in nature, please mark the correspondence accordingly. Additional information concerning this process is available in the are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.
All the documents below are available to shareholders and under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/ or in print, free of charge, upon request to the Corporate Secretary at Grainger's headquarters, 100 Grainger Parkway, Lake Forest, Illinois 60045-5201.
Grainger has adopted Business Conduct Guidelines for Directors, officers, and employees, which incorporate the Code of Ethics required by the SEC to apply to a company's chief executive officer, chief financial officer, and chief accounting officer or controller. The Company provides annual Business Conduct Guidelines training and all Directors, officers, and employees are required to certify annually that they have read, understand and are in compliance with the Business Conduct Guidelines. Our Business Conduct Guidelines are posted in the Governance section on Grainger's website at http://invest.grainger.com/.
Operating Principles for the Board of Directors
Grainger also has adopted Operating Principles for the Board of Directors, which represents its corporate governance guidelines. The Operating Principles are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.
The charters, as adopted by the Board and amended from time to time, of the Audit Committee, the BANC, and the Compensation Committee are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.
Grainger publishes an ESG report that is periodically updated and, while it is available under "Corporate Citizenship" in the Investor Relations section of our website at http://www.GraingerESG.com, it is not being incorporated by reference into our proxy statement.
Proxy Statement 33
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Grainger's non-employee Directors each receive an annual cash retainer of $100,000 and an annual deferred stock unit (DSU) grant of $145,000. The Lead Director and Directors serving as Committee Chairs receive an additional annual cash retainer.
Grainger's non-employee Directors are compensated at a level that approximates median market practice. In benchmarking Director pay, Grainger uses the same compensation comparator group that is used to benchmark compensation for Grainger's executives as described in the Compensation Discussion and Analysis / page 46. The Compensation Committee's independent compensation consultant periodically reviews and updates the comparator group as well as comparative compensation information and advises on Director compensation.
The Directors' compensation program, which was last adjusted in April 2018, consists of the following:
 | Additional Annual Cash Retainers: • $25,000—Lead Director • $20,000—Audit Committee Chair • $15,000—Compensation Committee Chair • $10,000—Board Affairs and Nominating Committee Chair |
All non-employee Directors receive an annual DSU grant worth $145,000. In 2020, the number of shares covered by each grant was equal to $145,000 divided by the 20-day average stock price through March 31 (a methodology consistent with the calculation used for equity awards to grant-eligible employees), rounded up to the next whole share. For non-employee Directors elected at the 2020 annual meeting of shareholders, the DSU formula resulted in payment of 576 DSUs based on a 20-day average stock price as of March 31, 2020 of $251.89 per share. The DSUs are settled in shares upon termination of service as a Director. Directors may defer their annual cash retainers, Lead Director retainer, and Committee Chair retainers (as applicable), into a DSU account.
Stock ownership guidelines applicable to non-employee Directors were established in 1998. These guidelines provide that within five years after election, a Director must own Grainger common stock and common stock equivalents having a value of at least five times the annual cash retainer fee for serving on the Board. The hedging or pledging of Company shares by Directors or executive officers is prohibited by Company policy (see Hedging and Pledging Prohibition / page 64). No Directors (or executive officers) have hedged or pledged any of the shares beneficially owned by them and all Directors are currently in compliance with the ownership guidelines.
Grainger matches Directors' charitable contributions on a three-to-one basis up to a maximum Company contribution of $7,500 per Director annually and provides discounts on product purchases, both on the same basis as provided to U.S. Grainger employees.
Mr. Macpherson, who is an employee of Grainger, does not receive any compensation for serving as a Director.
34 www.grainger.com
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Name | | Fees Earned or Paid in Cash (1) | | Stock Awards (2) | | All Other Compensation (3) | | Total | | |||||||||||
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Rodney C. Adkins | $115,000 | $164,748 | $7,500 | $287,248 | ||||||||||||||||
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| Brian P. Anderson | | $100,000 | | $164,748 | | $0 | | $264,748 | | ||||||||||
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V. Ann Hailey | $120,000 | $164,748 | $0 | $284,748 | ||||||||||||||||
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| Stuart L. Levenick | | $135,000 | | $164,748 | | $0 | | $299,748 | | ||||||||||
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Neil S. Novich | $100,000 | $164,748 | $7,500 | $272,248 | ||||||||||||||||
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| Beatriz R. Perez | | $100,000 | | $164,748 | | $7,500 | | $272,248 | | ||||||||||
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Michael J. Roberts | $100,000 | $164,748 | $0 | $264,748 | ||||||||||||||||
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| E. Scott Santi | | $100,000 | | $164,748 | | $7,500 | | $272,248 | | ||||||||||
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Susan Slavik Williams | $100,000 | $164,748 | $0 | $264,748 | ||||||||||||||||
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| Lucas E. Watson | | $100,000 | | $164,748 | | $7,500 | | $272,248 | | ||||||||||
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Steven A. White | $50,000 | $104,049 | $0 | $154,049 | ||||||||||||||||
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Proxy Statement 35
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Security Ownership of Certain Beneficial Owners
The following table sets forth information concerning any person known to Grainger to beneficially own more than 5% of Grainger's common stock, as of December 31, 2020 except as otherwise noted below. The information in the table and the related notes are based on statements filed by the respective beneficial owners with the SEC pursuant to Sections 13(d) and 13(g) under the Securities Exchange Act of 1934, as amended.
Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership (1) | | Percent of Class | ||||
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The Vanguard Group | 5,398,750(2) | 10.06% | ||||||
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Susan Slavik Williams | | 4,728,153(3) | | 8.81% | ||||
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Longview Partners (Guernsey) Limited | 2,689,371(4) | 5.12% | ||||||
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BlackRock, Inc. | | 3,728,861(5) | | 6.9% | ||||
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36 www.grainger.com
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Partners has an economic interest in more than 5% of the class. The Schedule 13G certifies that the securities were acquired and held in the ordinary course of business and not with the purpose or effect of changing or influencing the control of Grainger.
Proxy Statement 37
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Security Ownership of Management
The table below shows the ownership of Grainger common stock asby each Director nominee, each of March 5, 2018, by our directors, named executive officers,NEOs, and all of our directorsDirector nominees and all executive officers as a group.group, as of March 1, 2021 except as otherwise noted below.
Beneficial ownership is broadly defined by the SEC. In general, a person beneficially owns securities if the person, alone or with another, has voting power or investment power (the power to sell) over the securities. Being able to acquire either voting or investment power within 60 days, such as by exercising stock options, also results in beneficial ownership of securities. Unless otherwise indicated in the footnotes following the table, each of the named persons had sole voting and investment power with respect to the indicated number of Grainger shares.
| Name of Beneficial Owner | | Shares | | Stock Option Shares Exercisable Within 60 Days (1) | | Stock Units (2) | | Percent of Class (3) | | Name of Beneficial Owner | | Shares | | Stock Option Shares Exercisable within 60 Days (1) | | Stock Units (2) | | Percent of Class (3) | | ||||||||||||||||||||
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James D. Slavik (4) | 3,669,085 | 0 | 20,270 | 6.6% | Rodney C. Adkins | 400 | — | 4,416 | * | |||||||||||||||||||||||||||||||
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| Rodney C. Adkins | | 400 | | 0 | | 2,379 | | * | | Brian P. Anderson | | 3,340 | | — | | 19,827 | | * | | ||||||||||||||||||||
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Brian P. Anderson | 4,340 | 0 | 16,980 | * | V. Ann Hailey | 200 | — | 13,672 | * | |||||||||||||||||||||||||||||||
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| V. Ann Hailey | | 200 | | 0 | | 11,149 | | * | | John L. Howard (4) | | 234,676 | | 43,688 | | 20,000 | | * | | ||||||||||||||||||||
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Joseph C. High | 6,038 | 35,154 | 0 | * | Katherine D. Jaspon | — | — | — | * | |||||||||||||||||||||||||||||||
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| John L. Howard (5) | | 939,932 | | 74,837 | | 20,000 | | 1.8% | | Stuart L. Levenick | | 400 | | — | | 20,349 | | * | | ||||||||||||||||||||
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Ronald L. Jadin (6) | 20,459 | 118,963 | 0 | * | D.G. Macpherson | 44,560 | 169,134 | 9,925 | * | |||||||||||||||||||||||||||||||
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| Stuart L. Levenick | | 400 | | 0 | | 17,474 | | * | | Deidra C. Merriwether | | 1,757 | | 14,483 | | 3,398 | | * | | ||||||||||||||||||||
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D.G. Macpherson | 30,611 | 84,186 | 0 | * | Neil S. Novich | 4,605 | — | 29,529 | * | |||||||||||||||||||||||||||||||
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| Neil S. Novich | | 4,605 | | 0 | | 25,142 | | * | | Thomas B. Okray(5) | | — | | — | | — | | * | | ||||||||||||||||||||
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Beatriz R. Perez | 0 | 0 | 684 | Beatriz R. Perez | — | — | 3,170 | * | ||||||||||||||||||||||||||||||||
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| Paige K. Robbins | | 4,841 | | 14,209 | | 3,213 | | * | | Paige K. Robbins | | 7,114 | | 20,016 | | 4,079 | | * | | ||||||||||||||||||||
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Michael J. Roberts | 1,000 | 0 | 19,926 | * | Michael J. Roberts | 1,000 | — | 24,133 | * | |||||||||||||||||||||||||||||||
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| James T. Ryan | | 143,478 | | 379,572 | | 20,000 | | * | | E. Scott Santi | | 303 | | — | | 8,649 | | * | | ||||||||||||||||||||
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E. Scott Santi | 303 | 0 | 6,390 | * | Susan Slavik Williams(6) | 4,728,153 | — | 586 | 8.81% | |||||||||||||||||||||||||||||||
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| Lucas E. Watson | | 195 | | 0 | | 349 | | | | Lucas E. Watson (7) | | 157 | | — | | 3,360 | | * | | ||||||||||||||||||||
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Directors and Executive Officers as a group (7)(8) | 4,835,214 | 725,669 | 165,927 | 10.1% | Steven A. White | — | — | 431 | * | |||||||||||||||||||||||||||||||
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| Director Nominees and Executive Officers as a Group | | 5,029,320 | | 253,766 | | 171,971 | | 10.04% | | ||||||||||||||||||||||||||||||
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3038 www.grainger.com
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Corporate Governance | | | |
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Proxy Statement 3139
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and officers and persons who own more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC and the NYSE, and to furnish us with copies of the reports. Specific due dates for these reports are prescribed by SEC rules and we are required to report in this proxy statement any failure by directors, officers, or 10% holders to file such reports on a timely basis. Based on our review of such reports and written representations from our directors and officers, we believe that all such filing requirements were timely met during 2017, except for a Form 4 for Eric R. Tapia, which was filed late with respect to a single transaction relating to the Company withholding 85 shares common stock for his tax obligations upon the settlement of a restricted stock unit grant on April 24, 2017.
32 www.grainger.com
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors assists the Board in fulfilling its oversight responsibilities. The Board has determined that each of the members of the Audit Committee is "independent," as that term is defined in the independence requirements for audit committee members contained in the applicable rules of the Securities and Exchange Commission (the SEC) and corporate governance standards of the New York Stock Exchange. The Audit Committee acts under a charter that is reviewed annually; and, it was last amended by the Board on December 1, 2015.9, 2020. The charter is available on the Governance section of Grainger's website athttp://www.grainger.com/investorinvest.grainger.com/.
Management is responsible for the Company's internal controls and the financial reporting process and for compliance with applicable laws and regulations. Ernst & Young LLP (EY), the Company's independent auditor, was responsible for performing an independent audit of the Company's most recent consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States, of America, as well as expressing an opinion on the effectiveness of the Company's internal control over financial reporting. The Audit Committee's responsibility is to monitor and oversee these processes.
In performing these responsibilities, the Audit Committee reviewed and discussed the Company's audited consolidated financial statements and the effectiveness of internal control over financial reporting with management and EY. The Audit Committee discussed with EY matters required to be discussed under Statement on Auditing Standards No. 1301 "Communications with Audit Committees" adopted by the Public Company Accounting Oversight Board (PCAOB). EY also provided to the Audit Committee the letter and written disclosures required by PCAOB standards concerning EY's independence and the Audit Committee discussed with EY the matter of the firm's independence.
Based on the review and discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2020, as filed with the SEC.
E. Scott Santi,V. Ann Hailey, Chair
Brian P. AndersonV. Ann HaileyStuart L. Levenick
Neil S. NovichLucas E. WatsonScott Santi
Members of the Audit Committee of
the Board of Directors
Proxy Statement40 33www.grainger.com
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Corporate Governance | | | |
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AUDIT FEES AND AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The following table sets forth the fees for professional services rendered by Ernst & Young LLP (EY) with respect to fiscal years 20172020 and 2016,2019, respectively:
Fee Category | | | 2017 | | | 2016 | | | | 2020 | | | 2019 | | ||||||||||
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Audit Fees | $ | 5,966,200 | $ | 5,695,900 | | | $ | 6,081,000 | | | $ | 5,329,700 | | |||||||||||
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Audit-Related Fees | | | 224,100 | | | 192,400 | | | | | 177,000 | | | | 177,000 | | | |||||||
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Tax Fees | 678,500 | 1,302,627 | | | 282,300 | | | 372,300 | | |||||||||||||||
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All Other Fees | | | 3,000 | | | 43,000 | | | | | 7,000 | | | | 7,000 | | | |||||||
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Total Fees | $ | 6,871,800 | $ | 7,233,927 | | | $ | 6,547,300 | | | $ | 5,886,000 | | |||||||||||
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Pre-Approval Policy for Audit and Non-Audit Services
The Audit Committee has adopted a policy for the pre-approval of all audit and permitted non-audit services to be provided to Grainger by its independent auditor and is responsible for the review and approval of any fees associated with those services. Also, specific pre-approval by the Audit Committee is required for any proposed services exceeding pre-approved fee levels.
Pre-approvals for categories of services are granted at the start of each fiscal year and are applicable for 12 months from the date of pre-approval. In considering these pre-approvals, the Audit Committee reviews detailed supporting documentation from the independent auditor for each proposed service to be provided. Unused pre-approval amounts are not carried forward to the next year.
The Company's Controller monitors services provided by the independent auditor and overall compliance with the pre-approval policy. The Corporate Controller reports periodically to the Audit Committee about the status of outstanding engagements, including actual services provided and associated fees, and must promptly report any noncompliance with the pre-approval policy to the Chairman of the Audit Committee.
The Audit Committee may delegate pre-approval authority for audit and non-audit services to one or more of its members, and such authority has been delegated to the Chair of the Audit Committee. The decisions of any member to whom such authority is delegated must be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management its responsibilities to pre-approve services performed by the Company's independent auditor. The Audit Committee periodically reviews reports summarizing all services provided by the independent auditor.
34Proxy Statement www.grainger.com41
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Corporate Governance |
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent external audit firm that performs audit services. In considering Ernst & Young LLP's (EY) appointment for the 2018 fiscal year, the Committee reviewed the firm's qualifications and competencies, including the following factors:
 | The Audit Committee is directly responsible for the appointment, compensation, retention, evaluation, termination and oversight of the independent external audit firm that performs audit services. In considering Ernst & Young LLP's (EY) appointment for the 2021 fiscal year, the Audit Committee reviewed the firm's qualifications and competencies, including the following factors: • EY's historical performance and its recent performance during its engagement for the 2020 fiscal year; • EY's capability and expertise in handling the breadth and complexity of the Company's operations; • the qualifications and experience of key members of the engagement team, including the lead audit partner, for the audit of the Company's financial statements; • the quality of EY's communications with the Audit Committee regarding the conduct of the audit, and with management with respect to issues identified in the audit; • external data on audit quality and performance, including recent PCAOB reports on EY; and • EY's reputation for integrity and competence in the fields of accounting and auditing. |
EY has been retained as the Company's independent auditor continuously since 2005. To ensure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent auditor. The Audit Committee ensures that the mandated rotation of EY's personnel occurs routinely and the Audit Committee is directly involved in the review, selection and evaluation of EY's lead engagement partner.
The Audit Committee and the Board of Directors believe that the continued retention of EY to serve as the Company's independent auditor for the year ending December 31, 20182021 is in the best interests of the Company and its shareholders, and the Board is asking shareholders to ratify this appointment. Representatives of EY are expected to be present at the meeting to respond to appropriate questions of shareholders and to make any desired statements.
Approval of the proposal requires the affirmative votes of a majority of the shares of Grainger common stock present or represented in person or by proxy at the meeting and entitled to vote.vote at the annual meeting. Abstentions will have the same effect as votes against the proposal. In the event the proposal is not approved, the Board will consider the negative vote as a mandate to appoint another independent auditor for the next year.
Proxy Statement42 35www.grainger.com
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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis (CD&A) with management. Based on such review and discussion, the Compensation Committee has recommended to the Board of Directors that the CD&A be included in the Company's proxy statement for its 20182021 annual meeting of shareholders and in its Annual Report on Form 10-K for the year ended December 31, 2017,2020, as filed with the SEC. The Compensation Committee acts under a charter, last amended on December 9, 2020, that is reviewed annually and was last approved by the Board on December 13, 2017.annually. The Amended and Restated charter is available in the Governance section of Grainger's website athttp://www.grainger.com/investorinvest.grainger.com/.
Michael J. Roberts, Chairman
Rodney C. Adkins,Stuart L. Levenick Chairman
Beatriz R. PerezJames D.Michael J. Roberts
Susan Slavik Williams
Lucas E. Watson
Steven A. White
Members of the Compensation Committee of
the
Board of Directors
FEES FOR INDEPENDENT COMPENSATION CONSULTANTCONSULTANT; FEES
TheIn overseeing the Company's compensation programs, the Compensation Committee has engaged of the Board (the Compensation Committee) develops programs based on its own deliberations, programs and recommendations from management, and compensation and benefits consultants, including its independent compensation consultant.
Deloitte Consulting LLP (Deloitte Consulting) had served as the Compensation Committee's independent compensation consultant since 2009. In May 2020, the partner leading the Deloitte Consulting engagement retired, causing the Compensation Committee to conduct a broad-based search process for a new independent compensation consultant. Following review of the consulting firms asked to participate in the search process, the Compensation Committee selected and retained Pay Governance LLC (Pay Governance) as its independent compensation consultant. consultant effective November 2020.
After a review of the factors prescribed by the SEC and the NYSE rules and regulations, the Compensation Committee determined that each of Deloitte Consulting and Pay Governance and (collectively, the 2020 Independent Compensation Consultants) is independent.
At the Compensation Committee's direction, the independent compensation consultant:
Proxy Statement 43
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The following table sets forth the fees for services rendered by Deloitte Consulting and its affiliates with respect to fiscal year 2017:2020:
Type of Fee | | | 2017 | | | Deloitte Consulting | |||||||||
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Executive Compensation Consulting | $ | 334,137 | | | | $ | 177,505 | | | ||||||
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All Other Consulting | | $ | 1,571,350 | | | | | $ | 1,767,629 | | | ||||
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Total Fees | $ | 1,905,487 | | | | $ | 1,945,134 | | | ||||||
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The following table sets forth the fees for services rendered by Pay Governance and its affiliates with respect to fiscal year 2020:
Type of Fee | | | Pay Governance | ||||||
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Total Fees | | | | $ | 56,627 | | | ||
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Executive Compensation Consulting Fees: Consists of fees billed for services provided to advise the Compensation Committee of the Board with respect to executive and directorDirector compensation.
All Other Consulting Fees: Consists of fees billed for all other services provided to Grainger. None of these fees are related to compensation matters.
Affiliates of Deloitte Consulting have provided other services to Grainger that are unrelated to executive compensation matters. The decision to engage an affiliate of Deloitte Consulting for these other services was made by management. The Board has been informed of this ongoing work and the use of an affiliate of Deloitte Consulting but neither the Board nor the Compensation Committee specifically approved these services. After a review of the factors prescribed by the SEC and the NYSE rules and regulations, the Compensation Committee determined that its compensation consultant, Deloitte Consulting, did not havenone of the 2020 Independent Compensation Consultants had any conflicts of interest.interest
3644 www.grainger.com
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS |
This Compensation Discussion and Analysis (CD&A) explains the compensation earned by Grainger's Named Executive Officers (NEOs) and describes the Company's pay for performance compensation philosophy and programs.
Please read this CD&A in conjunction with the advisory vote we are conducting on the compensation of our NEOs under Proposal 3, Say on Pay, on page 81 as it contains information that is relevant to your voting decision.
Opportunity for Shareholder Comment
Grainger has a comprehensive shareholder engagement program to reach a significant cross-section of our shareholder base. The Compensation Committee carefully considers feedback from our shareholders regarding NEO compensation.
Shareholders who wish to directly provide feedback to the Company may by contacting investorrelations@grainger.com.
Introduction | 46 | |
2020 Highlights | 46 | |
Key 2020 Compensation Changes | 46 | |
Executive Summary | 47 | |
2021 Leadership Transitions | 48 | |
Compensation Philosophy | 48 | |
Performance Summary | 49 | |
Compensation Actions in Response to COVID-19 | 50 | |
Compensation Elements and Pay Mix | 50 | |
Total Target Compensation | 52 | |
Company Compensation Practices | 53 | |
Determination of Total Target Compensation | 53 | |
Risk Mitigating Actions | 54 | |
Risk Assessment | 55 | |
Compensation Philosophy, Plans, and Practices | 55 | |
Compensation Committee of the Board | 55 | |
Role of Management | 56 | |
Compensation Comparator Group | 56 | |
Base Salaries | 59 | |
Annual Incentives | 60 | |
Long-Term Incentives | 61 | |
Other At Risk Awards | 63 | |
Stock Ownership Guidelines | 64 | |
Hedging and Pledging Prohibition | 64 | |
Other Benefits | 64 | |
Compensation Tables | 66 | |
Summary Compensation Table | 66 | |
Grants of Plan-Based Awards Table | 67 | |
Outstanding Equity Awards at Fiscal Year-End Table | 68 | |
Option Exercises and Stock Vested Table | 69 | |
Nonqualified Deferred Compensation Table | 70 | |
Employment Agreements, Change in Control, and Termination of Employment Arrangements | 71 | |
Employment Agreements | 71 | |
Change in Control—Equity Plans | 71 | |
Change in Control Agreements | 71 | |
Deductibility of Executive Compensation | 71 | |
Accounting Considerations | 72 | |
Compensation Recoupment Policy (Claw-backs) | 72 | |
Termination | 73 | |
Retirement | 73 | |
Other Potential Post-Employment Payments | 74 |
Proxy Statement 45
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During the unprecedented global pandemic and a period of deep reflection on social issues, the Company remains guided by its purpose and its principles in fulfilling its commitment to serve customers, to protect the health and safety of employees, and to execute its business strategy. In the wake of these events, the Company focused on critical operating priorities and enhancing existing workplace initiatives related to health and safety, diversity, equity, and inclusion, and employee experience. Throughout the year, the Company reviewed financial performance as well as the pandemic's overall impact on its employees and concluded that its executive compensation programs remained relevant and consistent with shareholder and other stakeholder interests.
The 2020 Say on Pay vote garnered broad support with approximately 93% of shareholders voting in favor of our executive compensation programs. This Compensation Discussion and Analysis (CD&A) describesstrong support demonstrates the Company's responsiveness to shareholders, and indicates that shareholders agreed with various action the Company took in 2020 to strengthen the link between pay and performance, including:
46 www.grainger.com
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In recognition of the challenges and uncertainty resulting from the COVID-19 pandemic, the Company separately evaluated the 2020 compensation program against the following factors:
Based on its review and considering the shareholder support for Company programs, the Compensation Committee determined that the programs are aligned with shareholder value creation and no modifications or discretionary adjustments to the 2020 NEO short-term and long-term incentive compensation programs were needed. These actions to align compensation with shareholder value creation are consistent with the philosophy and programs generally,approach described throughout this CD&A.
Executive Summary |
The Company's compensation program is based upon a philosophy that is applied to all Company employees—to attract and explainsretain the compensation paidbest people and provide them with appropriate performance-based incentives that encourage them to the six most highly compensated executives in 2017—the achieve results that create long-term shareholder value.
Named Executive Officers (NEOs). for 2020
Named Executive Officers for 2017
The following table reflects NEO positions held as of the end of 2020. As explained below under "2021 Leadership Transitions," several leadership and role changes took place in January 2021 in connection with Mr. Okray's departure from the Company and new responsibilities assigned to Mses. Merriwether and Robbins.
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D.G. Macpherson | John L. Howard | |||||
Paige K. Robbins | ||||||
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The titles in the table above reflect positions held by the NEOs as of the end of 2017, and remain unchanged as of the date of this proxy statement. As explained under "Leadership Changes" below, between January 1, 2017 and September 30, 2017, Mr. Ryan served as the Company's Chairman, while Mr. Macpherson served as the Company's Chief Executive Officer (CEO). Effective October 1, 2017, Mr. Ryan retired from the Company and the Board, and Mr. Macpherson succeeded Mr. Ryan as Chairman while continuing in his position as CEO.
Long-term CEO succession planning is crucial to the stability of the business and a key responsibility of the Board. Effective October 1, 2017, as part of a planned succession process, the Company named Mr. Macpherson Chairman of the Board and CEO, upon Mr. Ryan's retirement as Chairman of the Board.
Prior steps in the succession plan included promoting Mr. Macpherson to CEO in October 2016, and to Chief Operating Officer in August 2015. In both roles, Mr. Macpherson was responsible for the Company's day-to-day operations and reported to Mr. Ryan. Previously, Mr. Macpherson had served the Company as Senior Vice President and Group President, Global Supply Chain and International since 2013; Senior Vice President and President, Global Supply Chain and Corporate Strategy, a position assumed in 2012; and Senior Vice President, Global Supply Chain, a position assumed in 2008.
Mr. Ryan's continued service in 2017 as Chairman of the Board enabled the Company to execute a successful leadership transition to Mr. Macpherson, while ensuring that the Board and Mr. Macpherson retained Mr. Ryan's significant knowledge of the Company's operations, strategy, people and resources during the transition process.
Proxy Statement 3747
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| Officer | | | Title | |
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| D.G. Macpherson | | | Chairman of the Board & Chief Executive Officer (CEO) | |
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| John L. Howard | | | | Senior Vice President & General Counsel |
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| Paige K. Robbins | | | Senior Vice President, Chief Technology, Merchandising, Marketing, and Strategy Officer* | |
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| Deidra C. Merriwether | | | | Senior Vice President & President, North American Sales & Service* |
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| Former Officer | | | Title | |
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| Thomas B. Okray | | | Former Senior Vice President & Chief Financial Officer* | |
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Executive Summary2021 Leadership Transitions
The following leadership transitions took place in January 2021:
The Company's compensation program is based upon a philosophy that is applied to all Company employees—to attract and retain the best people and provide them appropriate performance-based incentives that encourage them to achieve results that create long-term shareholder value.Compensation Philosophy
The Company's overall NEO compensation structure is designed to drive profitable growth leading to shareholder value creation. Employees at all levels ofcreation and create a strong link between pay and Company short-term and long-term performance. This philosophy extends throughout the Company including its executives,as employees below the executive level are also provided incentives to grow the business (Sales Growth) while achieving attractive investment returns (Return on Invested Capital, or ROIC) for the Company's shareholders. For executives, the compensation program is designed to link pay to performance and is structured to reward both annual and long-term Company performance, while not encouraging excessive risk taking. The Company is focused on its strategy of consistently gaining market share and attaining profitable sales growth through its High-Touch Solutions model and the Endless Assortment model. These objectives are directly reflected in the 2020 long-term incentive design for executives which further reinforces pay for performance.
Highlights for 2017 include:
NEO compensation includes a combination of base salary, short-term incentives, long-term equity incentives including performance shares and stock options, and a performance-based retirement vehicle. These components are combined to provide Company executives with appropriate incentives for profitable long-term growth.
3848 www.grainger.com
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The Company's NEO compensation is comprised
Performance Summary
In 2020, the Company maintained a strong financial position supporting a return of capital to shareholders while making progress on strategic growth priorities, including embedding the Grainger Edge principles as a new cultural framework. Following the onset of the following components:COVID-19 pandemic, the Company executed its pandemic plan across the organization to rapidly address customer needs, supply chain disruptions, and unprecedented macroeconomic conditions, while prioritizing the health and safety of employees. Through the collective efforts of our global workforce and leadership, the Company achieved strong operating results and ended the year with approximately less than 1% of its workforce on furlough and without any major workforce reductions.
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Incentives earned in 2020 reflect the following risk mitigating features:financial results against our performance metrics:
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Proxy Statement 3949
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areCompensation Actions in Response to COVID-19
During the early stages of the pandemic, the Company decided to defer for three months paying the annual company-wide merit increases planned for April 1, 2020 until July 1, 2020. This measure was intended to allow the Company to maintain financial flexibility and preserve job continuity in the face of considerable uncertainty. In addition, the Company's executive leadership team voluntarily elected temporary base salary reductions for the second quarter of 2020, including a 50% reduction for the Chairman and CEO and 20% reductions for the executive leadership (including NEOs).
To recognize employees whose day-to-day job responsibilities required them to remain working at Grainger facilities or customer locations during this unprecedented time, beginning in March 2020, the Company provided $6.9M in premium and essential leader pay, a benefit that continued through mid-June 2020 along with other pandemic, facility closure, and dependent care pay programs. The Company also assumed the full cost for COVID-related testing and enhanced our benefit offerings with additional tools and resources to support the physical and emotional well-being of our employees and their families, including providing two weeks of additional "pandemic pay" to cover lost wages for those impacted by COVID-19.
Throughout 2020, the executive compensation program was evaluated to determine if the original design remained relevant under current conditions as well as strongly aligned with performance. After review of the Company's performance during the pandemic, the Compensation Committee determined that no discretionary adjustments to the structure of existing incentive programs or modifications to final payouts were warranted, which were determined, in each case, based on many factors including individualpre-pandemic performance responsibilities,expectations. The Committee concluded that the existing programs remained strongly aligned with the Company's pay-for-performance objectives and the overall relation to market levels of compensation.
These components and the use of performance-based pay are consistent with shareholder interests.
Compensation Elements and Pay Mix
As part of the Company's pay for performance philosophy, the Company's compensation program includes several features that maintain alignment with shareholders.
The 2020 NEO compensation mix of the comparator group. The tables below show compensation components as a percentage of the total target compensation package.
"Performance Based Compensation" consists of the annual incentive plan, long-term incentives, and profit sharing as described further under "Annual Incentives" and "Long-Term Incentives."
"Fixed/Individual Based Compensation" consistsis comprised of base salary, as described further under "Base Salaries."
"Annual Compensation" consists of base salaryshort-term incentives, and long-term equity incentives including PSUs and RSUs, and a performance-based retirement vehicle. To make our long-term compensation program more performance-based, beginning in 2020, the annual incentive plan as described further under "Annual Incentives."
"Long-term Compensation" consists ofCompany replaced stock options and PRSUs with 50% performance shares,share units (PSUs) and profit sharing. Annual profit sharing contributions are based on the Company's short-term performance; distributions are50% restricted with full vesting of contributions once a participant has achieved five years of service with the Company as described further under "Long-Term Incentives" and "Other Benefitsstock units (RSUs)."
4050 www.grainger.com
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"Peers" are the comparator group in the 2017 Deloitte Consulting Compensation Study as described further under "
Compensation Comparator GroupElements Introduced in 2020:."
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The Company's compensation structure links paycurrent long-term incentive design and underlying metrics correspond directly with Company performance. Our 2017 financial results met expectations and therefore the annual bonus payment approximated target. However, the Company's long-term plan, establishedstrategic initiatives, which are critical to providing sustained shareholder returns and future growth. As previewed in 2015, did not meetour proxy statement for the threshold results2020 annual meeting of shareholders, the metrics for three year sales2020 PSU awards focus on three-year average U.S. share gain, endless assortment business revenue growth, and therefore there was no payout for this program.
adjusted operating margin(1). The Company is focused on profitable daily sales growth overCompensation Committee selected these performance measures because they are directly aligned with the short-Company's business strategy to gain share and long-term. The Company believes that using ROIC and sales growth are appropriate metrics for both short-term and long-term because:grow profitability as:
Proxy Statement 51
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Compensation Elements Continuing from 2019—The short-termdesign of the Company's annual incentive programplan, retirement and base salary practices remain unchanged in 2020. The annual incentive plan focuses on one-year sales growth compared to the prior year and a pre-determinedpredetermined level of ROIC, with both measures linked to the Company's one-year plan. The long-term incentive program focuses on a specific sales dollar goal in the third year of the performance period. In addition, the long-term incentive program requires a threshold level of ROIC over the performance period in order for the awards to vest.
AsEffective January 1, 2021, the Company's new Retirement Savings Plan replaced the Company's Employees Profit Sharing Plan as the primary Company-sponsored retirement vehicle for U.S.-based employees. The Retirement Savings Plan provides for a result,6% Company contribution to the Company believes that using ROIC and sales growth are appropriate metrics and do not create unreasonable risk.401(k) plan.
Total Target Compensation Philosophy, Plans, and Practices
As partTarget total compensation for the Company's employees is generally set to approximate the market median, with differentiation based on tenure, skills, proficiency, and performance as required to attract and retain key talent. The weighting of the Company'sindividual compensation components varies by level, with more senior level executives having a greater emphasis on performance-based long-term compensation—which aligns management incentives to the interests of shareholders. NEO compensation is generally structured so that the largest individual component is long-term equity, followed by base salary and performance-based annual incentives. Each NEO's compensation is compared to equivalent positions in a comparator group selected by the Compensation Committee (with assistance from the Committee's independent compensation consultant) and nationally recognized surveys. NEO base salaries and long-term incentive grant values are determined based on many factors including individual performance, responsibilities, internal equity and the overall relation to market levels of compensation.
These components and the use of performance-based pay are generally aligned with the compensation mix of the comparator group and survey data. The tables below show compensation components as a percentage of the total target compensation package. While Grainger no longer grants stock options, the table includes stock options in the performance-based pay category for performance philosophy,the comparator group.
52 www.grainger.com
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Company Compensation Practices
Overall, the Company's compensation program includes several features thatis designed to be straightforward and understandable to its employees and shareholders, and to drive long-term shareholder value creation by aligning compensation with both individual and Company performance. The Company's compensation programs also maintain alignment with shareholders:shareholders and best practices by not including certain features as outlined below.
Emphasis on Variable Performance-Based Compensation. Between 62%Determination of Total Target Compensation
The Compensation Committee is charged with ensuring that compensation, especially for executives, is linked to both individual and 87% of the NEOs' targetCompany performance, and ensuring that compensation is tiedpolicies and practices for all employees do not include incentives to Company performance.
Proxy Statement 4153
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In setting individual compensation levels, the Compensation Committee's independent compensation consultant.
Risk Mitigating Actions
The Company's compensation programs are designed to include risk-mitigating features, and the Compensation Committee also maintain alignment with shareholders by notengaged its independent compensation consultant to assist in the process of an annual internal risk assessment of all incentive-based compensation, including certain features:short-term and long-term incentive programs.
The Compensation Committee's oversight responsibility includes assessing the relationship between potential risk created by the Company's compensation programs and their impact on long-term shareholder value. The Company believes that the appropriate metrics are used in its incentive plan design and the metrics do not create unreasonable risk. In order to encourage profitable growth while protecting shareholders' interests, the Company's compensation programs includes the following risk mitigating components such as:
Overall, the Company's compensation program is designed to be straightforward and understandable to its employees and shareholders, and to drive long-term shareholder value creation by aligning compensation with both individual and Company performance.
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The Company has established recoupment policies with respect to executive compensation in the event of fraud, criminal misconduct, materially inaccurate financial statements, conduct that violates Company policy, misconduct that causes or is discovered to have caused damage or injury to the Company's property or reputation or violations of non-competition or non-solicitation agreements, or in the event an Executive receives any amount in excess of what the executive should have received for any reason.
Further, both the existing Change in Control Agreements and awards under the W.W. Grainger, Inc. 2015 Incentive Plan, as amended and restated as of October 31, 2018 (the 2015 Incentive Plan), have double-trigger change in control provisions.
Risk Assessment
Since 2009, the Compensation Committee has engaged its independent compensation consultant to conduct a risk assessment that is completed every three years. Deloitte Consulting conducted the Company's most recent triennial risk assessment in 2018 and the results were discussed with the Compensation Committee. For the interim years, the Company conducts an annual internal risk review based on practices and methodologies recommended by the Compensation Committee's independent compensation consultant.
Based on the risk review conducted in 2020 and the Compensation Committee's discussions, the Compensation Committee does not believe that the Company's compensation policies and practices are reasonably likely to have a material adverse effect on the Company. The Company continues to monitor and evaluate the above mitigating practices as part of its annual review process.
Compensation Philosophy, Plans, and Practices |
Compensation Committee of the Board
The Compensation Committee of the Board is responsible for the Company's compensation programs.
The Compensation Committee oversees the Company's compensation and benefit programs for all officers and other employees. The Compensation Committee is responsible for ensuring that the Company's compensation practices provide appropriate incentives to increase long-term shareholder value, reflect the highest level of integrity, and protect the interests of shareholders. One of its responsibilities is to make certain that a competitive compensation structure is in place that will attract, reward, and retain employees and to motivate them to grow the business profitably. TheUnder its charter, the Compensation Committee is also charged with ensuring thatmakes executive compensation especially for executives, is linkeddecisions and recommends actions to both individualthe Board of Directors and Company performance, and ensuring that compensation policies and practices for all employees do not include incentives to take inappropriate risk.shareholders (for example, related to the advisory Say on Pay vote or equity plan proposals), as appropriate.
In setting individual compensation levels, the Compensation Committee selects a compensation comparator group of companies and reviews studies of total compensation paid to executives in those comparator group companies with similar duties and responsibilities. The Compensation Committee then considers a variety of reference points, including competitive compensation data at the 25th, 50th, and 75th percentiles, individual and Company performance, the executive's overall experience,
Proxy Statement 55
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replaceability, internal equity, unique skills, and management's recommendation to determine appropriate compensation for each executive. All elements of compensation are valued and reviewed in evaluating the relative competitiveness of the Company's compensation practices against the comparator group. Target total compensation for the Company's employees and executives as a whole (including the NEOs) is generally set to approximate the market median.
The Compensation Committee reviews at least annually a tally sheet for each NEO to evaluate the potential value of all compensation. The tally sheet includes each NEO's current base salary, annual incentive award, and the value of all outstanding equity-based awardsequity-awards (both vested and unvested), deferrals, benefits, and perquisites, as well as potential payments under retirement and certain change in control situations. Since no NEO has an employment agreement with the Company that guarantees continued employment, the tally sheets also facilitate the Compensation Committee's evaluation of vested and unvested awards and the retention value of these awards.
Under its charter, the Compensation Committee makes executive compensation decisions and recommends actions to the Board of Directors and to shareholders (for example, related to the advisory Say on Pay vote or equity plan proposals), as appropriate.
In discharging its responsibilities, the Compensation Committee regularly consults with independent advisors, compensation consultants, and the Company's management. After a review of the factors prescribed by the SEC and the NYSE, the Compensation Committee determined that its compensation consultant, Deloitte Consulting, is an2020 Independent Compensation Consultants are independent advisoradvisors under the applicable rules and regulations.The Compensation Committee's charter can be foundis available in the Governance section of Grainger's website atwww.grainger.com/investorhttp://invest.grainger.com/.
Proxy Statement 43
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The following steps are performed each year to review, recommend, and approve NEO compensation. These steps are described further under "Role of Management," "Compensation Comparator Group," and "Base Salaries."
The Compensation Committee's oversight responsibility includes assessing the relationship between potential risk created by the Company's compensation programs and their impact on long-term shareholder value. The Company's compensation programs are designed to include risk-mitigating features, and the Committee also engaged its independent compensation consultant (Deloitte Consulting) to assist with the process of an annual internal risk assessment of all incentive-based compensation, including short-term and long-term incentive programs.
The incentive compensation programs include risk-mitigating components, such as:
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Since 2009, the Committee has engaged its independent compensation consultant to conduct a risk assessment that is completed every three years. The independent consultant will conduct its next risk assessment in 2018. For the two interim years, the Company conducts an annual internal risk review based on practices and methodologies recommended by the Committee's independent compensation consultant. The results of the internally-conducted 2017 risk review were discussed with the Committee.
Based on the risk review and the Committee's discussions, the Committee does not believe that the Company's compensation policies and practices are reasonably likely to have a material adverse effect on the Company.
At the 2017 annual meeting of shareholders, the annual advisory vote to approve the compensation of the Company's NEOs received the support of 97% of the shareholders voting on the proposal. The Compensation Committee has considered these results and believes that they confirm the appropriateness of the Company's current executive compensation policies and practices. The Company routinely discusses its compensation philosophy with its shareholders as part of investor relations activities.
The Company is required to seek shareholder vote on the frequency of the advisory Say on Pay vote every six years. In 2011 and 2017, management recommended an annual advisory Say on Pay vote. The next advisory frequency vote is scheduled for 2023.
Management assists the Compensation Committee in the design, recommendation, and implementation of compensation programs.
Members of management (including the NEOs and the CEO's other direct reports) assist the Compensation Committee by routinely recommending programs that management believes will provide the appropriate level of compensation and incentives consistent with the Company's compensation philosophy. Consistent with this process, management works with advisors from Deloitte Consultingthe Compensation Committee's independent compensation consultant to develop market information and recommends adjustments in base salaries, annual incentive targets, and long-term incentive awards to be reviewed by the Compensation Committee and approved by the Board. For NEOs other than Mr. Macpherson, the recommendations also include the structure and targets of short-term and long-term incentive programs, as well as changes to programs required for regulatory compliance. These recommendations are reviewed and approved by the Chairman of the Board and CEO before they are presented to the Compensation Committee. Mr. Macpherson's compensation is reviewed by the Compensation Committee in conjunction with its independent compensation consultant together with otherand is approved by the independent directors (as directed by the Board), in executive session without members of management present.
Proxy Statement 45
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The Company's compensation program is regularly benchmarked against a Compensation Committee-approved comparator group of companies that are similar to the Company in size and complexity.complexity and nationally recognized compensation surveys. The Company performs these studies to understand current market practices and to provide a reference point for compensation discussions.
Every year, the Compensation Committee determines a compensation comparator group of companies and undertakes a study of total compensation paid to executives occupying similar positions with similar duties and responsibilities in the comparator companies. All elements of compensation are valued and
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considered when determining the relative competitiveness of the Company's compensation practices. AConsistent with this practice, a comparator group compensation study was conducted in 2017 (20172020 (2020 Compensation Study).
Based on the 2020 Compensation Study, the previous comparator group was updated to include Stanley Black & Decker, Inc. due to its comparable business characteristics and operational similarities to the Company, and to remove Anixter International Inc., due to its acquisition by WESCO International Inc. (an existing peer), and Ingersoll-Rand plc, due its divestiture of its industrial segment. The 20172020 comparator group consists of 20 businesses17 companies that are relatively similar in complexity and size to the CompanyGrainger and represent the types of major companies with which the CompanyGrainger historically competes for executive talent. The companies that were selected for the 20172020 Compensation Study are generally within a range of 0.5 to 2.0 times Grainger's annual revenue. The competitive market for executive talent includes companies both within and outside the same industry or sector as the Company. Most of the Company's publicly traded direct competitors tend to be too small in sales or scope of operations for direct compensation comparisons with the Company. Including a broader range of companies provides a more representative depiction of the Company's competitive market for talent. Therefore, companies used for compensation comparison purposes differ from those in the industry indices used in the Company'sCompany Performance Graph in Part II, Item 5 of the Company's most recent Annual Report on Form 10-K.10-K for the fiscal year ended December 31, 2020.
Management played a minimal role in selecting the 2017 compensation comparator group, as theThe Committee relied on its independent compensation consultant (Deloitte Consulting)2020 Independent Compensation Consultants for survey and market data. The role of management in selecting the comparator group was limited to providing general comments on the relevance of each industry represented by the comparator companies.
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Listed below are the 2017 Compensation Study comparator group and the 2016 revenues and enterprise values for each company.
| Company | | 2016 Revenue ($mil)* | | 2016 Enterprise Value ($mil)** | |||||
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Anixter International Inc. | $7,623 | $3,983 | ||||||||
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| Avnet, Inc. | | $16,741 | | $7,588 | |||||
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CDW Corporation | $13,982 | $11,962 | ||||||||
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| Eaton Corporation plc | | $19,747 | | $38,090 | |||||
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Fastenal Company | $3,962 | $13,877 | ||||||||
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| Genuine Parts Company | | $15,340 | | $14,773 | |||||
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HD Supply Holdings, Inc. | $7,123 | $12,507 | ||||||||
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| Henry Schein, Inc. | | $11,572 | | $13,783 | |||||
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Illinois Tool Works Inc. | $13,599 | $48,383 | ||||||||
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| Ingersoll-Rand plc | | $13,509 | | $22,017 | |||||
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Insight Enterprises, Inc. | $5,486 | $1,639 | ||||||||
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| LKQ Corporation | | $8,584 | | $12,420 | |||||
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Parker-Hannifin Corporation | $11,361 | $19,788 | ||||||||
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| QVC Group | | $10,219 | | $15,564 | |||||
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Sanmina Corporation | $6,481 | $2,755 | ||||||||
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| Tech Data Corporation | | $26,380 | | $2,656 | |||||
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The Sherwin-Williams Company | $11,856 | $26,384 | ||||||||
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| Univar Inc. | | $8,074 | | $6,793 | |||||
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Veritiv Corporation | $8,327 | $1,771 | ||||||||
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| WESCO International, Inc. | | $7,336 | | $4,606 | |||||
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25th Percentile | $7,551 | $4,450 | ||||||||
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| 50th Percentile | | $10,790 | | $12,464 | |||||
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75th Percentile | $13,695 | $16,620 | ||||||||
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| W.W. Grainger, Inc. | | $10,137 | | $15,946 | |||||
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Percent Rank | 47% | 74% | ||||||||
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The Compensation Committee reviewed and approved the comparator group and considered the findings of the 2017 Compensation Study in conjunction with a tally sheet listing the potential value of all compensation available for the NEOs. The Compensation Committee concluded that the NEOs' earned and potential awards for 2017 were consistent with the Company's pay philosophy, Company and individual performance, and market practices (as reflected in the 2017 Compensation Study). Based on this review and the strong support from shareholders on the Say on Pay proposal, the Committee
Proxy Statement 4757
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did not make specific adjustments toListed below are the design2020 Compensation Study comparator group and the 2019 revenues and enterprise values for each company.
| Company | | | 2019 Revenue ($mil)* | | | 2019 Enterprise Value ($mil)** | ||
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| Avnet, Inc. | | | $19,519 | | | $5,752 | ||
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| Beacon Roofing Supply, Inc. | | | | $7,105 | | | | $5,119 |
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| CDW Corporation | | | $18,032 | | | $24,165 | ||
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| Eaton Corporation plc | | | | $21,390 | | | | $46,934 |
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| eBay Inc. | | | $10,800 | | | $34,702 | ||
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| Fastenal Company | | | | $5,334 | | | | $21,686 |
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| Genuine Parts Company | | | $19,392 | | | $19,525 | ||
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| HD Supply Holdings, Inc. | | | | $6,047 | | | | $9,120 |
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| Henry Schein, Inc. | | | $9,986 | | | $11,967 | ||
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| Illinois Tool Works Inc. | | | | $14,109 | | | | $63,739 |
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| Insight Enterprises, Inc. | | | $7,731 | | | $3,466 | ||
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| LKQ Corporation | | | | $12,506 | | | | $15,797 |
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| Parker-Hannifin Corporation | | | $14,320 | | | $31,777 | ||
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| Sanmina Corporation | | | | $8,234 | | | | $2,347 |
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| Stanley Black & Decker, Inc. | | | $14,442 | | | $31,550 | ||
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| Univar Solutions Inc. | | | | $9,287 | | | | $7,148 |
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| WESCO International, Inc. | | | $8,359 | | | $3,972 | ||
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| 25th Percentile | | | | $8,234 | | | | $5,752 |
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| 50th Percentile | | | $10,800 | | | $15,797 | ||
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| 75th Percentile | | | | $14,442 | | | | $31,550 |
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| W.W. Grainger, Inc. | | | $11,486 | | | $20,551 | ||
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| Percent Rank | | | | 53% | | | | 59% |
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The Compensation Committee reviewed and approved the comparator group and considered the findings of the 2020 Compensation Study in conjunction with a tally sheet listing the potential value of all compensation available for the NEOs. The Compensation Committee concluded that the NEOs' earned and potential awards for 2020 were consistent with the Company's compensation programs.pay philosophy, Company and individual performance, and market practices (as reflected in the 2020 Compensation Study). The next Compensation Study and comparator group validation is scheduled to take place in 2018.2021.
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Base salaries are intended to provide an appropriate level of fixed compensation to attract and retain executives. Base salaries are determined after a detailed evaluation of individual performance, competitive market levels, and executive experience.
Annual base salary adjustments are considered and implemented to reflect individual performance, contribution and experience, and to maintain market competitiveness. The 2017 Compensation Study showed that, on average, the Company's base salaries for NEOs were approximately 14% above the market median.
Base salary increases for the NEOs, with the exception of Messrs. Ryan and Macpherson, are reviewed and approved by both the Chairman of the Board and the CEO before they are presented to the Compensation Committee. In approving recommendations, the Committee reviews these recommendations in conjunction with its independent compensation consultant.
The compensation awarded to Messrs. Ryan and Macpherson was determined by the Board with assistance from the Compensation Committee and its independent compensation consultant. The Compensation Committee reviews and approves the corporate goals and objectives relevant to Messrs. Ryan and Macpherson's compensation and evaluates each individual's performance in light of those goals and objectives. Together with the other independent directors (as directed by the Board), the Compensation Committee determined and approved Messrs. Ryan and Macpherson's compensation level based on this evaluation, in executive session without members of management present.
Following the annual performance management review process (which is similar to the process in which all employees participate), base salaries are reviewed and adjusted (if appropriate) to reflect individual and Company performance with goals set in alignment with the Grainger Edge, base salaries for comparable positions from market studies, experience, tenure, fairness and internal equity.
BasedBase salary increases for the NEOs, with the exception of Mr. Macpherson, are reviewed and approved by the Chairman of the Board and CEO before they are presented to the Compensation Committee for review and recommendation to the Board. The Compensation Committee reviews these recommendations in conjunction with its independent compensation consultant.
The compensation awarded to Mr. Macpherson was determined by the independent directors with assistance from the Compensation Committee and its independent compensation consultant. The Compensation Committee reviews and approves the corporate goals and objectives relevant to Mr. Macpherson's compensation and evaluates his performance in light of those goals and objectives. The Compensation Committee recommended, and the independent directors approved in executive session without management present, Mr. Macpherson's compensation level based on this evaluation.
During the process outlined above and as a resultearly stages of leadership changes, onthe pandemic, the Company decided to defer for three months paying the annual company-wide merit increases planned for April 1, 2017, Mr. Ryan's base salary was decreased to $800,000 (–33.0%) and Mr. Macpherson's base salary was increased to $1,030,000 (+3.0%).
2020 until July 1, 2020. In addition, the followingCompany's executive leadership team voluntarily elected temporary base salary adjustments were madereductions for the other NEOssecond quarter of 2020 with a 50% reduction for the Chairman and CEO and 20% for the executive leadership (including NEOs). Salaries were reinstated and certain salaries were increased effective AprilJuly 1, 2017:2020 as follows:
Name | | 2019 Annualized Base Salary | | Annualized Base Salary Effective 7/1/2020 | | Annualized Base Salary Percent Change (3) | | Actual 2020 Base Salary Increase Percent (4) | | |||||||||||
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D.G. Macpherson | $1,060,900 | $1,060,900 | 0% | –9% | ||||||||||||||||
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| Thomas B. Okray | | $715,000 | | $730,000 | | 2% | | 0% | |||||||||||
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John L. Howard | $715,000 | $720,000 | 1% | –1% | ||||||||||||||||
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| Paige K. Robbins (1) | | $570,000 | | $570,000 | | 0% | | –1% | |||||||||||
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Deidra C. Merriwether (2) | $475,000 | $530,000 | 0% | –1% | ||||||||||||||||
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48Proxy Statement www.grainger.com59
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Annual incentives are intended to provide an appropriate level of variable compensation to encourage executives to achieve annual results that create shareholder value without encouraging excessive risk taking.
NEOs are eligible to receive short-term cash-based incentives on the achievement of specified annual Company-wide financial performance measures set forth in the Company Management Incentive Program (MIP). The Company structures the MIP to motivate performance that balances short-term and long-term results and aligns the interests of management with shareholders.
Each NEO's target incentive award under the annual incentive program is based on a review of competitive market practice and is designed to approximate a market value that is generally at the median of the comparator group.
The following table displays the 20172020 MIP target (program and payment)payment applicable to each NEO.
| Name | | 2017 Target Incentive (as a % of base salary) | | Program | | Actual Payment (as a % of the target) | | | 2020 Target Incentive (as a % of base salary) | | | Performance Results (as a % of the target) | | |||||||||
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| James T. Ryan | 130%* | Company | 94% | |||||||||||||||||||
D.G. Macpherson (1) | | | 150% | | | 84% | | |||||||||||||||
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| D.G. Macpherson | | 125% | | Company | | 94% | ||||||||||||||||
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| Ronald L. Jadin | 85% | Company | 94% | |||||||||||||||||||
Thomas B. Okray (2) | | | | 95% | | | | 0% | | |||||||||||||
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| John L. Howard | | 75% | | Company | | 94% | | | 80% | | | 84% | | |||||||||
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| Joseph C. High | 75% | Company | 94% | |||||||||||||||||||
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| Paige K. Robbins | | 60%** | | Company | | 94% | | | | 80% | | | | 84% | | |||||||
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Deidra C. Merriwether | | | 80% | | | 84% | | |||||||||||||||
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The Compensation Committeefinal payout is based as a percentage of the NEO's annualized base salary as of December 31, 2020 and management perform a thorough analysis in setting financial measures and goals for thetotal Company results. The 2020 MIP to ensure the program appropriately balanceswas based on the Company's objectives, is aligned with long-term shareholder interest,2020 Adjusted ROIC (see Appendix B) and has appropriateyear-over-year daily sales growth. The Company determined the payment earned for ROIC and effective risk-mitigating components. While the measures and goals are clearly aligned with the Company's strategy, they also accountpayment earned for current economic conditions. The combination of sales growth, and ROIC performance, as well as threshold, target, and maximum payment levels, serves to mitigate risk to the Company's shareholders.two amounts were added together:
MIP Payment = (ROIC Performance + Sales Growth Performance)
The Company believes the design of the annual incentive program createssupports the creation of shareholder value andas it encourages performance by focusingmanagement to focus on profitable sales growth and ROIC. The basic framework of the MIP has been in place for more than ten10 years, although specific objectives and performance target levels have been modified on a year-by-year basis in light of the current economic and competitive environment. This framework was selected to align with Company strategy and to balance sales growth with profitability, efficiency, expense management, and asset management. ROIC reflects how effectively management uses Company assets and is generally defined by the Company as pre-tax operating earnings divided by net working assets. Year-over-year daily sales growth is determined by
Proxy Statement 49
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year-over-year results. Acquisitions and divestitures that occur during the year are not included in the calculation of daily sales growth or ROIC. These measures are consistent with the Company's objective of growing profitably over time, which it believes is closely linked with shareholder value creation.
The 2017 Company MIP was based on the Company's ROIC and year-over-year daily sales growth. The Company determined the payment earned for ROIC and the payment earned for sales growth, and the two amounts were added together:60 www.grainger.com
Table of ContentsMIP Payment = (Sales Growth Performance + ROIC Performance)
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The following table shows variousthe performance and payout scenarios that were established at the beginning of the year:year for 2020:
| ROIC Performance | | % Payout* | | | % Payout (2) | |||
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| <19.10% | 0% | |||||||
| < 14.3% | | | 0% | |||||
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| 19.10% | | 50% | ||||||
| 28.1% | | | | 40% | ||||
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| 22.2%** | 81% | |||||||
| 29.5% to 29.8% | | | 50% | |||||
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| ³24.10% | | 100% | ||||||
| 31.3% | | | | 60% | ||||
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| 45.1% | | | 100% | |||||
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| Daily Sales Growth Performance | | % Payout* | | | % Payout (2) | |||
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| £3.50%** | 0% | |||||||
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| 4.87% | | 25% | ||||||
| 3.2% | | | | 40% | ||||
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| 4.5 to 4.9% | | | 50% | |||||
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| ³9.00% | | 100% | ||||||
| 6.0% | | | | 60% | ||||
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| 19.8% | | | 100% | |||||
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The Company believes that it establishes ROIC and sales growth and ROIC targets that are rigorous and provide an appropriate level of motivation. Under the Termsterms and Conditionsconditions of the MIP, the Committee has the discretion to adjust the reported financial results for incentive plan purposes to correct for any unusual circumstances, both positive and negative, that might affect ROIC or sales growth. For 2017,However, as noted earlier, the Compensation Committee adjusted ROICdid not elect to modify or exercise discretion for existing 2020 NEO compensation programs, including the impact of certain itemsMIP. After reviewing several factors, including financial performance relative to peers and pay for performance alignment, the Committee concluded that the Company believes are not indicative of ongoing operations relating to (1) corporate restructuring efforts in the U.S., Canadaoriginal construct and Other Business segments; (2) closure of operations in Colombia; (3) decreasing the Company's pre-tax reserve for resolving tax, freight, and miscellaneous billing issues relating to government contracts with the General Services Administration; and (4) accounting adjustments related to customer unclaimed property to reflect the Company's operating performance during the year. A more detailed discussion of these items is included in Part II, Item 6 to the Consolidate Financial Statements, of the Company's most recent Annual Report on Form 10-K. The net effect of these adjustments increased the Company MIP payout from 81% to 94% of target.
Incentive amounts paid to Messrs. Ryan, Macpherson, Jadin, Howard, High, and Ms. Robbins were based on the performance targets established for the 2017 MIP and were maderemained appropriate under a separate
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annual incentive program described in the 2015 Incentive Plan. This program is intended to qualify annual incentives for tax deductibility under Section 162(m) of the Internal Revenue Code (Section 162(m)). Under the program, the Committee allocates a portion of an incentive pool to each participant. The pool is funded with 5% of the Company's net earnings and the independent members of the Board have the authority to make specific awards. The sum of the individual participants' percentages may not be greater than 100% of the pool. The independent members of the Board may use their discretion to reduce these amounts but may not increase them. Consistent with prior years, the independent members of the Board used their discretion to reduce the amounts to yield payments equal to those that would have made using the same financial target and measures as the 2017 MIP.
Consistent with current practice, the 2018 MIP will continue to utilize daily sales growth along with ROIC as performance measures and all NEOs will be aligned to the Company MIP.conditions.
The Company annually provides annual long-term incentives to NEOs and other key managers in order to align with the following elements of the Company's strategy to improve shareholder value:to:
The Company's long-term incentives for NEOs consist of stock options and performance shares and are provided under shareholder-approved incentive plans. In 2017, in response to market practice, the Company changed the long term incentive mix from 70% stock options and 30% performance shares to 50% stock options and 50% performance shares. Providing a mix of different types of equity awards is consistent with market practice for senior executives. Using both stock options and performance shares provides incentives to drive shareholder value creation and the three year vesting schedule aids in executive retention.
The target number of shares provided for stock options and performance share awards is designed to approximate an economic value that targets the median of the compensation comparator group for comparable jobs. The Compensation Committee annually establishes the target value of the award based on the executive's position. The actual award may be adjusted up or down to reflect individual performance. The value is converted to shares using the 200-day average stock price as of January 31 in the year of grant. The use of the 200-day average to calculate the number of shares is intended to smooth stock price volatility that can distort the number of shares awarded.
Proxy Statement 51
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Stock Options
The Company's stock options provide the right to purchase Company stock at a specified price over a ten-year term with three-year cliff vesting. They are intended to directly link management's and shareholders' interests by tying a substantial portion of long-term incentives to stock price appreciation. The ten-year term is designed to focus the NEOs on long-term value creation. Three-year cliff vesting encourages meaningful retention before an executive can realize any value created by stock price appreciation. Stock option repricing is not permitted under any of the Company's equity incentive plans. Stock options are awarded at an exercise price equal to the closing price of the Company's common stock reported on the business day of the grant.
Performance Shares
The Company's performance share program provides the NEOs and other executives with a potential share payout depending on sales growth and ROIC achievement over a three-year cycle. The actual number of shares paid to an NEO can range from 0% to 200% of the target number of performance shares awarded. The Compensation Committee (with the assistance of its independent compensation consultant) and management perform a thorough analysis in setting the financial measures and goals for a three-year performance cycle that begins January 1 of the first year. The sales growth component is measured at the end of the cycle's third year and the ROIC component is measured at the end of the third year based on the three-year average. These measurement dates reinforce a long term focus. Dividend equivalents are not paid on performance shares. Due to the three-year cycle that each award covers, the Company has three performance share cycles ongoing at all times.
2015-2017 Performance Share Cycle
For the 2015-2017 performance share cycle, the 2017 sales target of $12.2 billion was established when 2014 sales were $10.0 billion. The Company's net sales in 2017 above a $10.6 billion threshold would have determined the number of shares earned, while vesting remained dependent on meeting a three
52 www.grainger.com
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year average ROIC hurdle of 18%. The payout of the target performance share awards for this program cycle would have been made according to the following table:
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2016-2018 Performance Share Cycle
For the 2016-2018 performance share cycle, the program was designed to reward for achievement based on a three-year average ROIC and 2018 sales. The sales goal was established when 2015 sales were $10.0 billion. The Company's average adjusted ROIC performance over the three-year period ending in 2018 and net sales in 2018 will determine the number of shares earned. The payout of the target performance share awards for this program cycle will be made according to the following table:
3-Year Average ROIC | % Payout* | |||
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£21.6% | 0% | |||
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Three-year average ROIC at or above 26% or sales at or above $12.2 billion in 2018 can independently achieve 100% of the target award. Achieving both will yield 200% of the target award. This award will remain at risk through 2018.
The Compensation Committee selected these performance measures because they balance sales growth with long-term profitability, expense management, and asset management and align with objectives established in the annual incentive program. The Committee may use different sales growth and ROIC objectives and targets from year to year to maximize alignment with then-current business objectives and to reflect economic conditions.
Proxy Statement 5361
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| | | Executive Compensation |
2017-2019The Company's long-term incentives for NEOs are provided under shareholder-approved incentive plans. The target number of shares granted to the NEOs is designed to approximate the median economic value of the compensation comparator group or applicable survey data for comparable jobs. The Compensation Committee annually establishes the target value of the award based on the executive's position. The actual award may be adjusted up or down to reflect individual performance.
After careful review and consideration informed by the Company's engagement with shareholders following the 2019 Say on Pay voting results, the Company retired its prior long-term incentive program comprised of 50% Performance Share CycleRestricted Stock Units (PRSUs) and 50% stock options; with the final grant of stock options and PRSUs occurring in 2019. In response to shareholder input and a review of market practice, the Company's 2020 program uses a mix of 50% PSUs and 50% RSUs. Beginning with the 2020 equity grants, the Company also adjusted the methodology for calculating the number of shares to both directors and grant-eligible employees from a 20-day average stock price ended January 31 to a 20-day average stock price ended March 31 to better reflect market practice and to reduce short-term volatility between the value used to convert shares and the stock price value on the day of grant.
2020 NEO Long-Term Incentives Overview
The structure of the 2017 Performance Share Program is similarlong-term incentives provided to the 2016 program. It is driven by total Company sales achieved in 2019 and 3-year average ROIC. The payout will be made by adding the results of the following two tables:NEOs during 2020 are summarized as follows:
3-Year Average ROIC | | % Payout | ||
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£19.1% | 0% | |||
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21.6% | | 50% | ||
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³24.0% | 100% | |||
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| Award | | | Weight | | | Vesting | | | Performance Measure | |||
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| Performance Share Units (PSUs) | | | 50% | | | Three-year cliff vesting contingent on performance | | | U.S. share gain, endless assortment businesses' revenue growth, and adjusted operating margin (1) percentage, with each metric equally weighted. | |||
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| Restricted Stock Units (RSUs) | | | | 50% | | | | Three-year graded vesting | | | | Grant allocated based on individual performance; long-term value based on appreciation in stock price. |
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As noted earlier, the Compensation Committee did not elect to modify or exercise discretion for existing 2020 NEO compensation programs, including the long-term incentive program. The Company continuously evaluates its long-term incentive program against its objective to provide appropriate incentives to drive long-term shareholder value creation, align management with the Company's strategic initiatives, and remain responsive to market practice.
2020 Performance Share Units (PSUs)
The Company's 2020 Performance Share Unit program provides the NEOs and other executives with a potential share payout depending on U.S. share gain, endless assortment businesses' revenue growth, and adjusted operating margin(1) achievement over a three-year cycle measured at the end of the third year based on the period average. The Compensation Committee (with the assistance of its independent compensation consultant) and management perform a thorough analysis in setting the financial measures and threshold, target, and maximum goals for a three-year performance cycle that begins January 1 of the first year. No dividend equivalents are paid on PSUs. The Compensation Committee may use different objectives and targets from year to year to maximize alignment with then-current business objectives and to reflect economic conditions.
62 www.grainger.com
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Executive Compensation | | | |
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The Company believes that these metrics are essential to gaining share and achieving profitable growth and are the appropriate performance measures to align with our pay for performance philosophy. This award will remain at risk through 2023.
2020 Restricted Stock Units (RSUs)
The Company's RSU program provides the NEOs and other executives with RSUs denominated in units of common stock with grants allocated based on individual performance. RSUs align NEO's and other executives' interests with stock price movement over time and three-year vesting encourages meaningful retention.
2018-2020 Performance Restricted Stock Unit (PRSUs)
The Company's 2018 PRSU program vested in 2020. The 2018 PRSU program was designed to provide NEOs and other executives with a potential share payout depending on ROIC achievement over a three-year cycle with the actual number of shares paid to an NEO being either 0% or 100% of the target number of PRSUs awarded. The ROIC component was measured at the end of the third year based on the three-year average. These measurement dates reinforced a long-term focus. No dividend equivalents were paid on PRSUs.
The 2018 PRSU Program focused on maintaining profitability over a three-year period and retaining key talent during our pricing initiative. Vesting was based on achieving total Company three-year average ROIC threshold at or above 18%, as shown in the table below.
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Three-yearThe 2018-2020 Adjusted Average ROIC was 28.6%. Accordingly, the profitability threshold was achieved, and participants earned 100% of their target. The Compensation Committee has approved the Company's calculation of 2018-2020 Adjusted Average ROIC for purposes of the 2018-2020 PRSU cycle.
The last grant under the PRSU program was made in 2019, with the same features as the 2018 program. The 2019 PRSU program focuses on maintaining a threshold level of profitability over a three-year period. Vesting is based on achieving total Company three-year average ROIC at or above 24% or sales at or above $12.24 billion in 2019 can independently achieve 100% of18%, consistent with the target award. Achieving both will yield 200% of the target award.2018 PRSU program design. This award will remain at risk through 2019.2021.
Changing Long-Term Incentive Vehicle for 2018Proxy Statement 63
In 2018, the Company changed the mix
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| | | Executive Compensation |
As of December 31, 2017,2020, all officers subject to stock ownership guidelines, including the NEOs, are in compliance with the guidelines.
The Company continues to believe that requiring executive ownership of Company stock creates alignment between executives and shareholders and encourages executives to act to increase shareholder value. In 1996, the Company established stock ownership guidelines for its NEOs and other officers. In 2011, the Company increased the minimum ownership requirement for the CEO from
54 www.grainger.com
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5x base salary to 6x and established a retention ratio for equity awards. The stock ownership guidelines for the current NEOs are as follows:
NEO | | | Minimum Ownership Requirement as a Percentage of Base Salary | | | Currently in Compliance? | |||||
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| | | | 3x | | | | Yes | |||
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These stock ownership guidelines must be met within three years of being appointed an officer or assuming a new position and are reviewed annually by the Board. NEOs are required to hold net shares realized from exercised option shares and other stock awards until ownership requirements are met. Officers who fail to achieve these ownership levels will not receive future equity-basedbe allowed to sell shares received from the vesting of equity awards until they comply with the guidelines. Shares owned directly by the officer (including those held as a joint tenant or as a tenant in common), RSUs, shares owned in a self-directed IRA, and certain shares owned or held for the benefit of a spouse or minor children, PRSUs, and RSUs are counted toward meeting the guidelines. Stock options (whether vested or unvested) and performance share awards are not counted toward meeting the ownership guidelines.
It is the Company's long-term goal for executives to also meet a second ownership requirement that is expressed in outright ownership (in actual shares and/or deferred vested shares). The Company has implemented a required 25% after-tax share retention ratio for NEOs. Upon receiving shares from the Company following the exercise or settlement of equity awards, if NEOs do not hold outright ownership of shares worth the required ownership multiple, they will be required to retain 25% of the shares received from all such equity awards (net of any shares used to satisfy tax withholding obligations and net of exercise price) until the stock ownership guidelines are met with shares owned outright.
Hedging and Pledging Prohibition
The Company's Business Conduct Guidelines (which are available under "Governance" in the GovernanceInvestor Relations section of Grainger'sour website atwww.grainger.com/investorhttp://invest.grainger.com/) prohibit employees and the Board of Directors from engaging in any financial arrangement (including, without limitation, short sales, put and call options and short sales)options) that establish a short position in Company stock and are designed to hedge or offset, aany decrease in market value. Effective January 1, 2013, by policy,value of the Company's (or its subsidiaries') equity securities. Company officers and directorsDirectors are also prohibited from pledging any Company stock at any amount as collateral for a loan or for a margin account. No Directors or executive officers have hedged or pledged any of the shares beneficially owned by them.
The other components of the Company's compensation program for NEOs are substantially similar to those available for most of the Company's other employees, other than the benefits discussed in this section. This includes the same health and welfare benefits and the same retirement profit sharing
Proxy Statement64 55www.grainger.com
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Executive Compensation | | | |
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The other components of the Company's compensation program for NEOs are substantially similar to those available for most of the Company's other employees. This includes the same health and welfare benefits and the same performance-based profit sharing contribution methodology that is applied to the U.S.-based employees who are retirement profit sharing participants. The Company provides Supplemental Profit Sharing Plans solely to maintain an equal percentage of retirement profit sharing compensation contribution to approximately 160149 employees, including NEOs, who would be subject to contribution or compensation limitations imposed on qualified plans by the Internal Revenue Code. The Company does not provide any other supplemental retirement benefits to its NEOs or other employees based in the United States.
Profit sharing is the primary Company-sponsored retirement vehicle for U.S.-based employees. Profit sharing aligns the interests of the Company's employees, management, and shareholders asFor 2020, the Company's annual contribution to retirement profit sharing is based on ROIC. TheUnder the terms of the Profit Sharing Plan, the Company contributes a minimum of 8% of payroll to the plan and provides employees the opportunity to share in the success of the Company beyond this amount onlyfor additional contribution if a threshold return on capital is achieved.
The Company's Profit Sharing Plan includes a 401(k) feature for all U.S.-based employees, including the NEOs. TheOf the 8% Company will contributeminimum contribution, the first 3% of pay to the 401(k) feature and this amount(which is funded from the retirement profit sharing pool. As mentioned above, the minimum Company contribution is 8% of pay with the first 3% goingpool) will go into the 401(k). Effective January 1, 2021, the Retirement Savings Plan replaced the Company's Profit Sharing Plan as the primary Company-sponsored retirement vehicle for U.S.-based employees. The Retirement Savings Plan provides for a 6% Company contribution to the 401(k) plan.
Effective April 2011, the Company requires that the NEOs and certain other Company officers have periodic physical examinations that are paid for by the Company. The Company believes that periodic physical exams are important to maintainhelpful in maintaining the effectiveness of its executive talent. There are currently 12seven participants in the program.
Effective December 31, 2009, the Company discontinued its executive death benefit program for executives hired or promoted after this date. The NEOs (except for Mr. HighMessrs. Macpherson and Ms. Robbins) and certain other Company officersHoward have grandfathered participation in the Company's former Executive Death Benefit Plan.Plan that was discontinued effective December 31, 2009. The beneficiary of a participant who dies while employed by the Company is entitled to a taxable benefit of 120 monthly payments of 50% of the participant's monthly compensation, calculated on the basis of salary and target annual incentive. UnlessThe Company's policy is that, unless offered to other Company employees, the Companyit will not make payments, grants, or awards following the death of an executive in the form of unearned salary or unearned bonuses, accelerated vesting or the continuation in force of unvested equity grants, awards or ungrantedun-granted equity, perquisites, and other payments or awards made in lieu of compensation.
NEOsMr. Howard has grandfathered participation in the Company's Voluntary Salary and Incentive Deferral Plan, which was discontinued effective December 31, 2016 (the Voluntary Salary and Incentive Deferral Plan). Participants of this plan were eligiblepreviously able to be reimbursed fordefer up to $10,000 in financial services in 2017. Reimbursement for financial services was discontinued following the 2017 program. The financial service reimbursements were fully taxable50% of their base salary and not grossed-upup to cover taxes. 85% of their bonus through this plan.
Officers are allowed the business use of corporate aircraft, andwhich is chartered by the Company from a third party provider on an as-needed basis, while Mr. Macpherson is allowed personal use of corporate aircraft, subject to reimbursement of the full cost of use. Officers also are allowed the business use of a car and driver, while each of Messrs. Ryan andMr. Macpherson is also allowed personal use of a car and driver, subject to reimbursement of the incremental cost of use. These benefits represent a cost-effective method of allowing the Company's top executives to more effectively use their time. All other benefits, including the retirement profit sharing contribution percentages and various welfare benefits provided to U.S. NEOs and other executive officers, are comparable to those provided to the majority of salaried and hourly U.S.-based Company employees.
56 www.grainger.com
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Name and Principal Position | | Year | | Salary | | Bonus | | Stock Awards (1) | | Option Awards (2) | | Non-Equity Incentive Plan Comp. (3) | | Change in Pension Value and NQDC Earnings | | All Other Comp. (4) | | Total | ||||||||||||||||||
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(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||
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James T. Ryan | 2017 | $697,986 | $0 | $0 | $4,900,261 | $620,400 | $0 | $165,998 | $6,384,645 | |||||||||||||||||||||||||||
Former Chairman of the Board | 2016 | $1,183,263 | $0 | $2,100,137 | $3,512,151 | $1,162,143 | $0 | $187,006 | $8,144,700 | |||||||||||||||||||||||||||
| 2015 | $1,150,169 | $0 | $2,266,070 | $3,063,077 | $715,165 | $0 | $333,106 | $7,527,587 | ||||||||||||||||||||||||||||
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D.G. Macpherson | | 2017 | | $1,022,500 | | $0 | | $2,634,042 | | $1,643,409 | | $1,210,250 | | $0 | | $456,158 | | $6,966,359 | ||||||||||||||||||
Chairman of the Board & | | 2016 | | $875,000 | | $0 | | $2,511,744 | | $1,070,785 | | $796,875 | | $0 | | $284,128 | | $5,538,532 | ||||||||||||||||||
Chief Executive Officer | | 2015 | | $725,750 | | $0 | | $2,322,855 | | $669,245 | | $350,400 | | $0 | | $293,893 | | $4,362,143 | ||||||||||||||||||
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Ronald L. Jadin | 2017 | $743,541 | $0 | $910,056 | $567,735 | $598,447 | $0 | $158,779 | $2,978,558 | |||||||||||||||||||||||||||
Sr.Vice President & Chief | 2016 | $721,885 | $0 | $486,615 | $813,818 | $463,577 | $0 | $99,328 | $2,585,223 | |||||||||||||||||||||||||||
Financial Officer | 2015 | $701,625 | $0 | $2,122,365 | $708,618 | $288,048 | $0 | $183,108 | $4,003,764 | |||||||||||||||||||||||||||
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John. L. Howard | | 2017 | | $694,042 | | $0 | | $622,544 | | $388,434 | | $492,889 | | $0 | | $261,308 | | $2,459,217 | ||||||||||||||||||
Sr.Vice President & | | 2016 | | $673,828 | | $0 | | $332,937 | | $556,807 | | $381,808 | | $0 | | $93,599 | | $2,038,979 | ||||||||||||||||||
General Counsel | | 2015 | | $654,900 | | $0 | | $1,368,565 | | $452,741 | | $237,240 | | $0 | | $133,159 | | $2,846,605 | ||||||||||||||||||
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Joseph C. High | 2017 | $511,250 | $0 | $478,897 | $298,806 | $363,075 | $0 | $105,031 | $1,757,059 | |||||||||||||||||||||||||||
Sr.Vice President & Chief | 2016 | $495,250 | $0 | $256,192 | $428,323 | $281,250 | $0 | $68,099 | $1,529,114 | |||||||||||||||||||||||||||
People Officer | 2015 | $478,050 | $0 | $758,863 | $393,682 | $173,160 | $0 | $98,949 | $1,902,704 | |||||||||||||||||||||||||||
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Paige K. Robbins | | 2017 | | $484,185 | | $0 | | $203,537 | | $126,996 | | $268,464 | | $0 | | $94,921 | | $1,178,103 | ||||||||||||||||||
Sr.Vice President, Grainger | | 2016 | | $441,769 | | $0 | | $202,621 | | $171,356 | | $191,813 | | $0 | | $51,835 | | $1,059,394 | ||||||||||||||||||
Chief Digital Officer | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
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It also includes the incremental cost of the frozen Executive Death Benefit Program ($0, $223,943, $0, and $117,900 for Messrs. Ryan, Macpherson, Jadin, and Howard, respectively) and the cost of executive physicals ($3,950, $4,025, $4,025, $4,400, $0, and $4,025 for Messrs. Ryan, Macpherson, Jadin, Howard, High, and Ms. Robbins, respectively).
Mr. Ryan retired from the Company effective October 1, 2017; therefore, he will receive a cash payment from the Executive Death Benefit Plan in the amount of $1,246,680 six months following his retirement date.
Proxy Statement 5765
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| | | Executive Compensation |
Compensation Tables |
Summary Compensation Table
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| | | | | | | | | | | | | | | | All Other | | All Other | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| | | | | | | | | | | | | | | | Awards: | | Awards: | | Exercise | | Date Fair | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | Estimated Possible Payouts | | Estimated Future Payouts | | No. of | | No. of | | or Base | | Value of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | Under Non-Equity Incentive | | Under Equity Incentive | | Shares of | | Securities | | Price of | | Stock and | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name and Principal Position* | | | Year | | | Salary(1) | | | Bonus | | | Stock Awards(2) | | | Option Awards(3) | | | Non-Equity Incentive Plan Comp.(4) | | | Change in Pension Value and NQDC Earnings | | | All Other Comp.(5) | | | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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| D. G. Macpherson | | | 2020 | | | $969,091 | | | $0 | | | $4,761,519 | | | $0 | | | $1,303,316 | | | $0 | | | $441,452 | | | $7,475,378 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Chairman of the Board & | | | 2019 | | | $1,053,175 | | | $0 | | | $2,901,333 | | | $2,081,098 | | | $1,074,161 | | | $0 | | | $555,360 | | | $7,665,127 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Chief Executive Officer | | | 2018 | | | $1,030,000 | | | $0 | | | $4,086,887 | | | $3,100,501 | | | $1,842,464 | | | $0 | | | $395,992 | | | $10,455,844 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| | Grant | | Plan Awards (1) | | Plan Awards (2) | | Stock or | | Underlying | | Option | | Option | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||
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Name | | Date | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | Units | | Options (3) | | Awards (4) | | Awards (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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James T. Ryan | 1/1/17 | $0 | $660,000 | �� | $1,320,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/1/17 | 0 | 0 | 0 | $0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Thomas B. Okray | | | | 2020 | | | | $714,827 | | | | $0 | | | | $1,571,661 | | | | $0 | | | | $0 | | | | $0 | | | | $99,158 | | | | $2,385,646 | ||||||||||||||||||||||||||||||||||||||||||||
| Sr. Vice President & | | | | 2019 | | | | $711,250 | | | | $0 | | | | $885,359 | | | | $634,924 | | | | $482,625 | | | | $0 | | | | $162,886 | | | | $2,877,044 | ||||||||||||||||||||||||||||||||||||||||||||
| Chief Financial Officer | | | | 2018 | | | | $498,630 | | | | $0 | | | | $2,450,059 | | | | $0 | | | | $567,000 | | | | $0 | | | | $795,845 | | | | $4,311,534 | ||||||||||||||||||||||||||||||||||||||||||||
| 4/3/17 | 0 | $231.20 | $4,900,261 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
D.G. Macpherson | | 1/1/17 | | $0 | | $1,287,500 | | $2,575,000 | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 1/1/17 | | | | | | | | 0 | | 12,139 | | 24,278 | | | | | | | | $2,634,042 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 4/3/17 | | | | | | | | | | | | | | | | 36,415 | | $231.20 | | $1,643,409 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Ronald L. Jadin | 1/1/17 | $0 | $636,646 | $1,273,292 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/1/17 | 0 | 4,194 | 8,388 | $910,056 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/3/17 | 12,580 | $231.20 | $567,735 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
John. L. Howard | | 1/1/17 | | $0 | | $524,350 | | $1,048,700 | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 1/1/17 | | | | | | | | 0 | | 2,869 | | 5,738 | | | | | | | | $622,544 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 4/3/17 | | | | | | | | | | | | | | | | 8,607 | | $231.20 | | $388,434 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Joseph C. High | 1/1/17 | $0 | $386,250 | $772,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/1/17 | 0 | 2,207 | 4,414 | $478,897 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| John L. Howard | | | 2020 | | | $709,442 | | | $0 | | | $1,000,279 | | | $0 | | | $483,840 | | | $0 | | | $324,391 | | | $2,517,952 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sr. Vice President & | | | 2019 | | | $712,500 | | | $0 | | | $565,733 | | | $405,659 | | | $429,000 | | | $0 | | | $397,717 | | | $2,510,609 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| General Counsel | | | 2018 | | | $703,533 | | | $0 | | | $796,617 | | | $604,376 | | | $749,486 | | | $0 | | | $185,994 | | | $3,040,006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/3/17 | 6,621 | $231.20 | $298,806 | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Paige K. Robbins | | 1/1/17 | | $0 | | $285,600 | | $571,200 | | | | | | | | | | | | | | | | | | 2020 | | | | $563,423 | | | | $0 | | | | $619,357 | | | | $0 | | | | $383,040 | | | | $0 | | | | $77,708 | | | | $1,643,528 | ||||||||||||||||||||||
| Sr. Vice President Chief Technology, | | | | 2019 | | | | $531,667 | | | | $0 | | | | $270,519 | | | | $194,040 | | | | $342,000 | | | | $0 | | | | $110,016 | | | | $1,448,242 | ||||||||||||||||||||||||||||||||||||||||||||
| Merchandising, Marketing and Strategy Officer | | | | 2018 | | | | $508,500 | | | | $0 | | | | $846,722 | | | | $262,778 | | | | $516,375 | | | | $0 | | | | $118,944 | | | | $2,253,319 | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 1/1/17 | | | | | | | | 0 | | 938 | | 1,876 | | | | | | | | $203,537 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| Deidra C. Merriwether | | | 2020 | | | $523,885 | | | $0 | | | $523,887 | | | $0 | | | $356,160 | | | $0 | | | $61,577 | | | $1,465,509 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sr. Vice President & President, | | | 2019 | | | $469,491 | | | $0 | | | $221,411 | | | $158,748 | | | $204,844 | | | $0 | | | $80,479 | | | $1,134,972 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| North America Sales & Service | | | 2018 | | | $448,922 | | | $0 | | | $293,843 | | | $210,209 | | | $305,749 | | | $0 | | | $100,035 | | | $1,358,758 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 4/3/17 | | | | | | | | | | | | | | | | 2,814 | | $231.20 | | $126,996 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
5866 www.grainger.com
| | | |
Executive Compensation | | | |
| | |
Grants of Plan-Based Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | All Other | | | | ||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock | | | Grant | ||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Awards: | | | Date Fair | ||
| | | | | | | | | | | | Estimated Future Payouts | | | Estimated Future Payouts | | | No. of | | | Value of | ||||||||||||||||||||
| | | | | | | | | | | | Under Non-Equity Incentive | | | Under Equity Incentive | | | Shares of | | | Stock and | ||||||||||||||||||||
| | | | Grant | | | Approval | | | Plan Awards (1) | | | Plan Awards (2) | | | Stock or | | | Option | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | | Date | | | Date | | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | | | Units | | | Awards (3) | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
D. G. Macpherson | | | | | | | $0 | | | $1,551,566 | | | $3,103,133 | | | | | | | | | | | |||||||||||||||||
| | | 4/1/20 | | | 2/18/20 | | | | | | | | | 0 | | | 9,925 | | | 19,850 | | | | | $2,295,156 | |||||||||||||||
| | | 4/1/20 | | | 2/18/20 | | | | | | | | | | | | | | | 9,925 | | | $2,466,363 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Thomas B. Okray | | | | | | | | | | | | $0 | | | | $684,375 | | | | $1,368,750 | | | | | | | | | | | | | | | | | | | | |
| | | | 4/1/20 | | | | 2/18/20 | | | | | | | | | | | | | | | | 0 | | | | 3,276 | | | | 6,552 | | | | | | | | $757,575 |
| | | | 4/1/20 | | | | 2/18/20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,276 | | | | $814,086 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
John L. Howard | | | | | | | $0 | | | $576,000 | | | $1,152,000 | | | | | | | | | | | |||||||||||||||||
| | | 4/1/20 | | | 2/18/20 | | | | | | | | | 0 | | | 2,085 | | | 4,170 | | | | | $482,156 | |||||||||||||||
| | | 4/1/20 | | | 2/18/20 | | | | | | | | | | | | | | | 2,085 | | | $518,123 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Paige K. Robbins | | | | | | | | | | | | $0 | | | | $456,000 | | | | $912,000 | | | | | | | | | | | | | | | | | | | | |
| | | | 4/1/20 | | | | 2/18/20 | | | | | | | | | | | | | | | | 0 | | | | 1,291 | | | | 2,582 | | | | | | | | $298,544 |
| | | | 4/1/20 | | | | 2/18/20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,291 | | | | $320,814 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deidra C. Merriwether | | | | | | | $0 | | | $424,000 | | | $848,000 | | | | | | | | | | | |||||||||||||||||
| | | 4/1/20 | | | 2/18/20 | | | | | | | | | 0 | | | 1,092 | | | 2,184 | | | | | $252,525 | |||||||||||||||
| | | 4/1/20 | | | 2/18/20 | | | | | | | | | | | | | | | 1,092 | | | $271,362 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Proxy Statement 67
| | | |
| | | Executive Compensation |
Outstanding Equity Awards at Fiscal Year-End
| | Option Awards | | Stock Awards | | | | Option Awards | | | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | No. of Securities Underlying Unexercised Options Exercisable (1) | | No. of Securities Underlying Unexercised Options Unexercisable (1) | | Equity Incentive Plan Awards: No. of Securities Underlying Unexercised Unearned Options | | Option Exercise Price (2) | | Option Expiration Date (3) | | No. of Shares or Units of Stock That Have Not Vested (4) | | Market Value of Shares or Units of Stock That Have Not Vested (5) | | Equity Incentive Plan Awards: No. of Unearned Shares, Units or Other Rights That Have Not Vested | | Equity Incentive Plan Awards: Market or Payout of Unearned Shares, Units or Other Rights That Have Not Vested (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name* | | | No. of Securities Underlying Unexercised Options Exercisable (1) | | | No. of Securities Underlying Unexercised Options Unexercisable (1) | | | Equity Incentive Plan Awards: No. of Securities Underlying Unexercised Unearned Options | | | Option Exercise Price (2) | | | Option Expiration Date (3) | | | No. of Shares or Units of Stock That Have Not Vested | | | Market Value of Shares or Units of Stock That Have Not Vested (4) | | | Equity Incentive Plan Awards: No. of Unearned Shares, Units or Other Rights That Have Not Vested (5) | | | Equity Incentive Plan Awards: Market or Payout of Unearned Shares, Units or Other Rights That Have Not Vested (6) | |||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
James T. Ryan | 96,400 | $149.02 | 4/26/21 | 0 | $0 | 0 | $0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
D. G. Macpherson | | | 15,741 (7) | | | | | | | $245.86 | | | 4/23/2023 | | | 9,925 (14) | | | $4,052,775 | | | 52,904 (15) | | | $21,602,819 | |||||||||||||||||||||||||||||||||||||||||||||||
| 78,100 | $204.01 | 4/24/22 | �� | | | 12,266 (8) | | | | | | | $248.22 | | | 4/29/2024 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||
| 70,465 | $245.86 | 4/23/23 | | | 14,380 (9) | | | | | | | $231.88 | | | 3/31/2025 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||
| 56,558 | $248.22 | 9/29/23 | | | 23,827 (10) | | | | | | | $234.38 | | | 3/31/2026 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||
| 65,816 | $231.88 | 9/29/23 | | | 36,415 (11) | | | | | | | $231.20 | | | 4/2/2027 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||
| 78,152 | $234.38 | 9/29/23 | | | | | 46,063 (12) | | | | | $276.64 | | | 4/1/2028 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||
| 108,581 | $231.20 | 9/29/23 | | | 10,221 (11) | | | 20,442 (13) | | | | | $311.26 | | | 3/31/2029 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
D.G. Macpherson | | 24,876 | | | | | | $149.02 | | 4/26/21 | | 0 | | $0 | | 35,001 | | $8,268,986 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Thomas B. Okray | | | | 3,118 (11) | | | | | | | | | | | | $311.26 | | | | 3/31/2029 | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| | 16,923 | | | | | | $204.01 | | 4/24/22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | 15,741 | | | | | | $245.86 | | 4/23/23 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 12,266 | | | | | | $248.22 | | 4/29/24 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | 14,380 | | | | $231.88 | | 3/31/25 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | 23,827 | | | | $234.38 | | 3/31/26 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | 36,415 | | | | $231.20 | | 4/2/27 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Ronald L. Jadin | 29,000 | $108.15 | 4/27/20 | 0 | $0 | 16,395 | $3,873,319 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 25,336 | $149.02 | 4/26/21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19,527 | $204.01 | 4/24/22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 16,790 | $245.86 | 4/23/23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13,084 | $248.22 | 4/29/24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 15,226 | $231.88 | 3/31/25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 18,109 | $234.38 | 3/31/26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12,580 | $231.20 | 4/2/27 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
John. L. Howard | | 19,500 | | | | | | $108.15 | | 4/27/20 | | 0 | | $0 | | 10,840 | | $2,560,950 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 14,990 | | | | | | $149.02 | | 4/26/21 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 11,716 | | | | | | $204.01 | | 4/24/22 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 11,543 | | | | | | $245.86 | | 4/23/23 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 7,360 | | | | | | $248.22 | | 4/29/24 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | 9,728 | | | | $231.88 | | 3/31/25 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | 12,390 | | | | $234.38 | | 3/31/26 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | 8,607 | | | | $231.20 | | 4/2/27 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Joseph C. High | 10,415 | $204.01 | 4/24/22 | 0 | $0 | 6,954 | $1,642,883 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8,920 | $245.86 | 4/23/23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John L. Howard | | | 9,728 (9) | | | | | | | $231.88 | | | 3/31/2025 | | | | | | | 7,071 (16) | | | $2,887,372 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 7,360 | $248.22 | 4/29/24 | | | 12,390 (10) | | | | | | | $234.38 | | | 3/31/2026 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||
| 8,459 | $231.88 | 3/31/25 | | | 8,607 (11) | | | | | | | $231.20 | | | 4/2/2027 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||
| 9,531 | $234.38 | 3/31/26 | | | | | 8,979 (12) | | | | | $276.64 | | | 4/1/2028 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||
| 6,621 | $231.20 | 4/2/27 | | | 1,992 (11) | | | 3,985 (13) | | | | | $311.26 | | | 3/31/2029 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||
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Paige K. Robbins | | 3,840 | | | | | | $149.02 | | 4/26/21 | | 3,213 | | $759,071 | | 1,929 | | $455,726 | | | | 2,330 (7) | | | | | | | | | | | | $245.86 | | | | 4/23/2023 | | | | 4,079 (17) | | | | $1,665,619 | | | | 3,546 (18) | | | | $1,447,974 | ||||||||||||||||||
| | 2,790 | | | | | | $204.01 | | 4/24/22 | | | | | | | | | | | | 2,127 (8) | | | | | | | | | | | | $248.22 | | | | 4/29/2024 | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | 2,330 | | | | | | $245.86 | | 4/23/23 | | | | | | | | | | | | 3,122 (9) | | | | | | | | | | | | $231.88 | | | | 3/31/2025 | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | 2,127 | | | | | | $248.22 | | 4/29/24 | | | | | | | | | | | | 3,813 (10) | | | | | | | | | | | | $234.38 | | | | 3/31/2026 | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | | | 3,122 | | | | $231.88 | | 3/31/25 | | | | | | | | | | | | 2,814 (11) | | | | | | | | | | | | $231.20 | | | | 4/2/2027 | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | | | 3,813 | | | | $234.38 | | 3/31/26 | | | | | | | | | | | | | | | | 3,904 (12) | | | | | | | | $276.64 | | | | 4/1/2028 | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | | | 2,814 | | | | $231.20 | | 4/2/27 | | | | | | | | | | | | 953 (11) | | | | 1,906 (13) | | | | | | | | $311.26 | | | | 3/31/2029 | | | | | | | | | | | | | | | | | ||||||||||||||||||
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Deidra C. Merriwether | | | 2,127 (8) | | | | | | | $248.22 | | | 4/29/2024 | | | 3,398 (19) | | | $1,387,539 | | | 1,872 (20) | | | $764,412 | |||||||||||||||||||||||||||||||||||||||||||||||
| | | 2,496 (9) | | | | | | | $231.88 | | | 3/31/2025 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | 2,860 (10) | | | | | | | $234.38 | | | 3/31/2026 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | 2,318 (11) | | | | | | | $231.20 | | | 4/2/2027 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | 3,123 (12) | | | | | $276.64 | | | 4/1/2028 | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | 779 (11) | | | 1,560 (13) | | | | | $311.26 | | | 3/31/2029 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||||||||
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Executive Compensation | | | |
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Option Exercises and Stock Vested
| | Option Awards Exercised | | Stock Awards Vested | |||||||||||||
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Name* | | No. of Shares Acquired on Exercise (1) | | Value Realized on Exercise (2) | | No. of Shares Acquired on Vesting | | Value Realized on Vesting (3) | ||||||||
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D. G. Macpherson | 16,923 | $2,573,054 | 13,232 | $4,479,297 | ||||||||||||
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Thomas B. Okray | | 0 | | $0 | | 2,868 | | $767,649 | ||||||||
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John L. Howard | 18,903 | $2,967,889 | 10,024 | $3,220,114 | ||||||||||||
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Paige K. Robbins | | 6,630 | | $1,085,012 | | 2,273 | | $691,468 | ||||||||
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Deidra C. Merriwether | 0 | $0 | 3,629 | $1,267,577 | ||||||||||||
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Proxy Statement 5969
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| | | Executive Compensation |
Option Exercises and Stock Vested
| | Option Awards Exercised | | Stock Awards Vested | |||||||||||||
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Name | | No. of Shares Acquired on Exercise (1) | | Value Realized on Exercise (2) | | No. of Shares Acquired on Vesting (3) | | Value Realized on Vesting (4) | ||||||||
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James T. Ryan | 187,000 | $24,832,488 | 10,877 | $2,184,251 | ||||||||||||
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D.G. Macpherson | | 26,000 | | $2,712,648 | | 4,841 | | $1,124,322 | ||||||||
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Ronald L. Jadin | 30,000 | $5,027,238 | 1,789 | $415,495 | ||||||||||||
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John. L. Howard | | 21,000 | | $2,920,447 | | 1,348 | | $313,073 | ||||||||
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Joseph C. High | 0 | $0 | 1,348 | $313,073 | ||||||||||||
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Paige K. Robbins | | 0 | | $0 | | 5,665 | | $1,122,536 | ||||||||
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Pension BenefitsNonqualified Deferred Compensation
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Name | | | Plan | | | Executive Contributions in Last FY | | | Company Contributions in Last FY (1) | | | Aggregate Earnings in Last FY (2) | | | Aggregate Withdrawals/ Distributions | | | Aggregate Balance at Last FYE (3) | ||||||
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D. G. Macpherson | | | SPSP & SPSP II | | | $0 | | | $284,975 | | | $369,061 | | | $0 | | | $2,630,671 | ||||||
| | | Total | | | $0 | | | $284,975 | | | $369,061 | | | $0 | | | $2,630,671 | |||||||
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Thomas B. Okray | | | | SPSP & SPSP II | | | | $0 | | | | $135,996 | | | | $55,400 | | | | $0 | | | | $321,769 |
| | | | Total | | | | $0 | | | | $135,996 | | | | $55,400 | | | | $0 | | | | $321,769 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
John L. Howard | | | Frozen Salary & Incentive Deferral | | | $0 | | | $0 | | | $387,162 | | | $0 | | | $3,781,006 | ||||||
| | | SPSP & SPSP II | | | $0 | | | $128,795 | | | $295,413 | | | $0 | | | $2,814,453 | |||||||
| | | Deferred RSUs | | | $0 | | | $0 | | | $1,396,400 | | | $0 | | | $8,166,800 | |||||||
| | | Total | | | $0 | | | $128,795 | | | $2,078,975 | | | $0 | | | $14,762,260 | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Paige K. Robbins | | | | SPSP & SPSP II | | | | $0 | | | | $83,426 | | | | $84,447 | | | | $0 | | | | $542,326 |
| | | | Total | | | | $0 | | | | $83,426 | | | | $84,447 | | | | $0 | | | | $542,326 | |
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Deidra C. Merriwether | | | SPSP & SPSP II | | | $0 | | | $53,889 | | | $48,078 | | | $0 | | | $287,709 | ||||||
| | | Total | | | $0 | | | $53,889 | | | $48,078 | | | $0 | | | $287,709 | |||||||
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6070 www.grainger.com
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Executive Compensation | | | |
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Nonqualified Deferred Compensation
Name | | Plan | | Executive Contributions in Last FY (1) | | Company Contributions in Last FY (2) | | Aggregate Earnings in Last FY (3) | | Aggregate Withdrawals/ Distributions | | Aggregate Balance at Last FYE (4) | ||||||||||||
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James T. Ryan | SPSP & SPSP II | $0 | $0 | $0 | $0 | $0 | ||||||||||||||||||
| Deferred RSUs | $0 | $0 | $80,000 | $0 | $4,725,000 | |||||||||||||||||||
| Total | $0 | $0 | $80,000 | $0 | $4,725,000 | |||||||||||||||||||
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D.G. Macpherson | | SPSP & SPSP II | | $0 | | $80,997 | | $182,817 | | $0 | | $1,245,383 | ||||||||||||
| | Total | | $0 | | $80,997 | | $182,817 | | $0 | | $1,245,383 | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Ronald L. Jadin | Voluntary Salary & Incentive Deferral | $436,931 | $44,178 | $764,242 | $0 | $5,590,725 | ||||||||||||||||||
| SPSP & SPSP II | $0 | $20,366 | $139,161 | $0 | $1,012,787 | |||||||||||||||||||
| Total | $436,931 | $64,544 | $903,402 | $0 | $6,603,512 | |||||||||||||||||||
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John. L. Howard | | Voluntary Salary & Incentive Deferral | | $110,084 | | $15,071 | | $345,050 | | $0 | | $3,026,297 | ||||||||||||
| | SPSP & SPSP II | | $0 | | $40,225 | | $204,129 | | $0 | | $1,894,449 | |||||||||||||
| | Deferred RSUs | | $0 | | $0 | | $80,000 | | $0 | | $4,725,000 | |||||||||||||
| | Total | | $110,084 | | $55,297 | | $549,179 | | $0 | | $4,920,746 | |||||||||||||
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Joseph C. High | SPSP & SPSP II | $0 | $34,234 | $36,841 | $0 | $306,821 | ||||||||||||||||||
| Total | $0 | $34,234 | $36,841 | $0 | $306,821 | |||||||||||||||||||
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Paige K. Robbins | | SPSP & SPSP II | | $0 | | $24,310 | | $31,256 | | $0 | | $201,807 | ||||||||||||
| | Total | | $0 | | $24,310 | | $31,256 | | $0 | | $201,807 | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
For Messrs. Jadin and Howard, this represents make-whole contributions to the SPSPs that would otherwise have been made had they not voluntarily deferred salary in 2017.
Messrs. Jadin and Howard and other officers voluntarily participated in this plan in 2017. None of the amounts reported in this column are reported in the 2017 Summary Compensation Table.
Proxy Statement 61
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EMPLOYMENT CONTRACTS, CHANGE IN CONTROL AGREEMENTS, AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Employment Agreements, Change in Control, and Termination of Employment Arrangements |
Employment Agreements
The Company does not maintain any employment agreements with its Named Executive Officers.NEOs.
Change in Control—Equity Plans
Under the terms of the Company's 2015 Incentive Plan, which is the source for all equity awards granted after April 2015, "double trigger" vesting provisions apply to all equity awards (that is,(i.e., both a change in control occurs and a participant is involuntarily terminated within one year of the change in control).
Change in Control Agreements
The Company has 2x Change in Control Agreements (the CIC(CIC Agreements) with a number of executives, including the NEOs. These CIC Agreements are intended to ensure that in the event of a pending or threatened change in control, the Company retains its management and that their full attention is focused on the best interests of the Company and its shareholders and not on the uncertainty of their future employment prospects under those circumstances.
Deductibility of Executive Compensation; Accounting ConsiderationsCompensation
Section 162(m) of the Internal Revenue Code (Section 162(m)) generally disallows a federal income tax deduction to a public company for compensation over $1 million per fiscaltaxable year paid to the Company's NEOs. CompensationPrior to the Tax Cuts and Jobs Act of 2017 (TCJA), compensation that qualifiesqualified as "performance-based" compensation iswas not subject to the deductibility limit. A Company objective isEffective for taxable years beginning after December 31, 2017, subject to attemptcertain transition relief, the TCJA eliminated this exception. Stock Options granted to maximize the deductibility of compensation under Section 162(m)our NEOs prior to the extent doing so is reasonable and consistent with Company strategies and goals. AwardsNovember 2, 2017 under the annual incentive plan in which2015 Incentive Plan qualify for the NEOs participate,transition relief, and gains on exercises of such stock options and shares received as the result of performance share awards and PRSUs are considered to be "performance-based" compensation not subject to the Section 162(m)$1 million deductibility limit. Awards of RSUs are not exempt fromAny other compensation paid to our NEOs, including awards other than the grandfathered stock options, is subject to the Section 162(m) deductibility limit and all or a portion of these awardssuch compensation may be nondeductible when the awards vest.nondeductible. While the tax treatment applicable to the Company's compensation programs was taken into accountconsidered, the Company intends to authorize compensation that will not be deductible under Section 162(m) as it believes doing so is in designing those programs, it was not a significant consideration.the best interest of the Company and its shareholders.
Proxy Statement 71
| | | |
| | | Executive Compensation |
Accounting Considerations
Upon vesting, settlement, or maturity, equity awards under the 2015 Incentive Plan and predecessor plans are distributed in the form of shares of the Company's common stock. Under the Accounting Standards Codification (ASC) 718 (formerly Financial Accounting Standard (FAS)FAS 123R), these types of awards are considered equity awards. As a result, the total amount of compensation expense to be recorded for the awards is based on the fair value of the awards on the grant date. This fair value is
62 www.grainger.com
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then recorded over the vesting period, usually three years, and is recorded to compensation expense and as an increase in paid-in capital. The amount of compensation expense is not subsequently adjusted for changes in the Company's share price, but it is adjusted for the estimated number of shares to be distributed. If an equity award is forfeited, all previously recorded compensation expensed is reversed. While the accounting treatment described above was considered in the development of the long-term incentive program, it was not a material consideration.
Compensation Recoupment Policy (Claw backs)(Claw-Backs)
In 2018,connection with using long-term incentives as a method to align management and shareholder interests, the Company expanded in its executiveprovides an annual equity award agreement that sets forth the terms of the award, including continued employment, and compliance with the Company's Business Conduct Guidelines and applicable laws and regulations. In addition, the Company's equity award agreements contain recoupment (or claw-back) provisions that specify situations granting the Board discretion to recoup both cash incentives and equity compensation from the NEOs and other employees.
Under the recoupment terms of these agreements, (or claw back) for equity and annual incentive payments made to officers. Thethe Company may recover incentive compensation (cash or equity) compensation:
This policy applies to any incentive compensation awarded or paid to an employee at a time when he or she is an officer. Subsequent changes in status, including retirement or termination of employment, do not impact the Company's rights to recover compensation under this policy.
72 www.grainger.com
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Executive Compensation | | | |
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Termination
The Company does not have employment contracts and does not maintain severance programs for its NEOs. The executive's CIC Agreements provide the potential for a lump sum payment following a change in control. Except for a limited period of time following a change in control, the NEOs are not entitled to severance upon termination.
Retirement
The definition of retirement eligibility is the same for all U.S. employees. Under this definition, an employee is retirement-eligible upon attaining any of the following:
Mr. Howard and Mr. High areis the only NEO who is retirement-eligible. Mr. Ryan retired as of October 1, 2017.
The Company provides the following upon retirement for all retirement-eligible employees, including NEO's:NEOs:
Proxy Statement 63
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The following tables illustrate the potential incremental payments and benefits that could be received by the NEOs upon his or her retirement, death or disability or upon a termination or change in control of the Company. The amounts shown belowin the following tables assume that any such terminationretirement, death, disability or change in control, as applicable, was effective as of December 31, 20172020 and thus only includes amounts earned through such date. However, the actual amounts that would be paid out under each circumstance can only be determined at the time of separation.
64 www.grainger.com
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Other Potential Post-Employment Payments
Macpherson, D.G.
Type of Payment | | Involuntary Termination without Cause or Voluntary Termination with Good Reason ($) | | Involuntary Termination for Cause or Voluntary Termination without Good Reason ($) | | Retirement (9) ($) | | Death ($) | | Disability ($) | | Change In Control Only ($) | | Change In Control and Termination without Cause or with Good Reason ($) | ||||||||||||||
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Cash Compensation | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Severance (1) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $5,191,200 | ||||||||||||||
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Management Incentive Program | ||||||||||||||||||||||||||||
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Prorated Annual Bonus Guarantee | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||
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Long-Term Incentives | ||||||||||||||||||||||||||||
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Stock Options | | | | | | | | |||||||||||||||||||||
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Unvested and Accelerated Awards (2) | $0 | $0 | $0 | $291,293 | $291,293 | $291,293 | $291,293 | |||||||||||||||||||||
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Restricted Stock Units | | | | | | | | |||||||||||||||||||||
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Unvested and Accelerated Awards (3) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
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Performance Shares | | | | | | | | |||||||||||||||||||||
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Unvested and Accelerated Awards (4) | $0 | $0 | $0 | $1,924,571 | $1,924,571 | $5,773,714 | $5,773,714 | |||||||||||||||||||||
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Retirement Benefits | | | | | | | | |||||||||||||||||||||
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Profit Sharing | ||||||||||||||||||||||||||||
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Unvested and Accelerated Awards (5) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||
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Deferred Compensation | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
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Benefits | | | | | | | | |||||||||||||||||||||
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Continuation of Health & Welfare Benefits (6) | $0 | $0 | $0 | $0 | $0 | $0 | $35,285 | |||||||||||||||||||||
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Life Insurance and Death Benefit Payout (7) | | $0 | | $0 | | $0 | | $7,318,733 | | $0 | | $0 | | $1,503,167 | ||||||||||||||
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Disability Payments | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
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Perquisites and Tax Payments | | | | | | | | |||||||||||||||||||||
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Excise Tax & Gross-Up | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
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Outplacement (8) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $154,500 | ||||||||||||||
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Total | $0 | $0 | $0 | $9,534,597 | $2,215,864 | $6,065,007 | $12,949,159 | |||||||||||||||||||||
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Proxy Statement 6573
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| | | Executive Compensation |
Other Potential Post-Employment Payments
Macpherson, D. G.
Type of Payment | | | Retirement (7) ($) | | | Death ($) | | | Disability ($) | | | Change In Control Only ($) | | | Change In Control and Termination without Cause or with Good Reason ($) | |||||
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Cash Compensation | | | | | | | | | | | ||||||||||
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Cash Severance | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $5,851,925 |
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Long-Term Incentives | | | | | | | | | | | ||||||||||
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Stock Options | | | | | | | | | | | | | | | | |||||
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Unvested and Accelerated Awards (1) | | | $0 | | | $8,051,006 | | | $8,051,006 | | | $8,051,006 | | | $8,051,006 | |||||
| | | | | | | | | | | | | | | | | | | | | |
Restricted Stock Units | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (2) | | | $0 | | | $4,052,775 | | | $4,052,775 | | | $4,052,775 | | | $4,052,775 | |||||
| | | | | | | | | | | | | | | | | | | | | |
Performance Shares | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (3) | | | $0 | | | $21,602,819 | | | $21,602,819 | | | $21,602,819 | | | $18,563,238 | |||||
| | | | | | | | | | | | | | | | | | | | | |
Benefits | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | |
Continuation of Health & Welfare Benefits (4) | | | $0 | | | $0 | | | $0 | | | $0 | | | $34,418 | |||||
| | | | | | | | | | | | | | | | | | | | | |
Life Insurance and Death Benefit Payout (5) | | | | $0 | | | | $11,812,269 | | | | $0 | | | | $0 | | | | $2,365,490 |
| | | | | | | | | | | | | | | | | | | | | |
Perquisites and Tax Payments | | | | | | | | | | | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Outplacement (6) | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $159,135 |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | $0 | | | $45,518,869 | | | $33,706,600 | | | $33,706,600 | | | $39,077,988 | |||||
| | | | | | | | | | | | | | | | | | | | | |
6674 www.grainger.com
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Executive Compensation | | | |
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Jadin, RonaldOkray, Thomas B.
Type of Payment | | Involuntary Termination without Cause or Voluntary Termination with Good Reason ($) | | Involuntary Termination for Cause or Voluntary Termination without Good Reason ($) | | Retirement (9) ($) | | Death ($) | | Disability ($) | | Change In Control Only ($) | | Change In Control and Termination without Cause or with Good Reason ($) | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Compensation | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Severance (1) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $3,103,836 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Incentive Program | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prorated Annual Bonus Guarantee | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Long-Term Incentives | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock Options | | | | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (2) | $0 | $0 | $0 | $163,930 | $163,930 | $163,930 | $163,930 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Restricted Stock Units | | | | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (3) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Shares | | | | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (4) | $0 | $0 | $0 | $534,004 | $534,004 | $1,602,011 | $1,602,011 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retirement Benefits | | | | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Profit Sharing | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (5) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred Compensation | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Benefits | | | | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Continuation of Health & Welfare Benefits (6) | $0 | $0 | $0 | $0 | $0 | $0 | $35,285 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Life Insurance and Death Benefit Payout (7) | | $0 | | $0 | | $0 | | $4,773,706 | | $0 | | $0 | | $1,066,939 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Disability Payments | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Perquisites and Tax Payments | | | | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Excise Tax & Gross-Up | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Outplacement (8) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $112,349 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $0 | $0 | $0 | $5,471,640 | $697,934 | $1,765,942 | $6,084,351 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mr. Okray resigned as Senior Vice President and Chief Financial Officer of the Company does not maintain any agreements with its named executive officers that guarantee the payment of cash severance upon termination, except in the event of a change in control followed by termination without cause or with good reason.
For plan year 2020, Mr. JadinOkray is entitled to receivea final Profit Sharing Plan contribution of $17,100 and Supplemental Profit Sharing Plan II contribution of $82,058 in settlement of performance shares, a number of shares of common stock, equal toMarch 2021 under the number of performance shares that vest based upon the Company's average return on invested capital, asexisting provisions of the date of retirement, death or disability, multiplied byrespective plans. Under plan rules, the prorated amount of timeentire Supplemental Profit Sharing II account balance will be transferred to Mr. Jadin was employed by the Company during the performance period. Mr. Jadin is not retirement eligible as of December 31, 2017.
Proxy Statement 6775
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| | | Executive Compensation |
Howard, John L.
Type of Payment | | | Retirement(7) ($) | | | Death ($) | | | Disability ($) | | | Change In Control Only ($) | | | Change In Control and Termination without Cause or with Good Reason ($) | |||||
| | | | | | | | | | | | | | | | | | | | | |
Cash Compensation | | | | | | | | | | | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Cash Severance | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $2,903,040 |
| | | | | | | | | | | | | | | | | | | | | |
Long-Term Incentives | | | | | | | | | | | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Stock Options | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards(1) | | | $1,569,398 | | | $1,569,398 | | | $1,569,398 | | | $1,569,398 | | | $1,569,398 | |||||
| | | | | | | | | | | | | | | | | | | | | |
Restricted Stock Units | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards(2) | | | $0 | | | $0 | | | $0 | | | $0 | | | $0 | |||||
| | | | | | | | | | | | | | | | | | | | | |
Performance Shares | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards(3) | | | $2,887,372 | | | $2,887,372 | | | $2,887,372 | | | $2,887,372 | | | $2,248,830 | |||||
| | | | | | | | | | | | | | | | | | | | | |
Benefits | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | |
Continuation of Health & Welfare Benefits(4) | | | $407,331 | | | $0 | | | $0 | | | $0 | | | $34,418 | |||||
| | | | | | | | | | | | | | | | | | | | | |
Life Insurance and Death Benefit Payout(5) | | | | $664,678 | | | | $5,859,866 | | | | $0 | | | | $0 | | | | $1,372,643 |
| | | | | | | | | | | | | | | | | | | | | |
Perquisites and Tax Payments | | | | | | | | | | | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Outplacement(6) | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $108,000 |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | $5,528,779 | | | $10,316,636 | | | $4,456,770 | | | $4,456,770 | | | $8,236,330 | |||||
| | | | | | | | | | | | | | | | | | | | | |
68 www.grainger.com
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Howard, John
Type of Payment | | Involuntary Termination without Cause or Voluntary Termination with Good Reason ($) | | Involuntary Termination for Cause or Voluntary Termination without Good Reason ($) | | Retirement (9) ($) | | Death ($) | | Disability ($) | | Change In Control Only ($) | | Change In Control and Termination without Cause or with Good Reason ($) | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Compensation | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Severance (1) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $2,740,602 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Incentive Program | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prorated Annual Bonus Guarantee | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Long-Term Incentives | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock Options | | | | | | | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (2) | $0 | $0 | $109,146 | $109,146 | $109,146 | $109,146 | $109,146 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Restricted Stock Units | | | | | | | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (3) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Shares | | | | | | | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (4) | $0 | $0 | $365,321 | $365,321 | $365,321 | $1,095,964 | $1,095,964 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retirement Benefits | | | | | | | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Profit Sharing | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (5) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred Compensation | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Benefits | | | | | | | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Continuation of Health & Welfare Benefits (6) | $0 | $0 | $450,772 | $0 | $0 | $0 | $35,285 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Life Insurance and Death Benefit Payout (7) | | $0 | | $0 | | $399,954 | | $4,215,051 | | $0 | | $0 | | $1,029,797 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Disability Payments | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Perquisites and Tax Payments | | | | | | | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Excise Tax & Gross-Up | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Outplacement (8) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $104,870 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $0 | $0 | $1,325,191 | $4,689,518 | $474,467 | $1,205,110 | $5,115,664 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Proxy Statement 69
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budget/insured rates projected forward throughout the two years using 9% health and 6% dental annual trends as well as a 5% annual discount factor.
7076 www.grainger.com
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Executive Compensation | | | |
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High, JosephRobbins, Paige K.
Type of Payment | | Involuntary Termination without Cause or Voluntary Termination with Good Reason ($) | | Involuntary Termination for Cause or Voluntary Termination without Good Reason ($) | | Retirement (9) ($) | | Death ($) | | Disability ($) | | Change In Control Only ($) | | Change In Control and Termination without Cause or with Good Reason ($) | | | Retirement (7) ($) | | | Death ($) | | | Disability ($) | | | Change In Control Only ($) | | | Change In Control and Termination without Cause or with Good Reason ($) | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Compensation | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Severance | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $2,018,800 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $2,298,240 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Incentive Program | ||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||
Prorated Annual Bonus Guarantee | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||
Long-Term Incentives | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock Options | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (2) | $0 | $0 | $88,225 | $88,225 | $88,225 | $88,225 | $88,225 | |||||||||||||||||||||||||||||||||||||||||
Unvested and Accelerated Awards (1) | | | $0 | | | $699,191 | | | $699,191 | | | $699,191 | | | $699,191 | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Restricted Stock Units | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (3) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||||||||||||||||||||||
Unvested and Accelerated Awards (2) | | | $0 | | | $1,665,619 | | | $1,665,619 | | | $1,665,619 | | | $1,665,619 | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Shares | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested and Accelerated Awards (4) | $0 | $0 | $281,059 | $281,059 | $281,059 | $843,176 | $843,176 | |||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
Retirement Benefits | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
Profit Sharing | ||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
Unvested and Accelerated Awards (5) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||
Deferred Compensation | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||||||||||||||||||||||
Unvested and Accelerated Awards (3) | | | $0 | | | $1,447,974 | | | $1,447,974 | | | $1,447,974 | | | $1,052,598 | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Continuation of Health & Welfare Benefits (6) | $0 | $0 | $0 | $0 | $0 | $0 | $35,258 | |||||||||||||||||||||||||||||||||||||||||
Continuation of Health & Welfare Benefits (4) | | | $0 | | | $0 | | | $0 | | | $0 | | | $34,418 | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Life Insurance and Death Benefit Payout (7) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||
Disability Payments | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||||||||||||||||||||||
Life Insurance and Death Benefit Payout (5) | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Perquisites and Tax Payments | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Excise Tax & Gross-Up | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||||||||||||||||||||||
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Outplacement (8) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $77,250 | ||||||||||||||||||||||||||||||||||
Outplacement (6) | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $85,500 | ||||||||||||||||||||||||||||
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Total | $0 | $0 | $369,284 | $369,284 | $369,284 | $931,401 | $3,062,736 | | | $0 | | | $3,812,784 | | | $3,812,784 | | | $3,812,784 | | | $5,835,567 | ||||||||||||||||||||||||||
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Proxy Statement 71
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72 www.grainger.com
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Robbins, Paige
| Type of Payment | | Involuntary Termination without Cause or Voluntary Termination with Good Reason ($) | | Involuntary Termination for Cause or Voluntary Termination without Good Reason ($) | | Retirement (9) ($) | | Death ($) | | Disability ($) | | Change In Control Only ($) | | Change In Control and Termination without Cause or with Good Reason ($) | ||||||||||||||
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| Cash Compensation | ||||||||||||||||||||||||||||
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Cash Severance (1) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $1,768,704 | ||||||||||||||
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| Management Incentive Program | ||||||||||||||||||||||||||||
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Prorated Annual Bonus Guarantee | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||
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| Long-Term Incentives | ||||||||||||||||||||||||||||
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Stock Options | | | | | | | | |||||||||||||||||||||
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Unvested and Accelerated Awards (2) | $0 | $0 | $0 | $34,984 | $34,984 | $34,984 | $34,984 | |||||||||||||||||||||
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Restricted Stock Units | | | | | | | | |||||||||||||||||||||
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Unvested and Accelerated Awards (3) | $0 | $0 | $0 | $759,071 | $759,071 | $759,071 | $759,071 | |||||||||||||||||||||
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Performance Shares | | | | | | | | |||||||||||||||||||||
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Unvested and Accelerated Awards (4) | $0 | $0 | $0 | $116,786 | $116,786 | $350,359 | $350,359 | |||||||||||||||||||||
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| Retirement Benefits | | | | | | | | |||||||||||||||||||||
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Profit Sharing | ||||||||||||||||||||||||||||
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Unvested and Accelerated Awards (5) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||
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Deferred Compensation | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
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| Benefits | | | | | | | | |||||||||||||||||||||
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Continuation of Health & Welfare Benefits (6) | $0 | $0 | $0 | $0 | $0 | $0 | $35,285 | |||||||||||||||||||||
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Life Insurance and Death Benefit Payout (7) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | ||||||||||||||
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Disability Payments | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
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| Perquisites and Tax Payments | | | | | | | | |||||||||||||||||||||
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Excise Tax & Gross-Up | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||||||||||||||
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Outplacement (8) | | $0 | | $0 | | $0 | | $0 | | $0 | | $0 | | $75,600 | ||||||||||||||
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| Total | $0 | $0 | $0 | $910,842 | $910,842 | $1,144,414 | $3,024,003 | |||||||||||||||||||||
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Proxy Statement 73
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budget/insured rates projected forward throughout the two years using 9% health and 6% dental annual trends as well as a 5% annual discount factor.
Ryan, JamesProxy Statement 77
Mr. Ryan retired from
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Merriwether. Deidra C.
| Type of Payment | | | Retirement (7) ($) | | | Death ($) | | | Disability ($) | | | Change In Control Only ($) | | | Change In Control and Termination without Cause or with Good Reason ($) | |||||
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| Cash Compensation | | | | | | | | | | | ||||||||||
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Cash Severance (1) | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $2,136,960 |
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| Long-Term Incentives | | | | | | | | | | | ||||||||||
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Stock Options | | | | | | | | | | | | | | | | |||||
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Unvested and Accelerated Awards (2) | | | $0 | | | $562,744 | | | $562,744 | | | $562,744 | | | $562,744 | |||||
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Restricted Stock Units | | | | | | | | | | | | | | | | |||||
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Unvested and Accelerated Awards (3) | | | $0 | | | $1,387,539 | | | $1,387,539 | | | $1,387,539 | | | $1,387,539 | |||||
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Performance Shares | | | | | | | | | | | | | | | | |||||
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Unvested and Accelerated Awards (4) | | | $0 | | | $764,412 | | | $764,412 | | | $764,412 | | | $429,982 | |||||
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| Benefits | | | | | | | | | | | | | | | | |||||
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Continuation of Health & Welfare Benefits (6) | | | $0 | | | $0 | | | $0 | | | $0 | | | $34,418 | |||||
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Life Insurance and Death Benefit Payout (7) | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $0 |
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| Perquisites and Tax Payments | | | | | | | | | | | ||||||||||
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Outplacement (8) | | | | $0 | | | | $0 | | | | $0 | | | | $0 | | | | $79,500 |
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| Total | | | $0 | | | $2,714,696 | | | $2,714,696 | | | $2,714,696 | | | $4,631,143 | |||||
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7478 www.grainger.com
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Executive Compensation | | | |
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CEO PAY RATIO DISCLOSURE |
Under SEC rules, we are required to calculate and disclose the ratio of the annual total compensation of Mr. Macpherson, Chairman and CEO, to the annual total compensation of the Company's median employee. Further, the median employee should be identified once every three years, unless has been a significant change to its employee population or compensation arrangements that it reasonably believes would result in a significant change in the pay ratio disclosure. As the Company identified the median employee in 2017, a new median employee has been identified for purposes of the 2021 CEO pay ratio disclosure.
Based on the newly identified median employee, the ratio of CEO pay to median employee pay is 116:1 as outlined below. In calculating 2020 total compensation for our median employee and CEO, we included the estimated Company cost of their respective Company-provided health and wellness benefits. The CEO's total compensation reported in the Summary Compensation Table for 2020 is $7,475,378. The CEO's total compensation for purposes of our pay ratio disclosure calculation is $7,485,389, which differs from the total compensation described in the Summary Compensation Table on page 66 of this document by his health and wellness benefits amount. The median employee's estimated 2020 total compensation was $64,355 (which includes compensation of $54,344 and estimated benefits of $10,011.
| | Element | | Chairman and CEO ($) | | Median Employee $ | | ||||||
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| Base Salary | $969,091 | $49,712 | ||||||||||
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| | Stock Awards | | $4,761,519 | | $0 | | ||||||
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| Non-Equity Incentive Plan Compensation | $1,303,316 | $0 | ||||||||||
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| | All Other Compensation | | $441,452 | | $4,632 | | ||||||
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| Estimated Company Health and Wellness Benefits | $10,011 | $10,011 | ||||||||||
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| | Total | | $7,485,389 | | $64,355 | |||||||
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| CEO PAY RATIO | 116:1 | |||||||||||
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As permitted under the SEC rules, in orderthe following process was used to identify ourthe median team member, we usedemployee in 2020:
We utilized thede minimis exemption to exclude approximately 4% The other components of our global workforce, or 920 employees, as reflected below:
In calculating Total Compensationcompensation program for NEOs are substantially similar to those available for most of our median team member and CEO, we includedother employees. This includes the estimated company cost of their respective Company-providedsame health and wellness benefits; thereforewelfare benefits and the CEO's Total Compensation for purposes of this calculation differs fromsame performance-based retirement profit sharing contribution methodology that is applied to the Total Compensation described in the SCT of this document by his health and wellness benefits amount.
The median team member's estimated Total Compensation for 2017 was $63,577 (note that this definition includes compensation of $53,139 and estimated benefits of $10,438). The ratio of CEO pay to median team member pay is 113:1.
Proxy Statement 7579
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| | | Executive Compensation |
The Company is asking its shareholders for their non-binding advisory approval exemption to exclude approximately 4.3% of our global workforce, or 1,015 employees (based on employee data as of the compensation of its Named Executive Officers (Say on Pay)analysis date), as disclosedreflected below:
As described in detail under "Compensation Discussion and Analysis," the Company's compensation program is based upon a philosophy that is applied to all Company employees—to attract and retain the best people and provide appropriate performance-based incentives that encourage them to achieve results that create long-term shareholder value. The Company sets target compensation for the Named Executive Officers to approximate the market median of compensation at companies of similar size and complexity. Employees at all levelscalculation: Canada, Japan, Mexico, United Kingdom, United States (approximately 22,644 employees as of the Company, including its executives, are provided clear incentives to grow the business (Sales Growth) while achieving investment returns (Return on Invested Capital or ROIC) for the Company's shareholders. The compensation program is structured to significantly reward long-term performance while not encouraging excessive risk taking.calculation date) Please read the Compensation Discussion and Analysis/ page 37 for additional details about the compensation
This Say on Pay vote is intended to address the compensation
We are asking our shareholders to vote "FOR" the following advisory resolution at the Company's 2018 annual meeting:
This advisory vote on the compensation of Grainger's Named Executive Officers is determined by the votes of a majority of the shares represented in person or by proxy at the meeting and entitled to vote. Abstentions will have the same effect as votes against the proposal. Broker non-votes will not affect the outcome of the vote.
This Say on Pay vote is advisory and non-binding on the Company, our Board of Directors and the Compensation Committee of the Board. However, the Board of Directors and the Compensation Committee of the Board, which is comprised of independent directors, expect to take into account the outcome of this Say on Pay vote when making future compensation decisions regarding Grainger's Named Executive Officers.
Approval of the proposal requires the affirmative votes of a majority of the shares of Grainger common stock represented in person or by proxy at the meeting and entitled to vote. Abstentions will have the same effect as votes against the proposal.
7680 www.grainger.com
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Executive Compensation | | | |
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This table contains information as of December 31, 2017 about Grainger's equity compensation plans, all of which have been approved by Grainger's shareholders.
| | | | Number of common shares to be issued upon exercise of outstanding stock options warrants, and rights | | Weighted-average exercise price of outstanding stock options, warrants, and rights | | Number of common shares available for future issuance under equity compensation plans (excluding common shares reflected in the first column) | | ||||||||
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| Equity compensation plans approved by shareholders | 2,536,492 (1) | $207.10 (2) | 2,707,024 (3) | |||||||||||||
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| | Equity compensation plans not approved by shareholders | | 0 | | N/A | | 0 | | ||||||||
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| Total | 2,536,492 | $207.10 | 2,707,024 | |||||||||||||
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 | The Company is asking its shareholders for their non-binding advisory approval of the 2020 compensation of its Named Executive Officers (NEOs). At our 2020 Annual Meeting of Shareholders, shareholders provided a clear endorsement of the Company's executive compensation programs with approximately 93% voting in favor of our NEO compensation. As described in the "Compensation Discussion and Analysis" on pages 46, the 2020 NEO compensation programs remain consistent with the program described to shareholders in our 2020 proxy statement and reflects: • Pay for Performance Approach: Our programs align pay with performance in the best interest of our shareholders. • Balanced and Sound Pay Practices: The Company sets target compensation to approximate the market median of companies that are of similar size and complexity and rewards long-term performance while not encouraging excessive risk taking. • Strong Financial Performance: The Company delivered strong operating results despite a challenging environment. • Direct Link to Strategy: NEO pay is tied to near and long-term strategic objectives with the long-term incentive directly tied to gaining share in our U.S. High-Touch Solutions model and propelling sales growth in our Endless Assortment business model over the next several years and our annual incentive program provided NEOs incentives to grow the business (Sales Growth) while achieving investment returns for the Company's shareholders (ROIC). | |
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We are asking our shareholders to vote "FOR" the approval of 392,919 restricted stock units that arethe compensation of the Company's NEOs, as disclosed in the "Compensation Discussion and Analysis" section of this proxy statement, including the related tables, notes and narrative.
While this Say on Pay vote is advisory and non-binding, the Board of Directors and the Compensation Committee of the Board, which is comprised of independent Directors, value the opinions expressed by our shareholders and will consider the outcome of this Say on Pay vote when making future compensation decisions regarding the NEOs.
This Say on Pay vote is intended to be settled byaddress the issuance2020 compensation of the NEOs as disclosed in the "Compensation Discussion and Analysis" as a whole rather than any specific item or amount of executive compensation.
Approval of the proposal requires the affirmative votes a majority of the shares of Grainger common stock on a 1-for-1 basis. It also includes 125,728 director's stock unitspresent or represented by proxy and entitled to be settled upon each director's retirement. Additionally, it includes 84,132 performance shares whichvote at the annual meeting. Abstentions will vest and settle between 2018 and 2023. The number of shares vested is dependent onhave the Company sales and/orsame effect as votes against the three-year average ROIC performance versus target.
Proxy Statement 7781
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| | | Executive Compensation |
The Company is required to seek a shareholder vote on the frequency of the advisory Say on Pay vote every six years. In 2011 and 2017, management recommended an annual advisory Say on Pay vote. The next advisory frequency vote is scheduled for 2023.
This table contains information as of December 31, 2020 about Grainger's equity compensation plans, all of which have been approved by Grainger's shareholders.
| | | | Number of common shares to be issued upon exercise of outstanding stock options warrants, and rights | | Weighted-average exercise price of outstanding stock options, warrants, and rights | | Number of common shares available for future issuance under equity compensation plans (excluding common shares reflected in the first column) | | ||||||||
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| Equity compensation plans approved by shareholders | 1,247,800(1)(2) | $258.15(3) | 2,145,860(4) | |||||||||||||
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| | Equity compensation plans not approved by shareholders | | 0 | | N/A | | 0 | | ||||||||
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| Total | 1,247,800 | $258.15 | 2,145,860 | |||||||||||||
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82 www.grainger.com
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Executive Compensation | | | |
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TRANSACTIONS WITH RELATED PERSONS
Grainger's Business Conduct Guidelines require that conflicts of interest in any form be avoided. The Board has adopted written policies and procedures, to be applied by the Board Affairs and Nominating Committee,BANC, for the review, approval, or ratification of any transactions with related persons. Those policies and procedures apply to any proposed transaction in which Grainger is a participant, the amount involved exceeds $120,000, and any director,Director, executive officer, or significant shareholder or any immediate family member of such a person has a direct or material indirect interest. The policy requires that any such proposed transaction be reviewed by the Board Affairs and Nominating CommitteeBANC to determine, among other things, the benefits of the transaction to Grainger, the availability of other sources of comparable products or services, and whether the terms of the proposed transaction are comparable to those provided to unrelated third parties. The Board Affairs and Nominating CommitteeBANC determined that the Company did not engage in any related person transactions in 2017.2020.
In the ordinary course of its operations during 2017,2020, Grainger engaged in various types of transactions with organizations with which Grainger directorsDirectors are associated in their principal business occupations or otherwise. Specifically, in the ordinary course of its business during 2017,2020, Grainger bought products and/or services from, or sold products and/or services to, companies with which Ms.Mses. Perez and Slavik Williams, and Messrs. Santi, SlavikWatson, and WatsonWhite are or were associated as executive officerssenior executives or otherwise as of December 31, 2017.2020. In no instance did the total amount of the purchases from or sales to any such company during 20172020 represent more than 0.087%0.188% of the consolidated gross revenues of that company for the year or more than 0.228%0.217% of the consolidated gross revenues of Grainger for the year. We believe that such transactions have been conducted on an arms'-length basis and do not represent a material interest to the Directors.
In addition, as part of its overall 20172020 charitable contributions program, Grainger made donations to tax-exempt organizations with which one or more directorsDirectors serve as officers, directors or trustees. In no instance did the total amount of the contributions to any charitable organization exceed $15,000$8,000 during 2017.2020.
78Proxy Statement www.grainger.com83
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VIRTUAL MEETING
How do I attend the virtual Annual Meeting of Shareholders? |
To virtually attend the annual meeting, go to the virtual Annual Meeting Website at www.virtualshareholdermeeting.com/GWW2021; then, you must enter the 16-digit control number found on your proxy card or voting instruction form (the "Control Number").
How do I vote during the virtual meeting? |
You may vote your shares and submit your questions during the virtual annual meeting by entering your Control Number and following the instructions also available on the Annual Meeting Website. You may vote during the virtual meeting by going to www.virtualshareholdermeeting.com/GWW2021.
What is the purpose of this proxy statement? |
This proxy statement relates to the 20182021 annual meeting of shareholders of Grainger, to be held on April 25, 2018,28, 2021, and any adjournment of that meeting to a later date. It contains information intended to help you make your voting decisions. We are sending this proxy statement to you because Grainger's Board of Directors is soliciting your proxy to vote your shares at the meeting. This proxy statement and other proxy-soliciting materials were first sent or made available to shareholders on or about March 15, 2018.18, 2021.
What does it mean if I receive more than one set of proxy materials? |
Receiving multiple sets of proxy-soliciting materials generally means that your Grainger shares are held in different names or in different accounts. You must sign, date and return all proxy forms to ensure that all of your shares are voted.
May I revoke my proxy? |
Yes. You may revoke your proxy at any time before the voting at the meeting. You can do so in one of the following ways:
84 www.grainger.com
Who is entitled to vote? |
Holders of shares of common stock outstanding on Grainger's books at the close of business on March 5, 2018,1, 2021, the record date for the meeting, may vote. There were 56,057,10552,340,993 shares of common stock outstanding on that date.
Proxy Statement 79
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What is the difference between holding shares as "shareholder of record" and as "beneficial owner"? |
If your shares are registered directly in your name with Grainger's transfer agent, Computershare Trust Company, N.A., you are the shareholder of record with respect to those shares and you have the right to instruct us directly how to vote your shares or to vote in person atduring the virtual meeting.
If your shares are held in street name by a brokerage firm, bank, or other nominee, you are the beneficial owner of the shares. Your nominee is required to vote your shares according to your direction.If you do not instruct your nominee how you want your shares voted, your shares cannot be voted for the election of directorsDirectors or on the advisory vote on the compensation of Grainger's Named Executive Officers.Officers (NEOs). Please contact your brokerage firm, bank, or other nominee with instructions to vote your shares for the election of directorsDirectors and on the advisory vote on the compensation of Grainger's Named Executive Officers,NEOs, and on other matters to be considered at the meeting.
If my shares are held in "street name," can my broker vote for me? |
Unless you have given specific voting instructions to your broker, your broker cannot vote your shares on the election of directors,Directors, on the advisory vote related to executive compensation, or on any non-routine matters.
What is the voting standard for each annual meeting agenda items? |
| | Annual Meeting Agenda Item | | Voting Standard | | Frequency of Vote | | Cumulative Voting? | |||||||||
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| Election of Directors | Majority Voting | Annual | Yes | |||||||||||||
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| | Ratification of Independent Auditor | | Majority Voting | | Annual | | No | | ||||||||
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| (Non-binding) Advisory Vote on NEO Compensation ("Say on Pay") | Majority Voting | Annual | No | |||||||||||||
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What is cumulative voting? How many votes do I have? |
You have the right to cumulative voting in the election of directors.Directors. This means that you have a number of votes in the election equal to the number of shares you own multiplied by the number of directorsDirectors being elected. You canmay cast those votes for the nominees as you choose. For example, you may cast all your votes for one nominee, or you may apportion your votes among two or more nominees.
Cumulative voting is only available for Director elections. In any matter other than the election of directors,Directors, each of your shares is entitled to one vote.
Proxy Statement 85
Does Grainger have majority voting for the election of |
Yes. As required under Illinois law, directors areDirectors may only be elected by the votes of a majority of the shares of Grainger common stock present or represented in person or by proxy at the meeting and entitled to vote.vote at the annual meeting. Moreover, in accordance with the Company's Criteria for Membership on the Board of Directors, any directorDirector standing for re-election (including the 1113 nominees standing for election at the annual meeting) who fails to receive the required majority vote is expected to tender his or her resignation for consideration by the Board Affairs and Nominating Committee.BANC. The Board Affairs and Nominating CommitteeBANC will consider the resignation and make a recommendation to the Board of Directors concerning the acceptance or rejection of the resignation. The Board will then take formal action on the Board Affairs and Nominating Committee'sBANC's recommendation within 90 days after the results of the directorDirector election at the annual meeting are certified. Following the Board's decision on the Board Affairs and Nominating Committee'sBANC's recommendation, the Company will publicly disclose the Board's decision.
80 www.grainger.com
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What voting standard applies to the ratification of the appointment of the independent auditor? |
Ratification of the appointment of the independent auditor requires the affirmative votes of a majority of the shares of Grainger common stock present or represented in person or by proxy at the meeting and entitled to vote.vote at the annual meeting.
What voting standard applies to the advisory vote on the compensation of the |
Although the shareholders' vote is advisory and therefore non-binding, the vote on the compensation of the Named Executive Officers—Officers (Say on Pay)—Grainger's sixfive highest paid executive officers whose compensation is discussed in the Compensation Discussion and Analysis section of this proxy statement—is determined by the votes of a majority of the shares of Grainger common stock present or represented in person or by proxy at the meeting and entitled to vote.vote at the annual meeting.
How frequently does Grainger conduct an advisory vote on the compensation of its |
The Board of Directors has determined to hold an advisory vote on the compensation of the Named Executive Officers (Say on Pay) at every annual meeting of shareholders. Shareholders have the opportunity to cast an advisory vote on the frequency of Say on Pay votes at least every six years. At the 2017 annual meeting, the shareholders voted for one year as the frequency of the Say on Pay vote. The next advisory vote on the frequency of the Say on Pay vote will occur at Grainger's 2023 annual meeting.
What if I don't indicate my voting choices? |
If Grainger receives your proxy in time to permit its use at the meeting, your shares will be voted in accordance with the instructions you indicate. If we have received your proxy and you have not indicated otherwise, your shares will be voted as recommended by Grainger's Board. Specifically, your shares will be voted, either individually or cumulatively:
86 www.grainger.com
If you are a beneficial owner and the shares you own are held in street name by a brokerage firm, bank, or other nomineeyou must specifically instruct your nominee how you want your shares voted for the election of directors,Directors on the advisory resolution on the compensation of Grainger's Named Executive Officers, and on the frequency of the shareholder advisory votes on the compensation of Grainger's Named Executive Officers;NEOs; otherwise, your nominee is not allowed to vote your shares.shares. Please contact your brokerage firm, bank, or other nominee with instructions to vote your shares for the election of directorsDirectors and on other matters to be considered at the meeting.
Proxy Statement 81
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How does discretionary voting apply? |
Grainger is not aware of any matter not described in this proxy statement that will be presented for consideration at the meeting. If another matter is properly presented, your shares will be voted on the matter in accordance with the judgment of the person or persons voting the proxy unless your proxy withholds discretionary authority.
What constitutes a quorum at the meeting? |
A majority of the outstanding shares entitled to vote on a matter whethermust be present in person or represented by proxy constitutesat the annual meeting to constitute a quorum for consideration of that matter at the meeting. A quorum is necessary for valid action to be taken on the matter. Your shares will be present by proxy and count toward the quorum if you give us your proxy by telephone, by Internet, or by signing, dating, and returning a proxy form.
How do I vote during the virtual meeting? |
You may vote your shares and submit your questions during the virtual annual meeting by entering your Control Number and following the instructions also available on the Annual Meeting Website. You may vote during the virtual meeting by going to www.virtualshareholdermeeting.com/GWW2021.
Where can I find the voting results? |
We will report the voting results on a Form 8-K within four business days after the end of our annual meeting.
What is the deadline for receipt of shareholder proposals for inclusion in the |
A shareholder who intends to present a proposal at the next annual meeting of shareholders and who wishes the proposal to be included in our proxy materials for that meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (Exchange Act), must submit the proposal in writing to the Corporate Secretary at the address on the notice of virtual annual meeting accompanying this proxy statement. The proposal must be received by Grainger no later than November 15, 2018,18, 2021 and must comply with the applicable SEC rules and other requirements prescribed in our By-laws.
What is the procedure for nomination of |
A qualifying shareholder, or a group of up to 20 qualifying shareholders, owning 3% or more of the Company's outstanding shares of common stock continuously for at least the previous three years may nominate and include in Grainger's proxy statement and proxy card qualifying directorDirector nominees
Proxy Statement 87
constituting up to the greater of two directorsDirectors or 20% of the directorsDirectors then serving on the Board, provided that the shareholder(s) and nominee(s) satisfy the requirements specified in our By-laws.
What is the procedure for other nominations of |
A shareholder entitled to vote for the election of directorsDirectors at an annual meeting and who is a shareholder of record on:
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may directly nominate persons for director,Director or make proposals of other business to be brought before the annual meeting, by providing proper timely written notice to the Corporate Secretary at the address on the notice of virtual annual meeting accompanying this proxy statement.
Our By-laws require that written notice of proposals intended to be presented by a shareholder at the next annual meeting, but that are not intended for inclusion in our proxy statement for that meeting pursuant to Rule 14a-8 of the Exchange Act, be delivered no earlier than December 26, 2018,29, 2021, and no later than January 25, 2019.28, 2022.
Our By-laws also require that written notice of nominees for the election of directorsDirectors intended to be made by a shareholder at the next annual meeting be delivered by no later than the date with respect to submission of shareholder proposals under Rule 14a-8 of the Exchange Act as set forth in the proxy statement for the preceding annual meeting of shareholders, which in this case is November 15, 2018.18, 2021.
To be in proper written form, these notices must include certain information required by our By-laws, including information about the shareholder, any beneficial owner on whose behalf the nomination or proposal is being made, their respective affiliates or associates or others acting in concert with them, and any proposed directorDirector nominee.
A copy of our By-laws is available under "Governance" in the GovernanceInvestor Relations section of Grainger'sour website athttp://www.grainger.com/investorinvest.grainger.com/ or may be obtained free of charge on written request to the Corporate Secretary at the address on the notice of virtual annual meeting accompanying this proxy statementstatement.
INFORMATION NOT INCORPORATED INTO THIS PROXY STATEMENT
The information on our website (http://invest.grainger.com/). is not and shall not be deemed to be a part of this Proxy Statement by reference or otherwise incorporated into any other filings we make with the SEC, except to the extent we specifically incorporate it by reference.
Proxy Statement88 83www.grainger.com
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Appendix A—Categorical Standards for Director Independence | | | |
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APPENDIX A
CATEGORICAL STANDARDS FOR DIRECTOR INDEPENDENCE
Business Transactions. A director'sDirector's independence will not be deemed to be impaired by reason of his or her service as an executive officer of another company that does business with Grainger if in each of the three most recent fiscal years the other company's annual sales to Grainger are less than one percent (1%) of that company's consolidated gross revenues and if in each of the three most recent fiscal years Grainger's sales to the other company are less than one percent (1%) of that company's consolidated gross revenues.
Tax-Exempt Contributions. A director'sDirector's independence will not be deemed to be impaired by reason of his or her service as an officer, directorDirector or trustee of a tax-exempt organization that receives contributions from Grainger if Grainger's contributions to the organization are less than one percent (1%) of the organization's total annual contributions.
A-1 Proxy Statement
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Appendix B—Definitions and Non-GAAP Financial Measures | | | |
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DEFINITIONS AND NON-GAAP FINANCIAL MEASURES
"2018 Adjusted ROIC" means ROIC calculated using operating earnings, adjusted (as reconciled to its most directly comparable GAAP measure in Part II, Item 7 (page 20) of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 28, 2019). The Company's GAAP financial statements are the source for all amounts used in the ROIC calculation. ROIC is calculated using operating earnings divided by net working assets (a five-point average for the year-to-date). Net working assets are working assets minus working liabilities defined as follows: working assets equal Total assets less cash equivalents (part of Cash and cash equivalents; 5-point average of $173.6 million), deferred taxes, and investments in unconsolidated entities (part of Other Assets), plus the LIFO reserves (part of Inventories—net; 5-point average of $386.7 million). Working liabilities equal Total current liabilities less Short-term debt, Current maturities of long-term debt and Income taxes payable. For purposes of the 2018 MIP payout (previously disclosed in the Company's 2019 Notice of Annual Meeting and Proxy Statement filed with the SEC on March 14, 2019) and the 2017-2019 PSU payout, the Compensation Committee has accepted the Company's calculation of 2018 Adjusted ROIC, which was 28.5%.
"2019 Adjusted ROIC" means the Company's return on invested capital calculated using operating earnings, adjusted (as reconciled to its most directly comparable GAAP measure in Part II, Item 7 (page 20) of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 20, 2020). The GAAP financial statements are the source for all amounts used in the ROIC calculation. ROIC is calculated using operating earnings divided by net working assets (a five-point average for the year-to-date). Net working assets are working assets minus working liabilities defined as follows: working assets equal total assets less cash equivalents (five-point average of $150.2 million), deferred taxes, and investments in unconsolidated entities (part of Other Assets), plus the LIFO reserve (part of Inventories—net; five-point average of $414.1 million). Working liabilities are the sum of trade payables, accrued compensation and benefits, accrued contributions to employees' profit-sharing plans, and accrued expenses. For purposes of the 2019 MIP and 2017-2019 PSU payouts, the Compensation Committee has accepted the Company's calculation of 2019 Adjusted ROIC, which was 29.3%.
"2020 Adjusted ROIC" means the Company's return on invested capital calculated using operating earnings, adjusted (as reconciled to its most directly comparable GAAP measure in Part II, Item 7 (page 27) of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on February 24, 2021). The GAAP financial statements are the source for all amounts used in the ROIC calculation. ROIC is calculated using operating earnings divided by net working assets (a five-point average for the year-to-date). Net working assets are working assets minus working liabilities defined as follows: working assets equal total assets less cash equivalents (five-point average of $745.2 million), deferred taxes, and investments in unconsolidated entities, plus the LIFO reserve (five-point average of $443.6 million). Working liabilities are the sum of trade payables, accrued compensation and benefits, accrued contributions to employees' profit sharing plans, and accrued expenses. For purposes of the 2020 MIP and 2018-2020 PRSU payouts, the Compensation Committee has accepted the Company's calculation of 2020 Adjusted ROIC, which was 28.2%.
"2018-2020 Adjusted Average ROIC" means the average of 2020 Adjusted ROIC (28.2%) plus of 2019 Adjusted ROIC (29.3%) plus 2018 Adjusted ROIC (28.5%). For purposes of the 2018-2020 PRSU payout, the Compensation Committee has accepted the Company's calculation of 2018-2020 Adjusted Average ROIC, which was 28.6%.
B-1 Proxy Statement
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| | | Appendix B—Definitions and Non-GAAP Financial Measures |
"Endless Assortment businesses" is one of two of Grainger's business models, where the Company's endless assortment businesses are focused on providing a simple, transparent and streamlined experience for customers to shop millions of products and includes Zoro Tools, Inc. in the U.S. and MonotaRO Co., Ltd. in Japan. Effective January 1, 2021, Grainger has established the Endless Assortment reportable segment, which includes Zoro Tools, Inc., MonotaRO Co., Ltd., and Zoro UK Limited.
"Endless assortment businesses' revenue growth" for purposes of the PSUs granted in 2020 refers to the Company's revenue growth attributable to Zoro Tools, Inc. in the U.S. and MonotaRO Co., Ltd. in Japan and will be calculated based on a three-year average for purposes of the 2020-2022 PSU cycle.
For purposes of the PSUs granted in 2021, endless assortment businesses' revenue growth will refer to revenue growth associated with the new Endless Assortment reportable segment effective January 1, 2021 which includes Zoro Tools, Inc., MonotaRO Co., Ltd., and Zoro UK Limited, and will be calculated based on a three-year average.
"High-Touch Solutions model" refers to one of two of Grainger's business models, where the Company's high-touch businesses provide value-added maintenance, repair and operating (MRO) solutions that are rooted in deep product knowledge and customer expertise primarily in North America. Effective January 1, 2021, Grainger has established the High Touch Solutions—North America reportable segment, which includes the Grainger-branded businesses in the U.S., Canada, Mexico and Puerto Rico.
"Long-term compensation" consists of stock options, PRSUs, PSUs, and retirement profit sharing. Annual retirement profit sharing contributions are based on the Company's short-term performance; distributions are restricted, with full vesting of contributions once a participant has achieved five years of service with the Company as described further under "Long-Term Incentives" and "Other Benefits."
"Organic Daily Sales" refers to organic constant currency daily sales and excludes results for Fabory (post June 30, 2020) and Grainger China (post August 21, 2020) in the prior year period to reflect the completed divestitures. The following table outlines the reconciliation of reported sales growth to organic, constant currency daily sales growth:
| | Daily Sales Growth, Constant Currency (in millions of dollars) | | Twelve Months Ended December 31, 2020 | | ||||
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| Reported sales | 2.7% | |||||||
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| | Day impact | | (0.4) | | ||||
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| Daily sales | 2.3% | |||||||
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| | Business divestitures(1) | | 1.3 | | ||||
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| Organic daily sales | 3.6% | |||||||
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| | Foreign exchange | | (0.1)% | | ||||
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| Organic, daily, constant currency sales | 3.5% | |||||||
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"Peer group" is the Company's comparator group in the 2020 Deloitte Consulting Compensation Study as described further under "Compensation Comparator Group."
Proxy Statement B-2
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Appendix B—Definitions and Non-GAAP Financial Measures | | | |
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"Performance-Based Compensation" consists of the annual incentive plan, long-term incentives, and retirement profit sharing as described further under "Annual Incentives" and "Long-Term Incentives."
"ROIC" means the Company's return on invested capital calculated using operating earnings divided by net working assets.
"Total Company Adjusted Operating Margin" means the Company's adjusted operating earnings over net sales on a consolidated basis using operating earnings, adjusted (as reconciled to its most directly comparable GAAP measure in Part II, Item 7 (page 27) of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on February 24, 2021). The GAAP financial statements are the source for all amounts used in the Total Company Adjusted Operating Margin calculation. For purposes of the PSUs granted in 2021, adjusted operating margin will be calculated based on a three-year average.
"U.S. share gain" means the Company's daily sales growth calculated under its former U.S. reportable segment less estimated U.S. MRO market growth. The U.S. MRO market is based on Company estimates using a compilation of external market data.
For purposes of the PSUs granted in 2021, U.S. share gain will refer to U.S. daily sales growth under the new High-Touch Solutions—North America reportable segment effective January 1, 2021 less estimated U.S. MRO market growth and will be calculated based on a three-year average. The U.S. MRO market is based on Company estimates using a compilation of external market data.
B-3 Proxy Statement
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MMMMMMMMMMMM . MMMMMMMMMMMMMMM C123456789 000004 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ Electronic Voting Instructions Available 24 hoursVIEW MATERIALS & VOTE w SCAN TO W.W. GRAINGER, INC. 100 GRAINGER PARKWAY LAKE FOREST, IL 60045 VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. ET on (1) April 25, 2021 for shares held in a day, 7 daysPlan and (2) April 27, 2021 if you are a week! Instead of mailingregistered shareholder. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/GWW2021 You may choose one ofattend the voting methods outlined below tomeeting via the Internet and vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submittedduring the meeting. Have the information that is printed in the box marked by the Internet orarrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone must be received by 1:00 a.m., Central Daylight Time,to transmit your voting instructions up until 11:59 p.m. ET on April 25, 2018. MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 62021 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote by Internet • Go to www.investorvote.com/GWW • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF YOU HAVE NOT VOTED VIA THE INTERNETProcessing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR TELEPHONE, FOLD ALONG THE PERFORATION,BLACK INK AS FOLLOWS: D39226-P47496 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THE BOTTOMTHIS PORTION IN THE ENCLOSED ENVELOPE. q Proposals — MANAGEMENT RECOMMENDS A VOTE “FOR” ITEMS 1, 2,ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND 3.DATED. W.W. GRAINGER, INC. The Board of Directors recommends you vote FOR the following: For Withhold For All AllAllExcept To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. ! ! ! 1. Election of Directors: + For Withhold For Withhold For Withhold 01 -Directors Nominees: 01) 02) 03) 04) 05) 06) 07) Rodney C. Adkins 02 - Brian P. Anderson 03 - V. Ann Hailey 04 -Katherine D. Jaspon Stuart L. Levenick 05 - D.G. Macpherson 06 - Neil S. Novich 07 -08) 09) 10) 11) 12) 13) Beatriz R. Perez 08 - Michael J. Roberts 09 - E. Scott Santi 10 - James D.Susan Slavik 11 -Williams Lucas E. Watson Steven A. White The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain ForAgainst Abstain! ! ! ! ! ! 2. Proposal to ratify the appointment of Ernst & Young LLP as independent auditor for the year ending December 31, 2018.2021. 3. Say on Pay: To approve on a non-binding advisory proposal to approvebasis the compensation of the Company’sCompany's Named Executive Officers. 4.NOTE: In their discretion upon such other matters as may properly come before the meeting. Non-Voting Items Change of Address — Please print new address below. Meeting Attendance Mark box to the right if you plan to attend the Annual Meeting. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Belowmeeting or any adjournment or postponement thereof. Please sign exactly as your name(s) appearsappear(s) hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian,other fiduciary, please give full title.title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MMMMMMMC 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 1 U P X3 6 1 8 4 9 1 02QUWA MMMMMMMMM C B A Annual Meeting Proxy Card1234 5678 9012 345 X IMPORTANT ANNUAL MEETING INFORMATION(Joint Owners) Date
. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. qThis material is being sent to you by reason of your being a registered shareholder or your participation in one or more of the following plans available to eligible employees of W.W. Grainger, Inc. and/or its subsidiaries: W.W. Grainger, Inc. Retirement Savings Plan W.W. Grainger, Inc. 401(k) Plan Employee Stock Purchase Plan Important Notice Regarding the Availability of Proxy —Materials for the Virtual Annual Meeting: The Notice & Proxy Statement, and the Annual Report are available at www.proxyvote.com. D39227-P47496 W.W. GRAINGER, INC. Proxy forVirtual Annual Meeting of Shareholders April 25, 2018 100 Grainger Parkway, Lake Forest, Illinois 60045-520128, 2021 10:00 AM CDT This proxy is solicited by the Board of Directors The undersigned hereby appoints D.G. Macpherson and John L. Howard, and each of them, proxies of the undersigned with full power of substitution to represent the undersigned and to vote all of the shares of the Common Stock of W.W. Grainger, Inc., which the undersigned is entitled to vote at the Virtual Annual Meeting of Shareholders of W.W. Grainger, Inc., to be held on April 25, 2018 at 10:00 a.m., CDT28, 2021 and at any and all adjournments thereof, with all the powers the undersigned would possess if personally present and voting. A majority of proxies or substitutes who shall be present at the meeting may exercise all powers hereunder. All proxies will be voted as specified. If no specification is made, the proxy will be voted FOR items 1, 2 and 3. The proxy holders reserve the right to cumulate votes and cast such votes in favor of the election of some or all of the applicable director nominees in their sole discretion. (Continued and to be voted, signed and dated on reverse side.)
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 1:00 A.M. Central Time, on April 25, 2018. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. W.W. GRAINGER, INC. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 1:00 A.M. Central Time, on April 25, 2018. Have your proxy card in hand when you call and then follow the instructions. 100 GRAINGER PARKWAY LAKE FOREST, IL 60045 VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For Withhold For All Except To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the AllAll The Board of Directors recommends you vote FOR the following: nominee(s) on the line below. 0 0 0 1. Election of Directors Nominees 01 Rodney C. Adkins 06 Neil S. Novich 11 Lucas E. Watson 02 Brian P. Anderson 07 Beatriz R. Perez 03 V. Ann Hailey 08 Michael J. Roberts 04 Stuart L. Levenick 09 E. Scott Santi 05 10 D.G. Macpherson James D. Slavik The Board of Directors recommends you vote FOR proposals 2 and 3. 2. Proposal to ratify the appointment of Ernst & Young LLP as independent auditor for the year ending December 31, 2018. 3. Say on Pay: Advisory proposal to approve compensation of the Company's Named Executive Officers. For 0 0 Against 0 0 Abstain 0 0 NOTE: In their discretion upon such other matters as may properly come before the meeting or any adjournment or postponement thereof. 0 For address change/comments, mark here. (see reverse for instructions) Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0000361931_1 R1.0.1.17
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report is/ are available at www.proxyvote.com W.W. GRAINGER, INC. Annual Meeting of Shareholders April 25, 2018 10:00 AM This proxy is solicited by the Board of Directors The undersigned hereby appoints D.G. Macpherson and John L. Howard, and each of them, proxies of the undersigned with full power of substitution to represent the undersigned and to vote all of the shares of the Common Stock of W.W. Grainger, Inc., which the undersigned is entitled to vote at the Annual Meeting of Shareholders of W.W. Grainger, Inc. to be held on April 25, 2018 and at any and all adjournments thereof, with all the powers the undersigned would possess if personally present and voting. A majority of proxies or substitutes who shall be present at the meeting may exercise all powers hereunder. All proxies will be voted as specified. If no specification is made, the proxy will be voted FOR items 1, 2 and 3. The proxy holders reserve the right to cumulate votes and cast such votes in favor of the election of some or all of the applicable director nominees in their sole discretion. Address change/comments: (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) Continued and to be voted, signed and dated on reverse side 0000361931_2 R1.0.1.17
