DEF 14A of W.w. Grainger, Inc.
Filed Mar 14, 2024 · FY20230001104659-24-034117
Director Nominees’ Qualifications, Attributes, Skills and Background Matrix
Director Nominees’ Qualifications, Attributes, Skills and Background Matrix The following table highlights specific experience, qualifications, attributes, skills, and background information that the Board considered for each Director nominee. A particular Director nominee may possess additional experience, qualifications, attributes, or skills, even if not indicated below.
Director Nominees’ Qualifications, Attributes, Skills and Background Matrix
| Corporate Governance/Public Company Experience | Government/Public Policy | Marketing/Sales & Brand Management | | | | | | Experience serving as a public company director; demonstrated understanding of current corporate governance standards and best practices in public companies | Experience overseeing complex regulatory matters that are integral to a business | Experience managing a marketing/sales function, and in increasing the perceived value of a product line or brand over time in the market | | Digital/eCommerce | Human Resources/Compensation | Operational/Strategy | | | | | | Experience implementing digital and omni-channel strategies and/or operating an eCommerce business | Experience managing a human resources/ compensation function; experience with executive compensation and broad-based incentive planning | Experience developing and implementing operating plans and business strategy | | Environmental, Social and Governance | International | Real Estate | | | | | | Informed on Company issues related to ESG while monitoring emerging issues potentially affecting the reputation of the business | Experience overseeing a complex global organization | Experience overseeing complex real estate matters that are integral to a business | | Business Ethics | Public Company/Leadership | Risk Assessment & Risk Management | | | | | | Track record of integrity, uncompromising moral principles and strength of character | “C-Suite” experience with a public company and/or leadership experience as a division president or functional leader within a complex organization | Experience overseeing complex risk management matters | | Finance/Capital Allocation | Supply Chain/Logistics | Technology/Cybersecurity | | | | | | Knowledge of finance or financial reporting; experience with debt and capital market transactions and/or mergers and acquisitions | Experience in supply chain management encompassing the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities | Experience implementing technology strategies and managing/mitigating cybersecurity risks |
Director Nominees’ Qualifications, Attributes, Skills and Background Matrix
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Director Nominees’ Qualifications, Attributes, Skills and Background Matrix
| ● | 6 | 2024 proxy statement |
Director Nominees’ Qualifications, Attributes, Skills and Background Matrix
| | Adkins | Davis | Jaspon | Klein | Levenick | Macpherson | Miller | Novich | Perez | Santi | Slavik Williams | Watson | White | | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | | ☑ | | | | ☑ | ☑ | | | ☑ | | | ☑ | ☑ | | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | | ☑ | ☑ | | | ☑ | ☑ | | ☑ | ☑ | ☑ | | ☑ | ☑ | | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | ☑ | ☑ | | ☑ | | | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | | ☑ | | | | ☑ | ☑ | ☑ | ☑ | | | | ☑ | ☑ | | | ☑ | | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | | ☑ | ☑ | ☑ | ☑ | | | | | | | ☑ | | ☑ | | | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | ☑ | | ☑ | ☑ | ☑ | ☑ | | | ☑ | ☑ | | | | ☑ | | ☑ | | ☑ | | ☑ | ☑ |
Director Nominees’ Qualifications, Attributes, Skills and Background Matrix
The following age, Board tenure, gender, and race/ethnicity information of the Board nominees is current as of March 14, 2024:
Board Refreshment Process
Board Refreshment Process 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 year-over-year Director continuity is beneficial to shareholders as Directors develop a deeper understanding of the Company over time. The Board plans for vacancies well before they arise and periodically evaluates whether its Directors collectively have the right mix of experiences, qualifications, attributes, skills, backgrounds, and diverse viewpoints necessary for it to be a good steward for the Company’s shareholders.
Board Refreshment Process
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Board Refreshment Process
| invest.grainger.com | 7 | ● |
Board Refreshment Process
The results of these evaluations are used to help inform searches for potential Board nominees and to screen Director candidates. The Board codified this evaluation practice into the charter of the BANC in 2017. 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, five new independent Directors have joined the Board. 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 various factors that the BANC should consider in reviewing candidates for the Board. Grainger’s Criteria provide that Directors who will be age 72 as of the next annual meeting generally will not be nominated. Last year, the Board determined not to apply this age guidance for V. Ann Hailey for one year to retain her unique experience and expertise as Audit Committee Chair. This year, Ms. Hailey will not stand for election at the annual meeting.
Board Tenure
Board Tenure As a group, the average Board tenure of the 2024 nominees for election to the Board, not including the New Nominee, is approximately 8 years, with 45% of the non-employee nominees having tenure of less than five years. See Board Qualifications, Attributes, Skills, and Background beginning on page 5 for a matrix reflecting tenure for each nominee.
Board Diversity
Board Diversity In addition to stating the desired relevant business experience, qualifications, attributes and skills for Directors, the Criteria also enumerate personal characteristics that should be considered, including reputation for ethics and integrity, sound 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 seeks qualified nominees from a variety of backgrounds, including gender, age, and racial and/or ethnic diversity. In any retained search for Board candidates, the Board interviews slates that include both gender and racially/ethnically diverse candidates. This practice was codified as a Board practice in the Criteria in 2019.
Attendance of Directors at Meetings
Attendance of Directors at Meetings As set forth in the Operating Principles, all Directors are expected to attend the annual meeting of shareholders, Board and Committee meetings, and to spend the time needed to properly discharge their duties. All Directors then serving attended the 2023 annual meeting of shareholders (the “2023 Annual Meeting”). In addition, during 2023, no Director attended fewer than 75% of the total number of meetings of the Board and of the Committees on which they served. This strong attendance, in addition to high engagement levels amongst our Directors, underscores that our processes designed to ensure our Directors are not overcommitted remain effective.
Annual Election of Directors
Annual Election of Directors The Company’s Directors are elected for a one-year term each year at the annual meeting of shareholders. Each nominee will, therefore, serve until the 2025 annual meeting of shareholders (the “2025 Annual Meeting”) if elected or until as otherwise provided in the Grainger bylaws or the nominating resolution. Twelve Director nominees, all current Board members, and the New Nominee, have been nominated by the Board for election. Ms. Hailey will not stand for re-election. 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 the Company’s 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 except the election of Directors, each share is entitled to one vote. In addition to “For” votes, Shareholders may vote “Against” a Director nominee or elect to “Abstain.” A shareholder’s abstention on a Director nominee will have the same effect as a vote against the election of that Director nominee. 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.
Annual Election of Directors
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Annual Election of Directors
| ● | 8 | 2024 proxy statement |
Candidates for Board Membership
Candidates for Board Membership The BANC recommends to the Board candidates for Board membership. Before making any recommendation, 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 the Company’s goals, and diversity. The BANC has established a long-standing relationship with a nationally recognized third-party search firm. This firm has assisted the BANC over the years in identifying, evaluating, recruiting and screening potential new Directors that satisfy the Board’s criteria. In addition to Board candidates identified by the BANC, suggestions as to nominees are received from the Directors, employees, shareholders, and other parties. Grainger’s bylaws, which can be found at http://invest.grainger.com under “Governance Documents,” include proxy access rights under which qualified shareholders can submit director nominations for inclusion in our proxy statement. Any shareholder who would like the BANC 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 Director 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 the Company’s headquarters. See Questions and Answers beginning on page 79 for more information.
Candidates for Board Membership
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Candidates for Board Membership
| invest.grainger.com | 9 | ● |
Candidates for Board Membership
| | PROPOSAL 1: Election of Directors | | What are you voting on? | | | At the 2024 Annual Meeting, 13 Directors are to be elected to hold office until the 2025 Annual Meeting and until their successors have been elected and qualified. Each Nominee is a current Grainger Board member who was elected by shareholders at the 2023 Annual Meeting, except for Messrs. Davis and Klein who were appointed to the Board in July 2023 and December 2023, respectively, and Ms. Miller who is standing for election to the Board for the first time. | | | The Board recommends a vote “FOR” each of the Director Nominees named in this proxy statement. | |
Director Nominees’ Experience and Qualifications
Director Nominees’ Experience and Qualifications The nominees have provided the following information about themselves, including their ages as of March 14, 2024, and their relevant background, including experience for at least the past five years. The Company’s nominees have varied experience, qualifications, attributes, skills, and backgrounds that assist them in their oversight of the Company. The Board has identified experiences, qualifications, attributes, skills, and backgrounds that, in light of the Company’s business, structure and challenges, are relevant to service on the Board. 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 the Company. In addition, the nominees for re-election 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 the Company. The Board believes each of the current nominees qualifies for service on the Board. 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 identifying and managing risks in organizations similar in size or complexity to the Company. The summaries provided below are not comprehensive 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.
Director Nominees’ Experience and Qualifications
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Director Nominees’ Experience and Qualifications
| ● | 10 | 2024 proxy statement |
Director Nominees’ Experience and Qualifications
| | Rodney C. Adkins Independent Director Former Senior Vice President, IBM; President, 3RAM Group LLC | Age: 65 Years on Grainger’s Board: 10 Director Since: 2014 Grainger Board Committees: BANC, Chair, CCOB |
Director Nominees’ Experience and Qualifications
| Mr. Adkins serves as president 3RAM Group, LLC and served as a Senior Vice President at International Business Machines (“IBM”), where he held various senior roles, including heading Corporate Strategy. In over 30 years 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. | | | | Other Current Public Company Boards • Avnet, Inc. (Chairman of the Board; Chair, executive committee; corporate governance committee) • PayPal Holdings, Inc. (audit, risk and compliance committee; corporate governance and nominating committee) • United Parcel Service, Inc. (Chair, risk committee; executive committee; compensation and human capital 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. • 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). | Prior Public Company Boards • PPL Corporation (2014-2019) (audit committee; finance committee) • Pitney Bowes Inc. (2007-2013) (audit committee; executive compensation committee) | | Qualifications, Attributes and Skills | | | | | | |
Director Nominees’ Experience and Qualifications
| | George S. Davis Independent Director Interim Chief Executive Officer, Pallidus; former Executive Vice President and Chief Financial Officer, Intel Corporation | Age: 66 Years on Grainger’s Board: 1 Director Since: 2023 Grainger Board Committees: Audit (Audit Committee Financial Expert), BANC |
Director Nominees’ Experience and Qualifications
| Mr. Davis currently serves as the interim CEO of Pallidus, a provider of silicon carbide technology, a role he assumed in 2023. Previously he served as CFO for three global, public companies for 16 years as part of a career spanning over 40 years and has deep knowledge of the semiconductor industry. From 2019-2022, he served as Executive Vice President, Chief Financial Officer of Intel Corporation, where he headed the global finance organization. Prior to joining Intel, Mr. Davis spent six years as Executive Vice President and Chief Financial Officer at Qualcomm Inc. and seven years in the same role at Applied Materials, Inc. At Applied Materials, he became the CFO after six years with the company where he began as Corporate Vice President and Treasurer, overseeing the treasury and tax organizations. Prior to that he spent 20 years at Atlantic Richfield Company (“ARCO”) in roles, including in assistant treasurer positions and later as CFO for ARCO’s EMEA business. Mr. Davis has expertise in corporate strategy and transformation, capital markets, mergers and acquisitions (“M&A”), information technology, cybersecurity, ESG and investor and government relations among others. His background includes engaging with boards on strategy finance, risk management, governance, compensation, and activism. Mr. Davis serves as a trustee for the Old Globe Theater in San Diego and as chairman for the United States arm of A4S (Accounting for Sustainability), a non-profit under the King’s Trust, seeking to embed sustainability in organizations’ strategy, operations, and reporting. | | Business and Other Experience • Pallidus, a provider of silicon carbide technology, where Mr. Davis has been interim Chief Executive Officer since 2023 and a Director since 2022. • Intel Corporation, a leading semiconductor company, where Mr. Davis held the position of Executive Vice President and Chief Financial Officer (2019-2022). • Qualcomm, Inc., a wireless technology innovator, where Mr. Davis held the position of Executive Vice President and Chief Financial Officer (2013-2019). • Applied Materials, Inc., a materials engineering solutions provider, where Mr. Davis held the position of Executive Vice President, Chief Financial Officer (2006-2013), Group Vice President, Corporate Business Development (2005-2006), and Corporate Vice President and Treasurer (2000-2005). | | Qualifications, Attributes and Skills |
Director Nominees’ Experience and Qualifications
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Director Nominees’ Experience and Qualifications
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Director Nominees’ Experience and Qualifications
| | Katherine D. Jaspon Independent Director Chief Financial Officer, Inspire Brands, Inc. | Age: 47 Years on Grainger’s Board: 3 Director Since: 2021 Grainger Board Committees: Audit (Audit Committee Financial Expert), BANC |
Director Nominees’ Experience and Qualifications
| Ms. Jaspon serves as Chief Financial Officer of Inspire Brands, Inc., a multi-brand restaurant company whose portfolio includes nearly 32,000 restaurants worldwide. Ms. Jaspon oversees all accounting and reporting, tax, financial planning and analysis, treasury, and internal audit functions for Inspire and its brands. She is also responsible for managing Inspire’s relationships with lending institutions, investors, and the financial community. Prior to joining Inspire in December 2020, Ms. Jaspon served as the Chief Financial Officer of Dunkin’ Brands Group, Inc., the former parent company of Dunkin’ and Baskin-Robbins, where she led all finance-related functions, as well as investor relations since 2017. In this role, she oversaw global financial planning and analysis, accounting, financial reporting, tax, treasury, enterprise risk management, payments, insurance, and demand planning functions. During her 15-year tenure with Dunkin’ Brands, Ms. Jaspon led several transactions, including the company’s initial public offering and follow-on equity offerings, securitizations and numerous debt transactions, the divestiture of a brand, and the sale of Dunkin’ Brands to Inspire. Previously, Ms. Jaspon spent eight years at KPMG LLP as an auditor. She is a certified public accountant. Ms. Jaspon previously served as a member and chair of the audit committee of the board of directors of MOD Pizza LLC and also serves on various non-profit boards. | | Business and Other Experience • Inspire Brands, Inc. (2020-Present), a multi-brand restaurant company, where she serves as Chief Financial Officer. • Dunkin’ Brands Group, Inc. (2005-2020), 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, Inspire Brands acquired Dunkin’ Brands. • KPMG LLP (1997-2005), a global audit, tax and advisory services firm, where Ms. Jaspon held various roles, including Senior Manager. | | Qualifications, Attributes and Skills |
Director Nominees’ Experience and Qualifications
| | Christopher J. Klein Independent Director Former Executive Chairman and Chief Executive Officer, Fortune Brands Home & Security, Inc. | Age: 60 Years on Grainger’s Board: <1 Director Since: 2023 Grainger Board Committees: Audit (Audit Committee Financial Expert), BANC |
Director Nominees’ Experience and Qualifications
| Mr. Klein served as Chief Executive Officer, Fortune Brands Home & Security, Inc. He led the spin-off of the Fortune Brands Home & Security division into its own public company in October 2011. From the initial public offering until his 2020 retirement, the newly public company’s revenues doubled and profits increased by 15 times. Prior to joining Fortune Brands, Mr. Klein served in a series of roles in the financial services sector and as a management consultant at McKinsey & Co. advising clients in this sector. He acquired significant experience in corporate strategy, distribution, branding, M&A, and restructuring and developing businesses. Mr. Klein has extensive experience in corporate governance matters and serves as a director of other publicly traded companies with additional responsibilities, including chairing at separate companies a nominating / ESG committee and a compensation committee. He also previously served as an executive chairman of the Fortune Brands Home & Security board. Mr. Klein also serves as the Chairman of the Board of Ravinia Music Festival and as an Advisory Board Member to the University of Iowa Tippie School of Business. | | | | Other Current Public Company Boards • Thor Industries (Chair, nominating / ESG committee, audit committee) • Vontier Corporation (Chair, compensation committee; nominating and governance committee) | Business and Other Experience • Fortune Brands Home & Security, Inc. (spun out of Fortune Brands in 2011) (2003-2020), a manufacturer of home and securities products, where Mr. Klein joined in 2003 as SVP Strategy / Corporate Development / HR, was named President and CEO Fortune Brands Home Division in 2009, and became CEO of Fortune Brands Home & Security, Inc. upon its public listing in October 2011. Upon his retirement as CEO in January 2020, he became Executive Chairman of the Board through December 2020. • Bank One (2001-2003), a bank now merged with JPMorgan Chase & Co., where as Executive Vice President Mr. Klein restructured businesses and developed the bank’s payments strategy. | Prior Public Company Boards • Fortune Brands Home & Security, Inc. (2011-2020) | | Qualifications, Attributes and Skills | | |
Director Nominees’ Experience and Qualifications
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Director Nominees’ Experience and Qualifications
| ● | 12 | 2024 proxy statement |
Director Nominees’ Experience and Qualifications
| | Stuart L. Levenick Independent Director Former Group President, Caterpillar, Inc. | Age: 71 Years on Grainger’s Board: 18 Director Since: 2005 Grainger Board Committees: Audit (Audit Committee Financial Expert), BANC |
Director Nominees’ Experience and Qualifications
| Mr. Levenick served as a Group President of Caterpillar Inc., leading several divisions for 10 years as part of a 37-year career at the company, in various leadership roles, including as the senior executive of Caterpillar’s former joint venture with Mitsubishi in Japan. He has extensive international operations experience as a result of positions outside of the United States in Japan, Singapore, Russia and other countries for more than 20 years. During his career at Caterpillar, Mr. Levenick held leadership roles with operational responsibility for supply chain and logistics, engineering and design, manufacturing, global parts and product support, and global dealer and marketing functions. In addition, he led Caterpillar’s global human resources and global purchasing functions. Mr. Levenick also has experience sitting on and chairing the audit and finance committees of other public companies and brings a broad range of experience to the Board based on his service as the lead director of Entergy Corporation. Mr. Levenick is a former chairman and director of the Association of Equipment Manufacturers and is a director of the University of Illinois Foundation. Previously he served as a director of the U.S.-Japan Business Council, the U.S.-China Business Council, the U.S.-Russia Business Council, and as executive director of the U.S. Chamber of Commerce. | | | Other Current Public Company Boards • Finning International Inc. (Chair, audit committee, governance and risk committee) • Entergy Corporation (Lead Independent Director) (Chair, corporate governance committee; executive and nuclear committee) | Business and Other Experience • Caterpillar Inc., a leading manufacturer of construction and mining equipment, where Mr. Levenick held various leadership roles, including Group President, Customer & Dealer Support (2004-2015). • Executive Office Member (2004-2015); Group President of Caterpillar Inc. (2004- 2014); Vice President, Caterpillar Inc. and Chairman of Shin Caterpillar Mitsubishi Ltd. (2000-2004); and Vice President, Asia Pacific Division (2001-2004). Prior to 2000, he held various senior positions with Caterpillar in North America, Asia, and Europe. | | Qualifications, Attributes and Skills | |
Director Nominees’ Experience and Qualifications
| | D.G. Macpherson Director Chairman and Chief Executive Officer, W.W. Grainger, Inc. | Age: 55 Years on Grainger’s Board: 6 Director Since: 2017 |
Director Nominees’ Experience and Qualifications
| Mr. Macpherson has served Grainger in many capacities over his more than 15 years with Grainger, including developing Company strategy, overseeing the launch of Grainger’s U.S. endless assortment business, Zoro Tools, Inc., building the Company’s supply chain capabilities globally and realigning the U.S. business to create greater value for customers of all sizes. Mr. Macpherson also has extensive experience in strategic planning, development and execution. Mr. Macpherson joined Grainger in 2008 after working closely with Grainger for six years as a partner and managing director at The Boston Consulting Group, a global management consulting firm, where he was a member of the Industrial Goods Leadership Team. | | | Business and Other Experience • Chairman of the Board of the Company, a position assumed in October 2017, and Chief Executive Officer of the Company, a position assumed in October 2016, at which time Mr. Macpherson was also appointed to the Board of Directors. • Previously, Mr. Macpherson held numerous senior management roles at the Company, including Chief Operating Officer (2015-2016); Senior Vice President and Group President, Global Supply Chain and International (2013-2015); Senior Vice President and President, Global Supply Chain and Corporate Strategy (2012-2013); and Senior Vice President, Global Supply Chain (2008-2012). • The Boston Consulting Group, Partner, and Managing Director (2002-2008). | Prior Public Company Boards • International Paper Company (2021-2024) | | Qualifications, Attributes and Skills | |
Director Nominees’ Experience and Qualifications
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Director Nominees’ Experience and Qualifications
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Director Nominees’ Experience and Qualifications
| | Cindy J. Miller Independent Director Director and President and Chief Executive Officer, Stericycle, Inc. | Age: 61 Years on Grainger’s Board: New Nominee |
Director Nominees’ Experience and Qualifications
| Ms. Miller serves as Director since February 2019 and as President and Chief Executive Officer since May 2019 of Stericycle, Inc. after serving as President and Chief Operating Officer since October 2018. Ms. Miller previously served as President, Global Freight Forwarding for United Parcel Service (“UPS”), a multinational package delivery and supply chain management company, from April 2016 to September 2018 and as President of UPS’s European region from March 2013 to March 2016. Ms. Miller has significant transportation and logistics expertise, and she also has deep knowledge and experience in the healthcare industry, business transformation and change management, operations management, strategy, safety and international business. Ms. Miller also serves as a director of UGI Corporation. | | | Other Current Public Company Boards • Stericycle, Inc. • UGI Corporation (compensation and management development committee; safety, environmental and regulatory compliance committee) | Business and Other Experience • Stericycle, Inc. (2018-Present), a business-to-business services company and leading provider of compliance-based solutions, including regulated waste management, secure information destruction, and compliance, training where, prior to assuming her current position in May 2019, Ms. Miller joined in 2018 as President and Chief Operating Officer. • United Parcel Service, Inc. (1988-2018), a package delivery company and a leading provider of global supply chain management solutions, where she held various roles of increasing responsibility including as President, Global Freight Forwarding, President, Europe Region, Managing Director, UPS UK, and Managing Director, UPS South Europe, Middle East and Africa. | | Qualifications, Attributes and Skills | |
Director Nominees’ Experience and Qualifications
| | Neil S. Novich Independent Director Former Chairman of the Board, President and Chief Executive Officer, Ryerson Inc. | Age: 69 Years on Grainger’s Board: 25 Director Since: 1999 Grainger Board Committees: Audit (Audit Committee Financial Expert), BANC |
Director Nominees’ Experience and Qualifications
| Mr. Novich served as the Chairman of the Board, President, and Chief Executive Officer of Ryerson Inc., 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 two audit committee chairmanships, four compensation committee chairmanships, 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. | | | | Other Current Public Company Boards • Beacon Roofing Supply, Inc. (nominating and governance; audit committee; former Chair, audit committee; former Chair, compensation committee) • Hillenbrand, Inc. (Chair, audit committee; mergers and acquisitions committee; nominating and corporate governance committee) | 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. | Prior Public Company Boards • Analog Devices, Inc. (2008-2020) (audit committee; former Chair, compensation committee) • Ryerson Inc., Chairman of the Board (1999-2007) | | Qualifications, Attributes and Skills | | | | | | |
Director Nominees’ Experience and Qualifications
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Director Nominees’ Experience and Qualifications
| ● | 14 | 2024 proxy statement |
Director Nominees’ Experience and Qualifications
| | Beatriz R. Perez Independent Director Executive Vice President and Global Chief Communications, Sustainability & Strategic Partnerships Officer, The Coca-Cola Company | Age: 54 Years on Grainger’s Board: 7 Director Since: 2017 Grainger Board Committees: BANC, CCOB |
Director Nominees’ Experience and Qualifications
| Ms. Perez is an Executive Vice President of The Coca-Cola Company, where she leads an integrated team across public affairs and communications, sustainability and marketing assets to support the company’s growth model and strategic initiatives. In this role, Ms. Perez aligns a diverse portfolio of work against critical business objectives to support brands, communities, consumers and partners worldwide. During her tenure of more than two decades at that company, she has held several leadership roles while garnering significant experience in marketing and sustainability programs. 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. | | | | Other Current Public Company Boards • Primerica, Inc. (corporate governance committee) | Business and Other Experience • The Coca-Cola Company (1996-present), a global beverage company, where prior to assuming her current position in March 2017, Ms. Perez held several leadership positions including as the company’s first Chief Sustainability Officer (2011-2017). Prior to that she held various roles of increasing responsibility at The Coca-Cola Company in the North America Operating Division, including Chief Marketing Officer, Senior Vice President Integrated Marketing, and multiple field operating roles. | Prior Public Company Boards • HSBC North America Holdings, Inc. (2007-2014), the HSBC Finance Corporation (2008-2014), and the HSBC Bank Nevada, N.A. (2011-2013) | | Qualifications, Attributes and Skills | | | | | | |
Director Nominees’ Experience and Qualifications
| | E. Scott Santi Independent Director Non-Executive Chairman, and former Chief Executive Officer, Illinois Tool Works Inc. | Age: 62 Years on Grainger’s Board: 14 Director Since: 2010 Grainger Board Committees: Audit (Audit Committee Financial Expert), BANC |
Director Nominees’ Experience and Qualifications
| Mr. Santi is the Non-Executive Chairman and former Chief Executive Officer of Illinois Tool Works Inc. (“ITW”). In the course of his more than 40 years with ITW, he served in various management roles for ITW including positions requiring substantial strategic, operational and financial responsibility. During his tenure he gained extensive international responsibility including operating responsibility for a business with annual international revenues of several billion dollars. Mr. Santi has significant experience with mergers, acquisitions and divestitures and integrating acquired companies, strategic marketing responsibilities, innovation driven growth, and talent management including compensation policy, leadership development and succession planning. Mr. Santi currently serves as a trustee or director of various civic and nonprofit organizations including the Rush System for Health, Northwestern University, the Art Institute of Chicago, the Lyric Opera of Chicago, the Chicago Symphony Orchestra Association, the Ravinia Festival Association, the Museum of Science and Industry, and Big Shoulders Fund. | | | Other Current Public Company Boards • Illinois Tool Works Inc. (Chairman of the Board) | Business and Other Experience • ITW (1983-present), a global multi-industry manufacturing leader of engineered components and systems, where Mr. Santi serves as Non-Executive Chairman. He served as ITW’s Chief Executive Officer (2012- 2024), and held various senior management roles, including President (2012-2015), Vice Chairman (2008-2012), and Executive Vice President (2004-2008). | | Qualifications, Attributes and Skills | | | | |
Director Nominees’ Experience and Qualifications
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Director Nominees’ Experience and Qualifications
| invest.grainger.com | 15 | ● |
Director Nominees’ Experience and Qualifications
| | Susan Slavik Williams Independent Director Founder, President, and Manager, Four Palms Ventures; Director Mark IV Capital Inc.; President, The Donald Slavik Family Foundation | Age: 55 Years on Grainger’s Board: 4 Director Since: 2020 Grainger Board Committees: BANC, CCOB |
Director Nominees’ Experience and Qualifications
| 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-plus 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 27 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. | | 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 and Manager (2019-present). • iSelect Fund, a venture capital investment firm, where Ms. Slavik Williams serves on the board (2017-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). | | Qualifications, Attributes and Skills |
Director Nominees’ Experience and Qualifications
| | Lucas E. Watson Independent Director Venture Partner, Archer Venture Capital and Former President, MSG Sphere at Madison Square Garden Entertainment Corp. | Age: 53 Years on Grainger’s Board: 6 Director Since: 2017 Grainger Board Committees: BANC, CCOB |
Director Nominees’ Experience and Qualifications
| Mr. Watson is Venture Partner at Archer Venture Capital. Previously he served as President, MSG Sphere at Madison Square Garden Entertainment Corp. where he led the strategy and execution of all business aspects of MSG’s Sphere’s planned state-of-the-art venues that will combine cutting-edge technology with multi-sensory storytelling to deliver fully immersive experiences. Additionally, he served as Senior Vice President, Go To Market, and Chief Marketing Officer and General Manager, at Cruise LLC where he led Cruise’s go to market strategy with respect to the company’s autonomous vehicle fleet. Before Cruise, he served as Executive Vice President and Chief Marketing and Sales Officer at Intuit, where he led the company’s global sales and go to market efforts bringing Intuit’s financial management solutions to market across a variety of channels while focusing on global brand expansion, market share growth and strengthening brand equity. As Vice President, Global Brand Solutions at Google, he led the company’s brand advertising business, working with some of the world’s leading companies to build stronger and more trusted brands. Before that, he served as a digital marketing executive at Procter & Gamble. | | Business and Other Experience • Venture Partner, Archer Venture Capital (2023-present), an investment firm and start-up advisory platform for entrepreneurs. • Madison Square Garden Entertainment Corp. (2022-2023), a leader in live company, where Mr. Watson served as President, MSG Sphere. • Cruise LLC (2018-2021), an autonomous vehicle and technology company owned by General Motors Company, a global automotive company, where Mr. Watson served as Senior Vice President, Go to Market (2020-2021) and Chief Marketing Officer and General Manager (2018-2020). • Intuit, Inc. (2016-2018), a global provider of business and financial management solutions, where Mr. Watson served as an Executive Vice President and Chief Marketing and Sales Officer. • Google, Inc. (2011-2016), a global technology company, where Mr. Watson served as Vice President, Global Brand Solutions. | | Qualifications, Attributes and Skills |
Director Nominees’ Experience and Qualifications
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Director Nominees’ Experience and Qualifications
| ● | 16 | 2024 proxy statement |
Director Nominees’ Experience and Qualifications
| | Steven A. White Independent Director President, Special Counsel to the CEO, Comcast Cable | Age: 63 Years on Grainger’s Board: 3 Director Since: 2020 Grainger Board Committees: BANC, CCOB |
Director Nominees’ Experience and Qualifications
| Mr. White brings over 30 years of experience in eCommerce, sales, marketing, operations, and general management across multiple industries. Now in his 21st year at Comcast Corporation, 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 one other public company, 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. He serves on the board for New Leaders and is a published author and public speaker. | | | | Other Current Public Company Boards • Hormel Food Corporation (compensation committee; governance 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 global telecommunications, media and technology services that merged with Comcast in 2002, where Mr. White was Senior Vice President (2000-2002). | Prior Public Company Boards • Shaw Communications Inc. (2021-2023) (human resources and compensation committee) | | Qualifications, Attributes and Skills | | |
Director Nominees’ Experience and Qualifications
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Director Nominees’ Experience and Qualifications
| invest.grainger.com | 17 | ● |
Board and Committee Meetings; Executive Sessions
Board and Committee Meetings; Executive Sessions Five meetings of the Board were held in 2023. Each Board meeting included at least one executive session, during which only independent Directors were present. In total, 16 Committee meetings were held in 2023. During 15 Committee meetings, Committee members also met in executive session, without management present. At each Board meeting, the Committees report to the full Board on their activities and actions.
Board Committees & Membership
Board Committees & Membership Our Board has established three standing committees: the Audit Committee; the Board Affairs and Nominating Committee; and the Compensation Committee (each, a “Committee”). Each Committee has a charter that defines its specific responsibilities. Each charter is reviewed annually and each Committee then recommends to the Board charter revisions that may be needed to reflect new responsibilities or evolving best practices. As required by each Committee’s charter, all members of each Committee must be “independent” Directors. Each Committee has the authority to retain independent advisors to assist it in carrying out its responsibilities. 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 Committee members are appointed by the Board based on recommendations of the BANC. Committee membership as of March 14, 2024 is as follows:
Board Committees & Membership
| | Audit Committee | Board Affairs & Nominating Committee | Compensation Committee | | Rodney C. Adkins | | | C | | George S. Davis (FE) | | | | | V. Ann Hailey† (FE) | C | | | | Katherine D. Jaspon (FE) | | | | | Christopher J. Klein | | | | | Stuart L. Levenick (LD)(FE) | | C | | | Neil S. Novich (FE) | | | | | Beatriz R. Perez | | | | | E. Scott Santi (FE) | | | | | Susan Slavik Williams | | | | | Lucas E. Watson | | | | | Steven A. White | | | |
Board Committees & Membership
| C | Chair ✓ Member LD Lead Director FE Audit Committee Financial Expert as defined under SEC (as defined below) rules |
Board Committees & Membership
† Ms. Hailey is not standing for re-election. Copies of each Committee charter are available under “Governance” in the Investor Relations section of our website at http://invest.grainger.com. The Board has delegated certain responsibilities and authority to its standing Committees, as described below.
Board Committees & Membership
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Board Committees & Membership
| ● | 18 | 2024 proxy statement |
Director Compensation
Director Compensation Grainger’s non-employee Directors each receive an annual cash retainer of $100,000 and an annual deferred stock unit (“DSU”) grant of $160,000. The Lead Director and Directors serving as Committee Chairs receive an additional annual cash retainer. Grainger aims to compensate its non-employee Directors at a level that approximates median market practice. In benchmarking Director pay, Grainger uses the same compensation comparator group as used to benchmark compensation for Grainger’s executives as described in the Compensation Discussion and Analysis section beginning on page 37. The Compensation Committee’s independent compensation consultant advises on Director compensation. The Directors’ compensation program, which was last adjusted in April 2022, consists of the following:
Director Compensation
Director Compensation
2023 Director Compensation Table
2023 Director Compensation Table
2023 Director Compensation Table
| Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total | | Rodney C. Adkins | $120,000 | $158,552 | $7,500 | $286,052 | | George S. Davis | $75,000 | $135,690 | $0 | $210,690 | | V. Ann Hailey | $125,000 | $158,552 | $6,750 | $290,302 | | Katherine D. Jaspon | $100,000 | $158,552 | $7,500 | $266,052 | | Christopher J. Klein | $33,333 | $64,865 | $0 | $98,198 | | Stuart L. Levenick | $145,000 | $158,552 | $7,500 | $311,052 | | Neil S. Novich | $100,000 | $158,552 | $7,500 | $266,052 | | Beatriz R. Perez | $100,000 | $158,552 | $7,500 | $266,052 | | E. Scott Santi | $100,000 | $158,552 | $7,500 | $266,052 | | Susan Slavik Williams | $100,000 | $158,552 | $0 | $258,552 | | Lucas E. Watson | $100,000 | $158,522 | $0 | $258,552 | | Steven A. White | $100,000 | $158,552 | $0 | $258,552 |
2023 Director Compensation Table
(1) Represents the annual cash retainers received in 2023 by all non-employee Directors. Mr. Klein’s became payable upon his appointment on December 13, 2023, and was delivered in January 2024. For Mr. Davis, who was appointed to the Board on July 26, 2023, represents a pro-rated retainer of 75% given his appointment to the Board approximately one-quarter of the way through the 2023-2024 Director term. For Mr. Klein, who was appointed to the Board on December 13, 2023, represents a pro-rated retainer of 33% given his appointment to the Board with approximately four months remaining in the 2023-2024 Director term. Michael J. Roberts served as a Director in 2023 but is omitted from the table because he did not receive any compensation in 2023. (2) Represents the fair value of the non-employee Directors’ 2023 award of 236 DSUs on the grant date of April 26, 2023, using the closing price of $671.83 per share of Grainger’s common stock as of April 25, 2023. For Mr. Davis, who was appointed to the Board on July 26, 2023, represents the fair value of his 2023 award of 177 DSUs (reflecting a pro-rated award of 75% given his appointment to the Board approximately one-quarter of the way through the 2023-2024 Director term) on the grant date of July 26, 2023, using the closing price of $766.61 per share of Grainger’s common stock as of July 25, 2023. For Mr. Klein, who as appointed to the Board on December 13, 2023, represents the fair value of his 2023 award of 79 DSUs (reflecting a pro-rated award of 33% given his appointment to the Board with approximately four months remaining for the 2023-2024 Director term) on the grant date of December 13, 2023, using the closing price of $821.07 per share of Grainger’s common stock as of December 12, 2023. The DSUs immediately vest upon the grant date and will be paid in shares of Grainger common stock on a 1:1 basis upon departure from the Board, computed in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. Represents amount paid by the Company to charitable organizations as part of the Company’s Matching Gifts Program with respect to donations made and matched in 2023. The Directors receive no direct or indirect benefit from the matching contributions.
2023 Director Compensation Table
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
2023 Director Compensation Table
| invest.grainger.com | 31 | ● |
2023 Highlights
| Metrics Aligned with Our Priorities | Reflect Strong 2023 Performance | Executive Pay is Pay for Performance | | NEO incentive programs and metrics aligned with our priorities to: • Execute on our growth drivers to provide customers with a flawless experience and tangible value. • Drive operational excellence and productivity to keep the business healthy and enable future investments. • Encourage long-term shareholder value creation. | Delivered record full year earnings: • Delivered $16.5 billion in sales, up 9.5% on a daily, organic constant currency basis.(1) • Produced total Company adjusted ROIC of 42.8%, up from 40.6% in 2022.(1) • Outgrew the U.S. MRO market by approximately 525 basis points (bps) in High-Touch Solutions—U.S. business. • Expanded operating margin by 130 bps to 15.7% on an adjusted basis.(1) • Increased diluted EPS by 20.5% on a reported basis and 23.6% on an adjusted basis.(1) Achieved a one-year TSR of 50.5% and three-year TSR of 110.8%. | 2023 NEO compensation reflects our pay for performance design: • 2023 short and long-term incentive payouts correspond with strong performance. • The NEO annual incentive payout was 128% of target and the 2021 PSU cycle payout was 124% of target. • 2023 CEO pay mix was updated to focus on 60% PSUs and 40% RSUs (updated from a 50/50 split). |
2023 Program Performance and Financial Highlights
| How We Performed (Incentive Program Financial Measures) |
2023 Program Performance and Financial Highlights
| Endless Assortment | • In our Endless Assortment segment, we are continuing to propel our proven Endless Assortment flywheel to deliver long-term value with Zoro U.S. daily sales growth of 4.8% and MonotaRO daily sales growth of 11.7% in local currency and local days. | | High-Touch Solutions | • In our High-Touch Solutions—N.A. segment, we executed well across the business and achieved approximately 525 bps of U.S. MRO market outgrowth in 2023, exceeding our updated target of 400-500 bps annually.(3) | | Financial Results | • We finished the year with record sales of $16.5 billion, up 8.2% on a reported basis or 9.5% in daily, organic constant currency sales.(1)(2) • During the year, we achieved 130 basis points of operating margin expansion on an adjusted basis and a 23.6% percent increase in adjusted earnings per share (“EPS”).(1) • We also generated over $2.0 billion in operating cash flow, an increase of 52.4% over 2022 and returned $1.2 billion to Grainger shareholders through dividends and share repurchases all while achieving 42.8% 2023 total Company adjusted return on invested capital (“ROIC”) up 220 basis points from last year.(1) • We delivered value to shareholders with one-year Total Shareholder Return (“TSR”) of 50.5% and three-year TSR of 110.8%. | | Strategic DC Investments | • We increased our service advantage by investing in new capacity, automation and sustainability initiatives. • We invested in new capacity initiatives such as: our Pacific Northwest Distribution Center (DC), three new bulk warehouses (leased facilities) and recently announced a new Houston DC. • We continue to undergo a digital transformation with strategic investments in infrastructure, talent and custom capabilities to support customers. |
2023 Program Performance and Financial Highlights
| 2023 NEO annual incentives paid at 128% of target reflecting a year of profitable growth |
2023 Program Performance and Financial Highlights
Throughout 2023, the Compensation Committee evaluated our compensation programs against the following factors: • Company performance, including whether the programs remain aligned with near and long-term objectives; • Appropriateness of the original targets to remain relevant and challenging under current conditions; • Alignment to the broader Grainger team and performance to peer companies; and • Ability for Company programs to attract, motivate and retain critical talent. The Committee did not alter the structure of existing incentive programs or adjust payouts for material items for the 2023 annual incentives as it believes the programs remained strongly aligned with the Company’s pay-for-performance objectives and consistent with shareholder interests. The discussion of the Company’s annual incentives within this CD&A refer to the Company Management Incentive Program (“MIP”), which is primarily tied to total Company financial performance (high-touch solutions model and endless assortment model). The 2023 MIP payout was defined as a percentage of the NEO’s annualized base salary generally as of December 31, 2023. The 2023 MIP was based on 2023 year-over-year total Company daily, organic constant currency sales and total Company adjusted ROIC, as well as on an ESG modifier, which can increase or decrease payouts determined by financial performance up to +/- 10 percentage points. Short-term financial results exceeded expectations and therefore, the payout for the 2023 MIP was above target. Total Company daily, organic constant currency sales was 9.2%, resulting in a 50% daily, organic constant currency sales payout, and 2023 total Company adjusted ROIC was 42.8%, resulting in a 78% total Company adjusted ROIC payout. Total absolute scope 1 and scope 2 emissions and diverse leadership representation outcomes were within the targeted range. Therefore, the ESG modifier was determined to be 0% and the final 2023 MIP payout was 128%. The Company’s average MIP payout for NEOs over the last five years (2018-2022) was 123%. Total Company daily, organic constant currency sales for the purpose of MIP, excludes the impact on Company’s sales due to foreign currency exchange rate fluctuations. The 2023 MIP financial metrics are modified for the Company’s current year planned foreign currency exchange rates used when setting initial targets. See Annual Incentives on page 49 and Appendix B of this Proxy Statement for information regarding compensation and non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures. The CEO and his U.S. direct reports, along with members of the Grainger Leadership Team are aligned to MIP as of December 31, 2023. For the period before Mr. Fortin’s appointment as SVP and Chief Human Resources Officer, he was a participant in the Company’s broad-based annual incentive program, North America Management Incentive Plan (“N.A. MIP”). N.A. MIP has the same financial metrics as the MIP, but is tied to the performance of the High-Touch Solutions—N.A. segment. The 2023 N.A. MIP payout was 126%.
2023 Program Performance and Financial Highlights
| 2021-2023 NEO Performance Share Units (PSUs) achieved 124% of target payout |
2023 Program Performance and Financial Highlights
The Compensation Committee approved the final results of the 2021-2023 PSU program at 124% of target. The 2021-2023 cycle covered a three-year performance period starting January 1, 2021 and ending December 31, 2023. The 2021 PSU cycle was based on three performance metrics— U.S. share gain (a relative metric), Endless Assortment daily sales growth based on year-over-year sales growth and total Company adjusted operating margin performance. As outlined in detail on page 52, U.S. share gain was 459 bps, Endless Assortment daily sales growth was 10.7% and total Company adjusted operating margin performance expanded 143 bps on average over the three-year performance period. Therefore, the payout for these PSUs attained 124% of target.(1) See Appendix B of this Proxy Statement for information regarding compensation and non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.
2023 Program Performance and Financial Highlights
| 2023 Long-Term Incentive Equity Mix: 60% PSUs | 40% Restricted Stock Units (RSUs) for the CEO |
2023 Program Performance and Financial Highlights
The equity mix for the 2023 long-term incentive program for the CEO was 60% PSUs and 40% time-vested RSUs; the other NEOs had an equity mix of 50% PSUs and 50% time-vested RSUs. The three-year performance period for the PSUs granted in 2023 runs from 2023-2025. The RSUs granted in 2023 vest annually on a pro-rata basis over a three-year period.
Compensation Elements and Pay Mix
Compensation Elements and Pay Mix As part of the Company’s pay for performance philosophy, the Company’s compensation programs are aligned with shareholders. The 2023 NEO compensation mix is comprised of base salary, annual incentives and long-term equity incentives consisting of PSUs and RSUs.
Compensation Elements and Pay Mix
| | Component | Purpose | Link to Strategy & Performance | | Short-Term | Base Salary | Establishes a market competitive and appropriate level of fixed compensation to attract and retain leaders. | Fixed and based on individual performance which considers the Grainger Edge. | | | Annual Incentives (Management Incentive Program) | Encourages annual results that create shareholder value. | Linked to annual achievement of predetermined Company objectives—daily, organic constant currency sales and total Company adjusted ROIC with an ESG modifier. | | Long-Term | Long-Term Incentive Plan—Performance Share Units | Aligns compensation with the Company’s long-term strategic growth and profitability goals. | Performance-based, linked to Company strategy and requires achieving predetermined Company three-year average profitability and growth goals. | | | Long-Term Incentive Plan—Restricted Stock Units | Encourages retention and links long-term incentives to stock price performance. | The initial grant value is linked to individual performance and potential, while the ultimate value of the program is linked to stock price performance; align NEOs’ interests to stock price performance over time and three-year vesting encourages meaningful retention. |
Compensation Elements and Pay Mix
In 2023, the annual incentive plan, which continues to focus on financial performance, was updated to include an ESG modifier and the CEO’s long-term incentive pay mix was updated from 50% PSUs and 50% RSUs to 60% PSUs and 40% RSUs, increasing CEO pay alignment with performance. The overall design and inclusion of the modifier supports our goal to drive a purpose-driven culture that enables strong performance. The design of the executive compensation programs and elements for 2023 otherwise remained unchanged from 2022. • Annual: The MIP will continue to focus on financial performance with a 50% weighting of one-year total Company daily, organic constant currency sales compared to the prior year and 50% weighting of total Company adjusted ROIC, with both measures aligned with the Company’s one-year plan. The financial results are subject to an ESG modifier, which can increase or decrease payouts up to +/-10 percentage points. Performance is measured at the Company-wide level. The MIP plan is capped at 200% of the target award. • Long-Term: The Company’s long-term incentive design and underlying metrics correspond directly with the Company’s strategic initiatives, which are critical to providing sustained shareholder returns and future growth. The metrics for 2023 PSU awards (to be paid in three years based on actual performance) focus on three-year average U.S. share gain relative to estimated U.S. market growth, Endless Assortment daily sales growth(1) and total Company adjusted operating margin performance.(2) The
How Annual NEO Compensation is Determined
| Select Peers | Analyze & Benchmark | Final Assessment | | Review comparator companies to maintain a group of companies that are relatively similar in complexity and size to Grainger. Review nationally recognized survey data for comparably sized general industry companies to gain a broader perspective of market practice, as the pool for executive talent extends beyond the comparator group. | Analyze data from an executive compensation study that includes total compensation paid to comparator group executives and survey matches with similar duties and responsibilities. Review competitive compensation benchmarking data at the 25th, 50th and 75th quartiles of the market. Evaluate considerations such as individual and Company performance, internal equity, management’s recommendation and the NEO’s overall experience, replaceability and unique skills. | Review the final assessment and analysis of NEO compensation versus comparator group to survey data to ensure relative competitiveness of the Company’s compensation practices. Evaluate recommendations for base salaries and changes to the structure and targets of short and long-term incentive programs are made in part based on market data. CEO Pay—Reviewed and recommended by the Compensation Committee. NEO Pay—Reviewed by the Chairman and CEO, reviewed and recommended by the Compensation Committee. | | Action: Reviewed and approved by the Compensation Committee in July. | Action: Reviewed by the Compensation Committee in October. | CEO Pay—Approved by independent directors in executive session without management present in February. NEO Pay—Approved by the Board in February. |
Independent Compensation Consultant
Independent Compensation Consultant After a review of the factors prescribed by the SEC and the NYSE rules and regulations, the Compensation Committee determined that Pay Governance is independent and retained Pay Governance as its independent compensation consultant. At the Compensation Committee’s direction, the independent compensation consultant: • Attends Compensation Committee meetings and select executive sessions; Assists the Compensation Committee in the review of goals and objectives for the CEO compensation;
Independent Compensation Consultant
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Independent Compensation Consultant
| invest.grainger.com | 47 | ● |
Independent Compensation Consultant
Provides the Compensation Committee with comparable compensation market data, including pay levels and pay practices of both our comparator companies and general industry; • Helps the Compensation Committee evaluate recommendations proposed by management; • Assists with incentive compensation program design, structure and selection of the metrics; • Annually reviews and recommends appropriate comparator companies used for compensation studies; • Conducts or assists in risk reviews of the Company’s performance and incentive-based compensation programs; • Provides regular updates on executive compensation trends and regulatory developments; and • Undertakes special projects as assigned. The Compensation Committee seeks advice from the independent compensation consultant on compensation trends and best practices, as well as in reviewing the Company’s programs and policies to ensure they are designed and operate to achieve their purposes and goals. The independent compensation consultant did not provide any additional services to the Company in 2023.
Role of Management
Role of Management 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) routinely recommend programs to the Compensation Committee 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 the Compensation Committee’s independent compensation consultant to develop market information and recommends adjustments in base salaries, annual incentive targets and long-term incentive awards, as well as changes to programs required for regulatory compliance 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. 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 and is approved by the independent directors in executive session without management present.
Compensation Comparator Group
Compensation Comparator Group The Company’s compensation programs are regularly benchmarked against a Compensation Committee-approved comparator group of companies that are similar to the Company in size and 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 considered when determining the relative competitiveness of the Company’s compensation practices. Consistent with this practice, a comparator group compensation study was conducted in 2022 to determine 2023 compensation (the “2023 Compensation Study”). The 2023 comparator group consists of 18 companies that are relatively similar in complexity and size to Grainger and represent the types of major companies with which Grainger historically competes for executive talent. The companies that were evaluated for the 2023 Compensation Study were approximately within a range of .4 to 2.5 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 Performance Graph in Part II, Item 5 of the Annual Report. The Committee relied on its 2023 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 company represented by the comparator group. Listed below are the 2023 Compensation Study comparator group and the 2022 revenues and enterprise values for each company.
Compensation Comparator Group
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Compensation Comparator Group
| ● | 48 | 2024 proxy statement |
Compensation Comparator Group
| Company | 2022 Revenue ($MM)(1) | 2022 Enterprise Value ($MM)(2) | | AutoZone, Inc. | $16,252 | $55,345 | | Avnet, Inc. | $24,311 | $6,348 | | CDW Corporation | $23,749 | $30,610 | | Cintas Corporation | $7,854 | $48,895 | | Eaton Corporation plc | $20,752 | $71,391 | | eBay Inc. | $9,795 | $27,289 | | Expeditors International of Washington, Inc. | $17,071 | $14,891 | | Fastenal Company | $6,981 | $27,680 | | Genuine Parts Company | $22,096 | $27,920 | | Henry Schein, Inc. | $12,647 | $13,288 | | Illinois Tool Works Inc. | $15,932 | $74,528 | | LKQ Corporation | $12,794 | $17,727 | | Parker-Hannifin Corporation | $15,862 | $50,819 | | Stanley Black & Decker, Inc. | $16,947 | $19,659 | | United Rentals, Inc. | $11,642 | $35,098 | | Univar Solutions Inc.(3) | $11,475 | $7,566 | | Watsco, Inc. | $7,274 | $9,429 | | WESCO International, Inc. | $21,420 | $11,844 | | 25th Percentile | $11,517 | $13,689 | | 50th Percentile | $15,897 | $27,485 | | 75th Percentile | $19,832 | $45,446 | | W.W. Grainger, Inc. | $15,228 | $30,763 | | Percent Rank | 46% | 65% |
Compensation Comparator Group
(1) Reflects revenue for the most recent fiscal year end as of December 31, 2022. (2) Enterprise Value is calculated as market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents, as of December 31, 2022. (3) Univar Solutions, Inc. was acquired and no longer public as of August 1, 2023. It has been excluded from the compensation peer group used to determine fiscal year 2024 pay and replaced by Tractor Supply Company. The latest Compensation Study and comparator group validation was completed in 2023. For purposes of determining fiscal year 2024 pay, the Company adjusted its comparator group to remove Univar Solutions, Inc. (due to its privatization in 2023) and replace it with Tractor Supply Company due to its comparable business characteristics and operational similarities.
Annual Incentives
Annual Incentives 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 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 describes the 2023 MIP target payment applicable to each NEO:
Annual Incentives
| Name(1) | 2023 Target Incentive (as a % of base salary)(2) | Performance Results (as a % of the target) | | D.G. Macpherson | 150% | 128% | | Deidra C. Merriwether(3) | 100% | 128% | | Paige K. Robbins(4) | 100% | 128% | | Nancy L. Berardinelli-Krantz(5) | 80% | 128% | | Matthew E. Fortin(6) | 80% | 128% |
Annual Incentives
(1) The table outlines current executive officers as of December 31, 2023. With respect to former executive officers, Mr. Howard’s annual MIP target was 80% and was prorated through July 31, 2023. Ms. Carroll’s annual MIP target was 80% and was prorated based on date of death. (2) Pro-rata calculations are made in accordance with plan provisions and based on the number of eligible days in each eligible month. (3) Ms. Merriwether’s annual MIP target was increased from 90% to 100% effective April 1, 2023. (4) Ms. Robbins’ annual MIP target was increased from 90% to 100% effective April 1, 2023. (5) Ms. Berardinelli-Krantz’s annual MIP target of 80% was effective with her appointment as SVP and Chief Legal Officer effective January 30, 2023 and remained unchanged thereafter. Mr. Fortin’s annual MIP target was 80% subsequent to his appointment as SVP and Chief Human Resources Officer. Prior to his appointment, he was aligned to the Company’s broad-based incentive plan N.A. MIP with a 45% target. For information regarding Mr. Fortin’s 2023 annual incentive award, see footnote 3 in the Summary Compensation Table.
Annual Incentives
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Annual Incentives
| ● | 50 | 2024 proxy statement |
Annual Incentives
The 2023 MIP payout was based as a percentage of the NEO’s annualized base salary as of December 31, 2023 with the exception of Ms. Carroll, whose MIP payout was based as a percentage of her base salary as of her date of death, and Mr. Howard, whose MIP payout was based as a percentage of his base salary as of July 31, 2023. The 2023 MIP was based on 2023 year-over-year total Company daily, organic constant currency sales and total Company adjusted ROIC, as well as on an ESG modifier, which can increase or decrease payouts determined by financial performance up to +/- 10 percentage points. The MIP is capped at 200% of the target award. The financial metrics that make up the framework of MIP continue to be in place as the Company believes the design of the annual incentive program supports the creation of shareholder value as it encourages management to focus on profitable sales growth and the effective use of capital. The core financial metrics that underpin the MIP have been in place for more than 20 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. The financial metrics were selected to align with Company strategy and to balance sales growth with profitability, efficiency, expense management and asset management. Total Company adjusted ROIC reflects how effectively management uses Company assets and is generally defined by the Company as pre-tax annual adjusted operating earnings divided by average net working assets for the period. Year-over-year daily sales growth is determined by year-over-year results and modified for the Company’s current year planned foreign currency exchange rates used when setting initial targets. Therefore, total Company daily, organic constant currency sales for the purpose of MIP, excludes the impact on the Company’s sales due to foreign currency exchange rate fluctuations. Business results from acquisitions, divestitures and liquidations that occur during the year are generally not included in the calculation of total Company daily, organic constant currency sales or total Company adjusted 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 financial results are subject to an ESG modifier, which can increase or decrease payouts up to +/-10 percentage points and is based on total absolute scope 1 and scope 2 emissions and diverse leadership representation results. The overall design and inclusion of the modifier supports our goal to drive a purpose-driven culture that enables strong performance. The following table shows the performance and payout scenarios established at the beginning of the year for 2023:
Annual Incentives
| Total Company Adjusted ROIC Performance(1) | % Payout(2) | | < 35.8% | 0% | | 38.0% | 40% | | 39.4 – 40.4% | 50% | | 41.6% | 60% | | 44.1% | 100% |
Annual Incentives
| Total Company Daily, Organic Constant Currency Sales Growth Performance(1) | % Payout(2) | | < 2.1% | 0% | | 7.0% | 40% | | 9% – 10.1% | 50% | | 11.5% | 60% | | 16.6% | 100% |
Annual Incentives
(1) The 2023 MIP financial metrics are modified for the Company’s current year planned foreign currency exchange rates used when setting initial targets resulting in total Company daily, organic constant currency sales of 9.2% and total Company adjusted ROIC of 42.8%. This resulted in a final MIP payout of 128% of target. No adjustments to payouts were made. See Appendix B of this Proxy Statement for information regarding compensation and non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures. Payouts are interpolated on a straight-line basis.
Annual Incentives
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Annual Incentives
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Annual Incentives
Based on the Compensation Committee’s review of the Company’s executive compensation programs, including the results driven by the programs and the strong level of shareholder support in 2023, the Compensation Committee determined that the program results are aligned with shareholder value creation and approved the 128% payout based on the financial results and incentive payout scales disclosed herein. Short-term financial results exceeded expectations and therefore, the payout for the 2023 MIP was above target. Total Company daily, organic constant currency sales was 9.2%, resulting in a 50% total Company daily, organic constant currency sales payout, and 2023 total Company adjusted ROIC was 42.8%, resulting in a 78% total Company adjusted ROIC payout. The 2023 MIP financial metrics are modified for the Company’s current year planned foreign currency exchange rates used when setting initial targets. Total absolute scope 1 and scope 2 emissions and diverse leadership representation outcomes were within the targeted range. Therefore, the ESG modifier was determined to be 0%. The final 2023 MIP payout was 128%. The Company’s average MIP payout for NEOs over the last five years (2018-2022) was 123%. The Company believes that it establishes total Company adjusted ROIC and sales growth targets that are rigorous and provide an appropriate level of motivation. Under the terms and conditions of the MIP, the Compensation Committee has the ability to adjust the reported financial results for incentive plan purposes to correct for any unusual circumstances, both positive and negative, that might affect total Company adjusted ROIC or sales growth.
Long-Term Incentives
Long-Term Incentives The Company provides annual long-term incentives to NEOs and other key managers in order to: • Align the Company’s long-term business strategy and goals with those that increase shareholder value; • Achieve financial performance that balances growth, profitability and asset management; • Reward management for taking prudent action and achieving results that create shareholder value; •
2023 NEO Long-Term Incentives Overview
2023 NEO Long-Term Incentives Overview The long-term incentives provided to NEOs during 2023 are summarized as follows:
2023 NEO Long-Term Incentives Overview
| Award | Weight as a Percentage of Total LTI (CEO) | Weight as a Percentage of Total LTI (Other NEOs) | Vesting | Performance Measure | | Performance Share Units (PSUs) | 60% | 50% | Three-year cliff vesting contingent on performance | U.S. share gain,(1) Endless Assortment daily sales growth,(2) and total Company adjusted operating margin performance,(3) with each metric equally weighted. | | Restricted Stock Units (RSUs) | 40% | 50% | Three-year graded vesting | Grant value determined based on individual performance; long-term value based on performance in stock price. |
2023 NEO Long-Term Incentives Overview
(1) U.S. share gain is a relative metric which refers to the High-Touch Solutions—U.S. business daily, organic sales less estimated U.S. MRO market growth. (2) Reflects daily sales growth as reported under the Endless Assortment segment, which was effective January 1, 2021. See Appendix B of this Proxy Statement for information regarding compensation and non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.
2023 NEO Long-Term Incentives Overview
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
2023 NEO Long-Term Incentives Overview
| ● | 52 | 2024 proxy statement |
2023 NEO Long-Term Incentives Overview
As noted earlier, the Compensation Committee did not make any adjustments to its existing 2023 NEO long-term incentive program design from the program used in 2022, other than to adjust the weighting of the PSUs and RSUs within the long-term incentive program for the CEO to 60% PSUs and 40% RSUs instead of 50% PSUs and 50% RSUs. This change was made to further align CEO pay with Company performance. 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.
2023 Performance Share Units (PSUs)
2023 Performance Share Units (PSUs) The Company’s 2023 PSU program provides the NEOs and other executives with a potential share payout depending on three performance metrics—U.S. share gain (a relative metric), Endless Assortment daily sales growth in constant currency, local days and total Company adjusted operating margin performance in constant currency—over a three-year cycle measured at the end of the third year based on the period average. Actual results are calculated on a constant currency basis in order to exclude foreign exchange impact. 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 has the flexibility to use different objectives and targets from year-to-year to maximize alignment with then-current business objectives and to reflect economic conditions. 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. The 2023 awards will remain at risk through 2025.
2022 Performance Share Units (PSUs)
2022 Performance Share Units (PSUs) The Company’s 2022 PSU program provides the NEOs and other executives with a potential share payout depending on three performance metrics—U.S. share gain (a relative metric), Endless Assortment daily sales growth in constant currency, local days and total Company adjusted operating margin performance—over a three-year cycle measured at the end of the third year based on the period average. The 2022 PSU program is designed on a similar basis as the 2023 PSU program, including with respect to financial measures, thresholds, targets and goals and do not include the payment of dividend equivalents. The 2022 award will remain at risk through 2024.
Restricted Stock Units (RSUs)
Restricted Stock Units (RSUs) The Company’s RSU program applicable for 2023 and in prior years provides the NEOs and other executives with RSU grants allocated based on individual performance. RSUs align NEOs and other executives’ interests to stock price performance over time and three-year graded vesting encourages meaningful retention.
2021 Performance Share Unit (PSU) Program
2021 Performance Share Unit (PSU) Program The Compensation Committee approved the final results of the 2021-2023 PSU program at 124%. The 2021-2023 cycle was based on a three-year performance period from January 1, 2021 and ending December 31, 2023 performance period and was underpinned by three performance metrics—U.S. share gain (a relative metric), Endless Assortment daily sales growth and total Company adjusted operating margin performance. U.S. share gain was 459 bps, Endless Assortment daily sales growth was 10.7% and total Company adjusted operating margin performance expanded 143 bps on average over the three-year performance period. Therefore, the payout for these PSUs was 124% of target.(1) No dividend equivalents were paid on PSUs. The following table shows the performance and payout scenarios that were established at the beginning of 2021:
2021 Performance Share Unit (PSU) Program
| Total Payout(1)(2) | U.S. Share Gain(2)(3) | Endless Assortment Daily Sales Growth(2)(4) | Total Company Adjusted Operating Margin Performance(2)(5) | | 0% | ≤ 0 bps | ≤ 0% | <-200 bps | | 1% to 79% | 1 bps to 149 bps | 1% to 9% | -199 bps to -61 bps | | 80% to 99% | 150 bps to 249 bps | 10% to 14% | -60 bps to -21 bps | | 100% | 250 bps to 350 bps | 15% to 20% | -20 bps to 20 bps | | 101% to 120% | 351 bps to 449 bps | 21% to 25% | 21 bps to 60 bps | | 121% to 199% | 450 bps to 799 bps | 26% to 39% | 61 bps to 199 bps | | 200% | >800 bps | >40% | >200 bps |
2021 Performance Share Unit (PSU) Program
(1) Payouts are interpolated on a straight-line basis. (2) See Appendix B of this Proxy Statement for information regarding compensation and non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures. Based on three-year average U.S. share gain performance for 2021 (+77 bps), 2022 (+781 bps) and 2023 (+518 bps).
2021 Performance Share Unit (PSU) Program
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
2021 Performance Share Unit (PSU) Program
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2021 Performance Share Unit (PSU) Program
Based on three-year average Endless Assortment daily sales growth performance for 2021 (19.2%), 2022 (7.7%) and 2023 (5.1%). Endless Assortment segment was effective January 1, 2021. For the 2021-2023 PSU cycle, Endless Assortment daily sales growth is based on Endless Assortment segment daily sales growth and based on year-over-year sales growth based on U.S. sales days and in U.S. dollars. (5) Based on three-year average year-over-year change in total Company adjusted operating margin performance for 2021 (+43 bps), 2022 (+253 bps) and 2023 (+132 bps).
Cash and Equity Sign-On/Promotion Awards
Cash and Equity Sign-On/Promotion Awards In fiscal year 2023, the Compensation Committee approved a one-time cash sign-on award with a total value of $900,000 subject to continued employment and a sign-on RSU award with a target grant date value of $1,100,000 with three-year ratable vesting to Ms. Berardinelli-Krantz who was appointed as Grainger’s SVP and Chief Legal Officer on January 30, 2023. The one-time cash and RSU awards were intended to compensate Ms. Berardinelli-Krantz for total compensation forfeited from her former employer. As informed by the Compensation Committee’s review of market data, talent market and critical nature of the Chief Legal Officer role, the one-time sign-on cash award and RSU award were deemed essential in hiring Ms. Berardinelli-Krantz. Additionally, the Compensation Committee approved a one-time promotional RSU award with a target grant date value of $500,000 to Mr. Fortin who was promoted and appointed as Grainger’s SVP and Chief Human Resources Officer on September 13, 2023. These RSUs are subject to three-year cliff vesting.
Other Benefits
Other Benefits All other benefits, including the Retirement Savings Plan, which provides for an annual, fixed 6% Company contribution to the 401(k) plan for NEOs and all other U.S.-based eligible employees and various welfare benefits provided to NEOs and other executive officers, are comparable to those provided to the majority of salaried and hourly U.S.-based Company employees, except as noted in this section. • The NEOs receive the same health and welfare benefits (the NEOs also receive the same Retirement Savings Plan Company contribution rate percentage of 6% to the 401(k) plan) that is applicable to all eligible U.S.-based employees. • The Company provides Supplemental Profit Sharing Plans (each, an “SPSP”) solely to maintain an equal Company retirement contribution percentage of 6% to approximately 184 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. Other components of the Company’s compensation programs that apply only to NEOs: • Physical Exams: Effective April 2011, the Company requires that certain Company officers (including certain NEOs) have periodic physical examinations that are paid for by the Company. The Company believes that periodic physical exams are helpful in maintaining the effectiveness of its executive talent. As of December 31, 2023, there were six participants in the program. • Transportation: Officers also are allowed the business and personal use of a car and driver, subject to reimbursement of the incremental cost of use. Officers are allowed the business use of corporate aircraft, which is chartered by the Company from a third-party provider on an as-needed basis, while Mr. Macpherson is allowed personal use, subject to reimbursement of the full cost of use of the charter. These benefits represent a cost-effective method of allowing the Company’s top executives to more effectively use their time. • Discontinued Benefit Plans: Messrs. Macpherson and Howard have grandfathered participation in the Company’s Executive Death Benefit Plan (the “EDBP”), which was closed to new participants effective December 31, 2009, at which time benefit formulas for existing participants were frozen. Under this program, 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 base salary and target annual incentive. If a participant who is retirement-eligible under the EDBP dies after retirement or other separation of service from the Company, the beneficiary is entitled to a lump sum death benefit equal to 100% of the participant’s annual base salary and target annual incentive, unless such participant elects to receive, in lieu of the post-retirement death benefit, a lump sum cashout of the participant’s death benefit upon retirement. The Company’s policy is that, unless offered to other employees, it 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 un-granted equity, perquisites and other payments or awards made in lieu of compensation. Mr. Howard has grandfathered participation in the Company’s Frozen Voluntary Salary and Incentive Deferral Plan, which was discontinued effective December 31, 2016. Participants of this plan were previously able to defer up to 50% of their base salary and up to 85% of their bonus through this plan.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position(1) | Year | Salary | Bonus | Stock Awards(2) | Non-Equity Incentive Plan Comp.(3) | All Other Comp.(4) | Total | | D.G. Macpherson Chairman of the Board & Chief Executive Officer | 2023 | $1,100,000 | $0 | $6,631,385 | $2,112,000 | $317,288 | $10,160,673 | | | 2022 | $1,100,000 | $0 | $5,734,290 | $2,920,500 | $212,868 | $9,967,658 | | | 2021 | $1,090,225 | $0 | $5,241,816 | $2,343,000 | $340,553 | $9,015,594 | | Deidra C. Merriwether Senior Vice President & Chief Financial Officer | 2023 | $693,836 | $0 | $2,000,793 | $873,905 | $110,883 | $3,679,417 | | | 2022 | $668,750 | $0 | $1,726,159 | $1,075,275 | $89,944 | $3,560,128 | | | 2021 | $646,384 | $0 | $1,236,411 | $830,700 | $64,835 | $2,778,330 | | Paige K. Robbins Senior Vice President & President Grainger Business Unit | 2023 | $693,836 | $0 | $2,000,793 | $873,905 | $110,883 | $3,679,417 | | | 2022 | $668,750 | $0 | $1,726,159 | $1,075,275 | $94,714 | $3,564,898 | | | 2021 | $647,589 | $0 | $1,236,411 | $830,700 | $66,549 | $2,781,249 | | Nancy L. Berardinelli-Krantz Senior Vice President & Chief Legal Officer | 2023 | $566,137 | $900,000 | $2,400,939 | $576,293 | $351,541 | $4,794,910 | | Matthew E. Fortin Senior Vice President & Chief Human Resources Officer | 2023 | $452,265 | $0 | $801,541 | $341,105 | $48,578 | $1,643,489 | | John L. Howard Former Senior Vice President & General Counsel(5) | 2023 | $597,946 | $0 | $1,300,380 | $449,920 | $125,143 | $2,473,389 | | | 2022 | $752,775 | $0 | $1,066,068 | $1,071,204 | $181,139 | $3,071,186 | | | 2021 | $736,200 | $0 | $1,038,961 | $842,458 | $78,907 | $2,696,526 | | Kathleen S. Carroll Former Senior Vice President & Chief Human Resources Officer(6) | 2023 | $384,444 | $0 | $1,151,067 | $381,796 | $65,240 | $1,982,547 | | | 2022 | $519,375 | $0 | $1,015,447 | $693,807 | $59,618 | $2,288,247 | | | 2021 | $477,250 | $0 | $420,755 | $377,223 | $46,325 | $1,321,553 |
Summary Compensation Table
(1) With the exception of Ms. Carroll, position titles correspond to the last executive position held during 2023. (2) Represents the grant date fair value of stock awards computed in accordance with FASB ASC Topic 718 and with PSUs calculated based on the probable outcome of such conditions (which was determined to be target). PSUs have a maximum payout of 200% of the target award. Therefore, the PSU awards at 200% of target would have a grant date fair value of $7,862,501, $1,970,974, $1,970,974, $1,280,999, $296,850, $1,280,999 and $1,133,912 for Mr. Macpherson, Ms. Merriwether, Ms. Robbins, Ms. Berardinelli-Krantz, Mr. Fortin, Mr. Howard and Ms. Carroll, respectively. Due to Ms. Carroll’s passing, her outstanding PSUs were settled at target (see footnote 6 below and footnote 24 in the Outstanding Equity Awards at Fiscal Year-End Table for further details). (3) The actual non-equity incentive plan payout for Mr. Fortin was $341,105 reflecting pro-rata payouts from 2023 MIP of $129,075 and the Company’s broad-based North America MIP (N.A. MIP) of $212,030 in accordance with the respective plan provisions. Mr. Fortin was aligned to the Company’s broad-based N.A. MIP prior to his appointment as SVP and Chief Human Resources Officer. Mr. Fortin was the only NEO who participated in the N.A. MIP, which includes a maximum individual performance multiplier of 150%. The portion received by Mr. Fortin under the 2023 N.A. MIP plan provisions was $129,075 which reflects performance results at 126% of target and an individual performance multiplier of 100%. The daily, organic constant currency sales High-Touch Solutions—N.A. MIP component was 9.2% resulting in a 53% sales growth payout, and the adjusted ROIC component was 45.7% resulting in a 73% adjusted ROIC payout, for a combined 2023 N.A. MIP payout of 126%, rounded to the nearest whole percent. The 2023 N.A. MIP financial metrics were modified for the Company’s current year planned foreign currency exchange rates used when setting initial targets. 2023 adjusted ROIC is a non-GAAP financial measure. For a definition of this measure and for a reconciliation to the nearest comparable GAAP measure, see Appendix B to this Proxy Statement. For 2023, includes contributions accrued under the Company’s Retirement Savings plan and the related SPSP of $241,230, $106,113, $106,113, $87,352, $48,578, $100,584 and $65,240 for Mr. Macpherson, Ms. Merriwether, Ms. Robbins, Ms. Berardinelli-Krantz, Mr. Fortin, Mr. Howard and Ms. Carroll, respectively. Ms. Carroll’s Retirement Savings Account contributions ceased as of the date of her death, and her trust will receive a final Retirement Savings Plan distribution based on her beneficiary elections and in accordance with the relevant plan provisions. Amounts in this column also include: the
Summary Compensation Table
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Summary Compensation Table
| ● | 56 | 2024 proxy statement |
Summary Compensation Table
incremental cost of the frozen EDBP of $71,288 for Mr. Macpherson and $18,481 to Mr. Howard, relocation costs of $218,164 and associated relocation benefit tax gross-ups of $40,696 pursuant to the Company’s relocation policy related to the relocation of Ms. Berardinelli-Krantz and the cost of executive physicals of $4,770, $4,770, $4,770, $5,329 and $6,078 for Mr. Macpherson, Ms. Merriwether, Ms. Robbins, Ms. Berardinelli-Krantz and Mr. Howard, respectively. (5) As previously disclosed on the Company’s Current Report filed with the SEC on December 15, 2022, Mr. Howard stepped down as the Company’s General Counsel on January 30, 2023. He continued to serve as an active employee thereafter. Ms. Carroll passed away during fiscal year 2023 on September 3, 2023.
Summary Compensation Table
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Summary Compensation Table
| invest.grainger.com | 57 | ● |
Grants of Plan-Based Awards
Grants of Plan-Based Awards
Grants of Plan-Based Awards
| Name | Grant Date | Approval Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: No. of Shares of Stock or Units | Grant Date Fair Value of Stock and Option Awards(3) | | | | | Threshold | Target | Maximum | Threshold | Target | Maximum | | | | D.G. Macpherson | | | $0 | $1,650,000 | $3,300,000 | | | | | | | | 4/1/23 | 2/14/23 | | | | 0 | 5,880 | 11,760 | | $3,931,250 | | | 4/1/23 | 2/14/23 | | | | | | | 3,920 | $2,700,135 | | Deidra C. Merriwether | | | $0 | $682,738 | $1,365,476 | | | | | | | | 4/1/23 | 2/14/23 | | | | 0 | 1,474 | 2,948 | | $985,487 | | | 4/1/23 | 2/14/23 | | | | | | | 1,474 | $1,015,306 | | Paige K. Robbins | | | $0 | $682,738 | $1,365,476 | | | | | | | | 4/1/23 | 2/14/23 | | | | 0 | 1,474 | 2,948 | | $985,487 | | | 4/1/23 | 2/14/23 | | | | | | | 1,474 | $1,015,306 | | Nancy L. Berardinelli-Krantz | | | $0 | $450,229 | $900,458 | | | | | | | | 2/1/23 | 12/13/22 | | | | | | | 1,867 | $1,100,559 | | | 4/1/23 | 2/14/23 | | | | 0 | 958 | 1,916 | | $640,500 | | | 4/1/23 | 2/14/23 | | | | | | | 958 | $659,880 | | Matthew E. Fortin | | | $0 | $269,118 | $538,236 | | | | | | | | 4/1/23 | 2/14/23 | | | | 0 | 222 | 444 | | $148,425 | | | 4/1/23 | 2/14/23 | | | | | | | 222 | $152,916 | | | 10/1/23 | 9/8/23 | | | | | | | 723 | $500,200 | | John L. Howard | | | $0 | $351,500 | $703,000 | | | | | | | | 4/1/23 | 2/14/23 | | | | 0 | 958 | 1,916 | | $640,500 | | | 4/1/23 | 2/14/23 | | | | | | | 919 | $659,880 | | Kathleen S. Carroll(4) | | | $0 | $298,278 | $596,556 | | | | | | | | 4/1/23 | 2/14/23 | | | | 0 | 848 | 1,696 | | $566,956 | | | 4/1/23 | 2/14/23 | | | | | | | 848 | $584,111 |
Grants of Plan-Based Awards
(1) Represents potential amounts under the 2023 MIP. Actual payout amounts under the 2023 MIP are included in the “Non-Equity Incentive Plan Comp.” column of the Summary Compensation Table. Mr. Fortin was aligned to the Company’s broad-based N.A. MIP Program for the period from January 1, 2023 to September 16, 2023. Mr. Fortin was the only NEO who participated for a portion of the year in the N.A. MIP which includes a maximum individual performance multiplier of 150%. For actual performance under the N.A. MIP for Mr. Fortin, see footnote 3 in the Summary Compensation Table. (2) The number of shares that may be earned for the 2023 grant of PSUs from 0% to 200% of the target awards made under the 2022 Incentive Plan. (3) Represents the grant date fair value of awards of RSUs and PSUs (based on the probable outcome of the performance conditions) as calculated under FASB ASC Topic 718 without allocating over the vesting period. Ms. Berardinelli-Krantz received a sign-on restricted stock unit award granted on February 1, 2023 with three-year graded vesting. Mr. Fortin received a sign-on restricted stock unit award granted on October 1, 2023 with three-year cliff vesting. In accordance with the 2015 Incentive Plan and 2022 Incentive Plan (and consistent with how equity is treated for all Grainger employees upon death), Ms. Carroll’s 1,696 unvested RSU awards were accelerated and settled and unvested PSUs were settled at target, resulting in 2,388 PSUs at settlement upon death.
Grants of Plan-Based Awards
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Grants of Plan-Based Awards
| ● | 58 | 2024 proxy statement |
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End
| Name | Option Awards | | | | | Stock Awards | | | | | | 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) | | D.G. Macpherson | | | | | | 18,222(12) | $15,100,389 | 23,088(13) | $19,132,795 | | | 46,063(10) | | | $276.64 | 4/1/28 | | | | | | | 30,663(11) | | | $311.26 | 3/31/29 | | | | | | Deidra C. Merriwether | | | | | | 6,359(14) | $5,269,640 | 6,358(15) | $5,268,811 | | | 2,860(8) | | | $234.38 | 3/31/26 | | | | | | | 2,318(9) | | | $231.20 | 4/2/27 | | | | | | | 3,123(10) | | | $276.64 | 4/1/28 | | | | | | | 2,339(11) | | | $311.26 | 3/31/29 | | | | | | Paige K. Robbins | | | | | | 6,866(16) | $5,689,786 | 6,358(17) | $5,268,811 | | | 3,122(7) | | | $231.88 | 3/31/25 | | | | | | | 3,813(8) | | | $234.38 | 3/31/26 | | | | | | | 2,814(9) | | | $231.20 | 4/2/27 | | | | | | | 3,904(10) | | | $276.64 | 4/1/28 | | | | | | | 2,859(11) | | | $311.26 | 3/31/29 | | | | | | Nancy L. Berardinelli-Krantz | | | | | | 2,825(18) | $2,341,049 | 1,916(19) | $1,587,770 | | Matthew E. Fortin | | | | | | 2,068(20) | $1,713,731 | 1,076(21) | $891,670 | | John L. Howard | | | | | | 2,564(22) | $2,124,761 | 4,022(23) | $3,332,991 | | | 8,979(10) | | | $276.64 | 4/1/28 | | | | | | | 5,977(11) | | | $311.26 | 3/31/29 | | | | | | Kathleen S. Carroll(24) | 0 | | | | | 0 | $0 | 0 | $0 |
Outstanding Equity Awards at Fiscal Year-End
(1) Represents stock option awards with a 10-year term and three-year cliff vesting for awards granted through 2018; three-year graded vesting for awards granted in 2019. Upon retirement from the Company, unvested options automatically vest and may be exercised within the lesser of six years or the remaining term of the option. (2) Awards were issued at fair market value, which is the closing stock price on the grant date. (3) Represents 10 years after the award date. (4) Represents the aggregate unvested RSUs outstanding multiplied by the year-end closing price of $828.69 and 2021 PSUs granted to all NEOs, excluding Ms. Carroll as her unvested RSUs were accelerated upon death and settled and unvested PSUs were accelerated and settled at target upon death. (5) Represents the maximum number of shares to be issued in connection with the 2022 and 2023 PSUs. (6) Represents the aggregate performance awards outstanding assuming payouts at maximum levels multiplied by the year-end closing price of $828.69. (7) 100% of these options vested on April 1, 2018. (8) 100% of these options vested on April 1, 2019. (9) 100% of these options vested on April 3, 2020. (10) 100% of these options vested on April 2, 2021. (11) 100% of these options vested on April 1, 2022. Represents 2,230 RSUs that will vest on April 1, 2024, 1,888 RSUs that will vest on April 1, 2024, 1,888 RSUs that will vest on April 1, 2025, 1,306 RSUs that will vest on April 1, 2024, 1,307 RSUs that will vest on April 1, 2025, 1,307 RSUs that will vest on April 1, 2026 and 8,296 PSUs that will vest on April 1, 2024, based on the final 2021 PSU performance results from January 1, 2021 through December 31, 2023.
Outstanding Equity Awards at Fiscal Year-End
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Outstanding Equity Awards at Fiscal Year-End
| invest.grainger.com | 59 | ● |
Outstanding Equity Awards at Fiscal Year-End
Represents 11,328 PSUs that are assumed to vest on April 1, 2025, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2022 through December 31, 2024 and 11,760 PSUs that are assumed to vest on April 1, 2026, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2023 through December 31, 2025. (14) Represents 1,265 RSUs that will vest on November 1, 2024, 526 RSUs that will vest on April 1, 2024, 568 RSUs that will vest on April 1, 2024, 569 RSUs that will vest on April 1, 2025, 491 RSUs that will vest on April 1, 2024, 491 RSUs that will vest on April 1, 2025, 492 RSUs that will vest on April 1, 2026 and 1,957 PSUs that will vest on April 1, 2024, based on the final 2021 PSU performance results from January 1, 2021 through December 31, 2023. (15) Represents 3,410 PSUs that are assumed to vest on April 1, 2025, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2022 through December 31, 2024 and 2,948 PSUs that are assumed to vest on April 1, 2026, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2023 through December 31, 2025. (16) Represents 526 RSUs that will vest on April 1, 2024, 568 RSUs that will vest on April 1, 2024, 569 RSUs that will vest on April 1, 2025, 491 RSUs that will vest on April 1, 2024, 491 RSUs that will vest on April 1, 2025, 492 RSUs that will vest on April 1, 2026, 1,772 RSUs that will vest on April 2, 2025 and 1,957 PSUs that will vest on April 1, 2024, based on the final 2021 PSU performance results from January 1, 2021 through December 31, 2023. (17) Represents 3,410 PSUs that are assumed to vest on April 1, 2025, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2022 through December 31, 2024 and 2,948 PSUs that are assumed to vest on April 1, 2026, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2023 through December 31, 2025. (18) Represents 622 RSUs that will vest on February 1, 2024, 622 RSUs that will vest on February 1, 2025, 623 RSUs that will vest on February 1, 2026, 319 RSUs that will vest on April 1, 2024, 319 RSUs that will vest on April 1, 2025 and 320 RSUs that will vest on April 1, 2026. (19) Represents 1,916 PSUs that are assumed to vest on April 1, 2026, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2023 through December 31, 2025. (20) Represents 121 RSUs that will vest on April 1, 2024, 343 RSUs that will vest on July 1, 2025, 105 RSUs that will vest on April 1, 2024, 106 RSUs that will vest on April 1, 2025, 74 RSUs that will vest on April 1, 2024, 74 RSUs that will vest on April 1, 2025, 74 RSUs that will vest on April 1, 2026, 723 RSUs that will vest on October 1, 2026 and 448 PSUs that will vest on April 1, 2024, based on the final 2021 PSU performance results from January 1, 2021 through December 31, 2023. (21) Represents 632 PSUs that are assumed to vest on April 1, 2025, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2022 through December 31, 2024 and 444 PSUs that are assumed to vest on April 1, 2026, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2023 through December 31, 2025. (22) Represents 306 RSUs that will vest on April 1, 2024, 306 RSUs that will vest on April 1, 2025, 307 RSUs that will vest on April 1, 2026 and 1,645 PSUs that will vest on April 1, 2024, based on the final 2021 PSU performance results from January 1, 2021 through December 31, 2023. (23) Represents 2,106 PSUs that are assumed to vest on April 1, 2025, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2022 through December 31, 2024 and 1,916 PSUs that are assumed to vest on April 1, 2026, based on the maximum level of achievement of the performance goals over the three-year performance period from January 1, 2023 through December 31, 2025. Ms. Carroll’s vested equity awards transferred to her estate upon her death. In accordance with the 2015 Incentive Plan and 2022 Incentive Plan (and consistent with how equity is treated for all Grainger employees upon death), 1,696 unvested RSU awards were accelerated and settled upon death, and 2,388 unvested PSU awards were accelerated and settled at target upon death.
Outstanding Equity Awards at Fiscal Year-End
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Outstanding Equity Awards at Fiscal Year-End
| ● | 60 | 2024 proxy statement |
Option Exercises and Stock Vested
Option Exercises and Stock Vested
Option Exercises and Stock Vested
| Name | Option Awards Exercised | | Stock Awards Vested | | | | No. of Shares Acquired on Exercise(1) | Value Realized on Exercise(2) | No. of Shares Acquired on Vesting | Value Realized on Vesting(3) | | D.G. Macpherson | 60,242 | $27,825,975 | 28,531 | $19,679,393 | | Deidra C. Merriwether | 4,623 | $1,965,985 | 2,802 | $1,930,046 | | Paige K. Robbins | 2,127 | $943,749 | 3,113 | $2,144,266 | | Nancy L. Berardinelli-Krantz | 0 | $0 | 0 | $0 | | Matthew E. Fortin | 3,439 | $1,527,739 | 2,316 | $1,644,590 | | John L. Howard | 20,997 | $10,073,678 | 2,604 | $2,465,975 | | Kathleen S. Carroll | 1,690 | $608,907 | 5,684 | $4,004,922 |
Option Exercises and Stock Vested
(1) Represents the number of stock options exercised. The amounts included in these columns for Ms. Carroll represent stock options that were exercised by Ms. Carroll prior to her death. (2) Represents the difference between the exercise price and the market price of the common stock on the date of exercise. Represents the value of the RSU, PSU and performance RSU (“PRSU”) awards on the vesting date. Ms. Carroll’s vested equity awards transferred to her estate upon her death. In accordance with the 2015 Incentive Plan and 2022 Incentive Plan (and consistent with how equity is treated for all Grainger employees upon death), 1,696 unvested RSU awards were accelerated and settled upon death and unvested PSUs were settled at target, resulting in 2,388 PSUs at settlement upon death.
Option Exercises and Stock Vested
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Option Exercises and Stock Vested
| invest.grainger.com | 61 | ● |
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation
| Name | Plan | Executive Contributions in Last Fiscal Year | Company Contributions in Last Fiscal Year(1) | Aggregate Earnings in Last Fiscal Year(2) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last Fiscal Year Equivalent(3) | | D.G. Macpherson | SPSP II | $0 | $188,280 | $460,028 | $0 | $3,365,892 | | | Total | $0 | $188,280 | $460,028 | $0 | $3,365,892 | | Deidra C. Merriwether | SPSP II | $0 | $71,644 | $69,638 | $0 | $489,778 | | | Total | $0 | $71,644 | $69,638 | $0 | $489,778 | | Paige K. Robbins | SPSP II | $0 | $71,644 | $113,531 | $0 | $788,261 | | | Total | $0 | $71,644 | $113,531 | $0 | $788,261 | | Nancy L. Berardinelli-Krantz | SPSP II | $0 | $0 | $0 | $0 | $0 | | | Total | $0 | $0 | $0 | $0 | $0 | | Matthew E. Fortin | SPSP II | $0 | $24,794 | $31,062 | $0 | $324,116 | | | Total | $0 | $24,794 | $31,062 | $0 | $324,116 | | John L. Howard(4) | Frozen Salary & Incentive Deferral | $0 | $0 | $505,626 | $0 | $4,000,178 | | | SPSP & SPSP II | $0 | $77,400 | $400,585 | $0 | $3,200,847 | | | Deferred RSUs | $0 | $0 | $5,448,800 | $0 | $16,573,800 | | | Total | $0 | $77,400 | $6,355,011 | $0 | $23,774,825 | | Kathleen S. Carroll(5) | SPSP II | $0 | $35,451 | $5,429 | $115,296 | $0 | | | Total | $0 | $35,451 | $5,429 | $115,296 | $0 |
Nonqualified Deferred Compensation
(1) The Company provides the SPSPs solely to maintain an equal percentage of profit-sharing contribution to employees (including all NEOs) who would be subject to contribution or compensation limits imposed on qualified plans by the Internal Revenue Code. For Mr. Macpherson, Ms. Merriwether, Ms. Robbins, Ms. Berardinelli-Krantz, Mr. Fortin, Mr. Howard and Ms. Carroll, this represents the Company SPSP contribution. These contributions were disclosed as part of All Other Comp. in the Summary Compensation Table. (2) Represents earnings on all nonqualified balances, including SPSP earnings. For Mr. Howard, also includes earnings on voluntary deferrals and vested deferred restricted stock units as shown above. (3) Aggregate year-end balances for the SPSPs (contributions are disclosed as “All Other Comp.” in the Summary Compensation Table). For Mr. Howard, also includes year-end balances for his voluntary deferral account and vested deferred RSUs. For Mr. Howard, also includes year-end balances for his voluntary deferral account and vested deferred restricted stock units which do not offer above market earnings (as defined by SEC rules). As a result, none of these earnings or losses are reflected in the Summary Compensation Table. (4) Mr. Howard will receive a final lump-sum distribution in November 2024 of his entire SPSP balance as noted above adjusted to reflect investment gains and losses, in accordance with the plan provisions. For the SPSP II and Frozen Voluntary Salary and Deferral Plan, annual installments will commence in February 2024 with subsequent annual distributions made until the end of the five-year term in February 2028. Ms. Carroll’s trust received a distribution of $115,296 from her SPSP II account on October 2, 2023, based on her beneficiary elections and in accordance with the relevant plan provisions. A final SPSP II contribution of $45,440 will be distributed to her estate on April 1, 2024, adjusted to reflect investment gains and losses, in accordance with the plan provisions.
Nonqualified Deferred Compensation
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Nonqualified Deferred Compensation
| ● | 62 | 2024 proxy statement |
Nonqualified Deferred Compensation
| Employment Agreements, Change in Control and Termination of Employment Arrangements |
Retirement
Retirement The definition of retirement eligibility is the same for all U.S. employees. Under the Retirement Savings Plan, an employee is retirement-eligible upon reaching age 60. For equity awards made under the prior 2015 Incentive Plan, an employee is retirement-eligible upon attaining age 60, age 55 with 20 years of service, or 25 years of service. Under the retirement definition applicable to the 2022 Incentive Plan, an additional 5 years of service was added to the age 60 requirement such that an employee is retirement-eligible upon attaining any of the following: • age 60 and 5 years of service; • age 55 and 20 years of service; or • 25 years of service. Under the 2022 Incentive Plan, the Company provides the following upon termination of active employment due to retirement for all retirement-eligible employees, including NEOs: • Outstanding stock options become vested and executives have the right to exercise such stock options within six years from date of termination or for the remaining term of the stock option, whichever is less; • Settlement of PRSUs and PSUs occurs after the end of the performance period in common stock equal to the number of the executive’s outstanding performance shares earned for the performance period; • Continued vesting for RSUs granted under the 2022 Incentive Plan; and • Cash payments equal to account balances under retirement profit sharing, any supplemental retirement profit sharing program and the Frozen Voluntary Salary and Incentive Deferral Plan will be made in installment payments for up to 15 years or in a lump-sum payment based on the election made by the executive in accordance with the terms and conditions of those plans. Mr. Howard is the only NEO who is retirement-eligible as of December 31, 2023 for purposes of the Company’s active retirement programs and discontinued EDBP. Mr. Macpherson is only considered early retirement eligible under the Company’s discontinued EDBP, which was closed to new participants effective December 31, 2009 (see Other Benefits on page 54 for details on the frozen EDBP). 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 change in control of the Company. The amounts shown in the following tables assume that any such retirement, death, disability or change in control, as applicable, was effective as of December 31, 2023 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.
Retirement
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Retirement
| ● | 64 | 2024 proxy statement |
CEO Pay Ratio
CEO Pay Ratio As part of its annual process, the Company calculates 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 there has been a change to the Company’s employee population or compensation arrangements that it reasonably believes would result in a significant change in the pay ratio disclosure. As the Company last identified the median employee in 2020, a new median employee has been identified for purposes of the 2023 CEO pay ratio disclosure. Based on the newly identified median employee, the 2023 ratio of CEO pay to median employee pay is 157:1. For context, the 2022 ratio of CEO pay to the Company’s median employee pay was 143:1. The increase in the CEO pay ratio in 2023 relative to 2022 is due to overall growth in our hourly employee and overseas subsidiary headcount. In calculating 2023 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 2023 is $10,160,673. The CEO’s total compensation for purposes of our pay ratio disclosure calculation is $10,173,068, which differs from the total compensation described in the Summary Compensation Table on page 55 by the amount of his estimated health and wellness benefits. The median employee’s estimated 2023 total compensation was $65,160 (which includes compensation of $52,765 and estimated benefits of $12,395).
CEO Pay Ratio
| Element | Chairman and CEO ($) | Median Employee ($) | | Base Salary | $1,100,000 | $48,471 | | Stock Awards | $6,631,385 | $0 | | Non-Equity Incentive Plan Compensation | $2,112,000 | $0 | | All Other Compensation | $317,288 | $4,294 | | Estimated Company Health and Wellness Benefits | $12,395 | $12,395 | | Total | $10,173,068 | $65,160 | | CEO PAY RATIO | 157:1 | |
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Act of 2010, we provide the following disclosure regarding executive compensation for our principal executive officer (“PEO”) and our other NEOs (“Non-PEO NEOs”) and Company performance for the fiscal years listed below. While we are required to identify total Company adjusted ROIC as the Company Selected Measure (“CSM”) in accordance with Item 402(v) of Regulation S-K of the Exchange Act, adjusted ROIC and daily sales growth are the financial measures we consider the two most important in linking compensation actually paid to the NEOs for the 2023 fiscal year to Company performance, as the Company’s overall NEO compensation structure is designed to drive profitable growth leading to shareholder value creation.
Pay Versus Performance Disclosure
| Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(1)(2)(3) | Average Summary Compensation Table Total for Non-PEO NEOs(1) | Average Compensation Actually Paid to Non-PEO NEOs(1)(2)(3) | Value of Initial Fixed $100 Investment Based On:(4) | | Net Income ($MM) | Adjusted ROIC(5) (CSM) | Daily Sales Growth(5) (Supplemental Measure) | | | | | | | TSR | Peer Group TSR | | | | | 2023 | $10,160,673 | $23,002,860 | $3,042,195 | $4,822,536 | $259 | $223 | $1,829 | 42.8% | 9.2% | | 2022 | $9,967,658 | $14,293,346 | $3,121,115 | $3,736,729 | $172 | $151 | $1,547 | 40.6% | 16.5% | | 2021 | $9,015,594 | $16,301,335 | $2,138,920 | $2,891,203 | $158 | $170 | $1,043 | 31.9% | 12.8% | | 2020 | $7,475,378 | $14,661,338 | $2,003,159 | $3,002,624 | $123 | $125 | $695 | 28.2% | 3.5% |
Pay Versus Performance Disclosure
(1) D.G. Macpherson was our PEO for each year presented. The individuals comprising the Non-PEO NEOs for each year presented are listed below.
Pay Versus Performance Disclosure
| 2020 | 2021 | 2022 | 2023 | | Thomas B. Okray | Deidra C. Merriwether | Deidra C. Merriwether | Paige K. Robbins | | John L. Howard | Paige K. Robbins | Paige K. Robbins | Deidra C. Merriwether | | Paige K. Robbins | John L. Howard | John L. Howard | Nancy L. Berardinelli-Krantz | | Deidra C. Merriwether | Kathleen S. Carroll | Kathleen S. Carroll | Matthew E. Fortin | | | Robert F. O’Keef, Jr | | Kathleen S. Carroll | | | | | John L. Howard |
Pay Versus Performance Disclosure
(2) The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K of the Exchange Act and do not reflect compensation actually realized or received by the Company’s NEOs. These amounts reflect total compensation as set forth in the Summary Compensation Table above for each year, adjusted as described in footnote 3 below. (3) Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the PEO and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in the Exclusion of Stock Awards and Option Awards column are the totals from the Stock Awards and Option Awards columns set forth in the Summary Compensation Table. PEO:
Pay Versus Performance Disclosure
| Year | Summary Compensation Table Total for Mr. Macpherson | Exclusion of Stock Awards and Option Awards for Mr. Macpherson | Total—Inclusion of Equity Values for Mr. Macpherson | Compensation Actually Paid to Mr. Macpherson | | 2023 | $10,160,673 | ($6,631,385) | $19,473,572 | $23,002,860 |
Pay Versus Performance Disclosure
Non-PEO NEOs (Average):
Pay Versus Performance Disclosure
| Year | Average Summary Compensation Table Total for Non-PEO NEOs | Average Exclusion of Stock Awards and Option Awards for Non-PEO NEOs | Total—Average Inclusion of Equity Values for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs | | 2023 | $3,042,195 | ($1,609,252) | $3,389,593 | $4,822,536 |
Pay Versus Performance Disclosure
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Pay Versus Performance Disclosure
| invest.grainger.com | 73 | ● |
Pay Versus Performance Disclosure
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables. The amounts reported in the total columns reflect rounding, which may result in slight variations when compared with the sum of the components listed in the tables: PEO:
Pay Versus Performance Disclosure
| Year | Year End Fair Value of Equity Granted During the Covered Year that are Outstanding and Unvested at the Covered Year End | Change in Fair Value from Last Day of Prior Year to Covered Year End of Unvested Equity Awards | Vesting-Date Fair Value of Equity Awards Granted During the Covered Year that Vested During the Covered Year | Change in Fair Value from Last Day of Prior Year to Covered Year End Equity Awards that Vested During the Covered Year | Dividends/ Earnings Paid on Awards in the Covered Year | Inclusion of Equity Values | | 2023 | $8,646,331 | $6,875,049 | $0 | $3,873,700 | $78,492 | $19,473,572 |
Pay Versus Performance Disclosure
Non-PEO NEOs (Average):
Pay Versus Performance Disclosure
| Year | Year End Fair Value of Equity Granted During the Covered Year that are Outstanding and Unvested at the Covered Year End | Change in Fair Value from Last Day of Prior Year to Covered Year End of Unvested Equity Award | Vesting-Date Fair Value of Equity Awards Granted During the Covered Year that Vested During the Covered Year | Change in Fair Value from Last Day of Prior Year to Covered Year End Equity Awards that Vested During the Covered Year | Dividends/ Earnings Paid on Awards in the Covered Year | Inclusion of Equity Values | | 2023 | $1,833,122 | $1,003,094 | $205,658 | $328,372 | $19,349 | $3,389,593 |
Pay Versus Performance Disclosure
For the equity values included in the above tables, the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of the grant. (4) The Peer Group TSR set forth in this table utilizes the Dow Jones U.S. Industrial Suppliers Total Stock Market Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K of the Exchange Act included in our Annual Report. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in the Company and in the Dow Jones U.S. Industrial Suppliers Total Stock Market Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. (5) While we are required to identify adjusted ROIC as the CSM in accordance with Item 402(v) of Regulation S-K of the Exchange Act, adjusted ROIC and daily sales growth are the financial measures we consider the two most important in linking performance to compensation actually paid to the NEOs for the 2023 fiscal year to Company performance, as the Company’s overall NEO compensation structure is designed to drive profitable growth leading to shareholder value creation. The 2023 MIP financial metrics are modified for the Company’s current year planned foreign currency exchange rates used when setting initial targets resulting in total Company daily, organic constant currency sales of 9.2% and total Company adjusted ROIC of 42.8%. Daily sales growth and adjusted ROIC, for purposes of the relevant incentive program, reflects certain non-GAAP adjustments as previously disclosed for certain program years. See Appendix B of this Proxy Statement for information regarding compensation and non-GAAP financial measures for year ended December 31, 2023. As it relates to Grainger’s prior year financial targets and result for its MIP and PSU grants, including the Company’s reconciliations of non-GAAP and other financial measures to the directly comparable GAAP measure, refer to the Company’s proxy statement on Form DEF 14A filed with the SEC on March 16, 2023.
Pay Versus Performance Disclosure
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Pay Versus Performance Disclosure
| ● | 74 | 2024 proxy statement |
Pay Versus Performance Disclosure
Description of Relationship Between NEO Compensation Actually Paid and Company TSR The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our other NEOs and the Company’s cumulative TSR over the four-year period from 2020 through 2023, as well as the relationship between the Company’s cumulative TSR and the TSR of the Dow Jones U.S. Industrial Suppliers Total Stock Market Index (peer group TSR). PEO and Average NEO Compensation Actually Paid Versus Grainger TSR and Grainger TSR Versus Peer Group TSR, 2020-2023 Description of Relationship Between NEO Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our other NEOs and our net income during fiscal 2020 through 2023. PEO and Average NEO Compensation Actually Paid Versus Grainger Net Income, 2020-2023
Pay Versus Performance Disclosure
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Pay Versus Performance Disclosure
| invest.grainger.com | 75 | ● |
Pay Versus Performance Disclosure
Description of Relationship Between NEO Compensation Actually Paid and total Company Adjusted ROIC The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our other NEOs and total Company adjusted ROIC during fiscal 2020-2023.(1) PEO and Average NEO Compensation Actually Paid Versus Grainger Total Company ROIC, 2020-2023 Description of Relationship Between NEO Compensation Actually Paid and Daily Sales Growth The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our other NEOs and daily sales growth during fiscal 2020-2023.(1) PEO and Average NEO Compensation Actually Paid Versus Grainger Daily Sales Growth, 2020-2023 Daily sales growth for purposes of the relevant incentive program reflects certain non-GAAP adjustments as previously disclosed for certain program years. See Appendix B of this Proxy Statement for information regarding compensation and non-GAAP financial measures. As it relates to Grainger’s prior
Pay Versus Performance Disclosure
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Pay Versus Performance Disclosure
| ● | 76 | 2024 proxy statement |
Pay Versus Performance Disclosure
year financial targets and result for its MIP and PSU grants, including the Company’s reconciliations of non-GAAP and other financial measures to the directly comparable GAAP measure, refer to the Company’s proxy statement on Form DEF 14A filed with the SEC on March 16, 2023. Fiscal 2023 Tabular List of Most Important Financial Performance Measures The following table presents the financial performance measures that the Company considers to have been the most important in linking Compensation Actually Paid to our PEO and other NEOs in fiscal 2023 to Company performance. The measures in this table are not ranked; definitions for these terms can be found in Appendix B to this Proxy Statement.
Pay Versus Performance Disclosure
| Most Important Performance Measures (3 to 7 metrics w/o ranking) | | Adjusted ROIC(1) | | Daily Sales Growth(2) | | U.S. Share Gain(3) | | Endless Assortment Daily Sales Growth(4) | | Total Company Adjusted Operating Margin Performance(5) |
Pay Versus Performance Disclosure
(1) Adjusted ROIC is a non-GAAP financial measure. See Appendix B of this Proxy Statement for information regarding non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures. (2) Daily sales are a non-GAAP measure and for purposes of the annual incentive program. (3) U.S. share gain is a relative metric which refers to the High-Touch Solutions—U.S. business daily sales growth less estimated U.S. MRO market growth. (4) Reported daily sales growth for Endless Assortment segment. Total Company adjusted operating margin performance is a non-GAAP measure and for purposes of the annual incentive program.
Pay Versus Performance Disclosure
| CORPORATE GOVERNANCE | PROPOSAL 1: ELECTION OF DIRECTORS | PROPOSAL 2: RATIFY THE INDEPENDENT AUDITOR | EXECUTIVE COMPENSATION | PROPOSAL 3: SAY ON PAY | QUESTIONS AND ANSWERS | APPENDICES |
Pay Versus Performance Disclosure
| invest.grainger.com | 77 | ● |