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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

 

W.W. Grainger, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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No fee required.

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        
 
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Fee paid previously with preliminary materials.

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

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LOGO

    W.W. GRAINGER, INC.
100 GRAINGER PARKWAY
LAKE FOREST, ILLINOIS 60045-5201

(847) 535-1000

PHOTO

March 18, 2021

Dear Grainger Shareholders:

We are pleased to invite you to attend virtually the 2021 annual meeting of shareholders of W.W. Grainger, Inc. on Wednesday, April 28, 2021, at 10 a.m. Central Daylight Time. This year's annual meeting will be held as a virtual meeting with no in-person attendance.

At the meeting, we will report on our operations and other matters of current interest. Shareholders will also vote on the matters described in the accompanying Notice of Virtual Annual Meeting and Proxy Statement and any other matters properly brought before the meeting.

As in prior years, we have elected to deliver our proxy materials to the majority of our shareholders over the Internet. This delivery process allows us to provide shareholders with the information they need, while at the same time conserving natural resources and lowering the cost of delivery. The Notice of Virtual Annual Meeting of Shareholders on the following page contains instructions on how to:

vote by Internet, by telephone or by mail; and

receive a paper copy of the proxy materials by mail.

Please take the time to carefully read the Notice of Virtual Annual Meeting and Proxy Statement that follow. Whether or not you plan to attend the meeting, please ensure that your shares are represented by giving us your proxy. You can do so by telephone, by Internet, or by signing and dating the enclosed proxy form and returning it promptly in the envelope provided.

We look forward to your participation in the meeting.

    Sincerely,

 

 

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D.G. Macpherson
Chairman of the Board and Chief Executive Officer

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NOTICE OF VIRTUAL ANNUAL MEETING
OF SHAREHOLDERS

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MEETING AGENDA

 
  Proposal
  Board
Recommendation

  For more
information

   
    1.   to elect 13 Directors for the ensuing year   FOR
(all nominees)
  Page 12    

 

 

2.

 

to ratify the appointment of Ernst & Young LLP as independent auditor for the year ending December 31, 2021; and

 

FOR

 

Page 42

 

 

 

 

3.

 

to approve on a non-binding advisory basis the compensation of Grainger's Named Executive Officers

 

FOR

 

Page 81

 

 

We will also consider any other matters that may properly be brought before the meeting (and any postponements or adjournments of the meeting). As of the date of this proxy statement, we have not received notice of any such matters.

VOTING

Shareholders of W.W. Grainger, Inc. (Grainger or the Company), as of the record date, are entitled to vote, as follows:

Shareholders have the right to cumulative voting in the election of Directors. For a definition of cumulative voting, see Questions and Answers—Voting Information / What is cumulative voting? How many votes do I have?/page 85, and

Each share of Grainger common stock is entitled to one vote for each of the other proposals.
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Internet   Telephone   Mail
www.proxyvote.com
up until 11:59 p.m. EDT
April 27, 2021

During the Meeting:
www.virtualshareholdermeeting.com/GWW2021
  1-800-690-6903
up until 1:00 a.m. CDT, on April 28, 2021
  Mark, sign and date your proxy card and return it in the pre-addressed
postage-paid envelope we have provided or return it to:
Vote Processing
c/o Broadridge
51 Mercedes Way
Edgewood, NY 11717

Regardless of whether you plan to attend the virtual annual meeting, we hope you will vote as soon as possible. You may vote your shares during the virtual annual meeting, over the Internet or via a toll-free telephone number. If you received a paper copy of a proxy or voting instruction card by mail, you also may submit your proxy or voting instruction card before the annual meeting by completing, signing, dating and returning your proxy or voting instruction card in the pre-addressed envelope provided. For specific instructions on voting, please refer to the section, Questions and Answers—Voting Information / page 85.


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VIRTUAL MEETING

Due to the public health impact of the COVID-19 pandemic, the 2021 annual meeting will be a virtual meeting without in-person attendance. To virtually attend the annual meeting at www.virtualshareholdermeeting.com/GWW2021 (the "Annual Meeting Website"), you must enter the 16-digit control number found on your proxy card or voting instruction form (the "Control Number"). You may vote your shares and submit your questions during the virtual annual meeting by entering your Control Number and following the instructions also available on the Annual Meeting Website.

Whether or not you plan to virtually attend the annual meeting, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described in the proxy materials for the annual meeting. Shareholders who have sent in proxies or voted via telephone or internet do not need to take any further action. As always, we encourage you to vote your shares prior to the annual meeting.

PROXY MATERIALS

This Notice of Virtual Annual Meeting, Proxy Statement and Form of Proxy were first distributed or made available to shareholders on or about March 18, 2021.

By order of the Board of Directors.

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Hugo Dubovoy, Jr.
Vice President, Corporate Secretary

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 28, 2021

This Notice of Virtual Annual Meeting, Proxy Statement and Form of Proxy and our 2020 Annual Report on Form 10-K are available under "Financials" in the Investor Relations section of our website at http://invest.grainger.com/and also may be obtained free of charge on written request to the Corporate Secretary at Grainger's headquarters, 100 Grainger Parkway, Lake Forest, Illinois 60045-5201.


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 TABLE OF CONTENTS

 

 CORPORATE GOVERNANCE   1

The Role of the Board

 

1
The COVID-19 Pandemic   1
Board Actions   1
Corporate Culture: The Grainger Edge   2
Corporate Governance Practices   4
Operating Principles of the Board of Directors   4

Director Independence

 

4

Board Qualifications, Attributes, Skills and Background

 

5
Board Refreshment Process   8
Board Tenure   9
Board Diversity—Rooney Rule   9

Attendance of Directors at Meetings

 

9

Annual Election of Directors

 

9

Candidates for Board Membership

 

10

Director Nominees' Experience and Qualifications

 

11

Proposal 1: Election of Directors

 

12

2020 Board Meetings and Committee Membership

 

20

Audit Committee

 

21

Board Affairs and Nominating Committee

 

22

Compensation Committee of the Board

 

23

Leadership Structure

 

24

Lead Director

 

24

Board, Committee and Director Evaluations

 

25
Process   26
Actions   28

Board Oversight

 

28
Board's Role in Shareholder Engagement   28
Succession Planning, Talent and Human Capital Management   29
Board's Role in Risk Oversight   30

Environmental, Social and Governance (ESG)

 

30

Political Activity

 

32


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Other Communications with Directors

 

33

Available Information

 

33
Business Conduct Guidelines   33
Operating Principles for the Board of Directors   33
Committee Charters   33
ESG Report   33

Director Compensation

 

34
2020 Director Compensation   35

Ownership of Grainger Stock

 

36
Security Ownership of Certain Beneficial Owners   36
Security Ownership of Management   38

Report of the Audit Committee

 

40

Audit Fees and Audit Committee Pre-Approval Policies and Procedures

 

41
Pre-approval Policy for Audit and Non-Audit Services   41

Proposal 2: Ratify the Independent Auditor

 

42

Report of the Compensation Committee of the Board

 

43

Independent Compensation Consultant; Fees

 

43

 

 

 
 EXECUTIVE COMPENSATION    

 COMPENSATION DISCUSSION AND ANALYSIS

 

45

CEO Pay Ratio Disclosure

 

79

Proposal 3: Say on Pay

 

81

Equity Compensation Plans

 

82

Transactions with Related Persons

 

83

 

 

 
 QUESTIONS AND ANSWERS   84

Virtual Meeting

 

84

Proxy Materials

 

84

Voting Information

 

85

Information Not Incorporated Into This Proxy Statement

 

88

 

 

 
 APPENDIX A—CATEGORICAL STANDARDS FOR DIRECTOR INDEPENDENCE   A-1

 

 

 
 APPENDIX B—DEFINITIONS AND NON-GAAP FINANCIAL MEASURES   B-1


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CORPORATE GOVERNANCE

THE ROLE OF THE BOARD

The Board of Directors of the Company (the Board) acts as the steward of the Company. Our Directors bring to the Board a wealth of business experience and a track record of good business judgment in situations relevant to the Company's operations and strategy.

The Board recognizes the importance of ensuring that our strategy is designed to create sustainable long-term value for Grainger's shareholders and other stakeholders. The Board maintains an active role in formulating, planning and overseeing the implementation of Grainger's strategy as to operational, financial, regulatory and environmental, social and governance (ESG) matters.

The Board has a robust annual strategic planning process during which key elements of our business and financial plans, strategies and near-term and long-term initiatives are developed and reviewed. This process culminates with a full-day Board session with our senior leadership team to review Grainger's overall strategy, opportunities, challenges and capabilities. The annual strategy process also helps shape the strategic content presented in our communications with the investment community. In addition to business strategy, the Board reviews Grainger's short-term and long-term financial plans, which serve as the basis for the annual operating and capital plans for the upcoming year. The Board evaluates progress made as well as related challenges and risks with respect to our strategy and plans throughout the year. In addition, through its Committees, the Board oversees Grainger's approach to ESG.

The COVID-19 Pandemic

As part of the Board's strategic guidance and oversight, it has engaged with management to make sure the Company is able to successfully adjust to changing environments during the COVID-19 pandemic. Throughout the pandemic, Grainger has been an essential business supporting hospitals, governments, first responders, food manufacturers, distribution companies and other customers who depend on our products and services to combat the virus on the front lines and keep their businesses up and running. The Board has closely monitored and helped ensure that Grainger's management processes and financial resources have been effectively deployed to fulfill our purpose—"We Keep the World Working"—and to remain the go-to-partner for people who build and run safe, sustainable and productive operations. With health as the primary focus, we established three priorities during this challenge:

    first, continuing to serve our customers well;

    second, supporting team members by providing a safe environment and job continuity; and

    third, preserving a strong financial and liquidity position to execute business plans and remain positioned to succeed beyond this pandemic.

Board Actions

The Board believes that a diverse, experienced and vibrant board significantly contributes to the broad-based thinking needed to reach the sound decisions that drive shareholder value and helps ensure that the Board is prepared to help the Company meet both current challenges and future needs. The 2021 Board slate consists of 13 Director nominees of varying experience and background, including five non-employee Directors newly appointed since July 2014 and one new independent nominee, Katherine D. Jaspon (the New Nominee). These additions to the Board demonstrate its commitment to gaining the benefits of different perspectives and diversity.

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Corporate Governance

The Board's various experiences and viewpoints benefit the Company most when they are aligned with our global business needs, reflective of our strong corporate governance practices and consistent with our ESG goals. As a result of the Board's ongoing refreshment efforts, we have added Directors with expertise in the technology and digital space as well as in leading ESG initiatives for a global business. Our five newest non-employee Directors, Rodney C. Adkins, Beatriz R. Perez, Susan Slavik Williams, Lucas E. Watson and Steven A. White, and Katherine D. Jaspon as the New Nominee, bring valuable perspectives and experiences in addition to enhancing the diversity of our Board.

Corporate Culture: The Grainger Edge

The Board strongly believes that the Company's culture must be strongly aligned with business strategy to create value. To that end, the Board is actively engaged with senior management in cultivating Grainger's culture. The Board believes that a purpose-driven culture has been an asset of the Company that creates a sustainable competitive advantage. Building on the Company's strong foundation while evolving a framework to address future challenges is critical to Grainger's continued success.

In 2019, the Company introduced the Grainger Edge, a new strategic framework that defines who Grainger is, why Grainger exists, and how team members work together to achieve Grainger's objectives.

The Grainger Edge includes a set of principles that defines the behaviors expected from team members as they work with each other, customers and suppliers. They support the Company's commitment to having an inclusive culture where all team members operate with the highest ethics in and outside of the Company's industry. The Board fully endorses these principles and believes that alignment to them creates value for shareholders.

The Grainger Edge also is the foundational structure for the Company's business strategy, which is to consistently gain share through two distinct business models that allow it to leverage its scale and supply chain to support customers with different needs.

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The Company's pay for performance compensation philosophy aligns with the Grainger Edge and helps further the Company's strategy and long-term value creation.

The Board is committed to helping the Company make the Grainger Edge a successful foundational framework for Grainger and its employees as the Company works to consistently serve customers and gain share. The Board understands that top talent is necessary to achieve these goals and supports the Company's commitment to providing employees with resources designed to help them succeed. Grainger's culture and principles advance the Board's priority of ensuring that the Company attracts, retains, motivates and develops top diverse talent across the Company. The Board routinely conducts in-depth reviews of senior leaders and their development. This engagement gives the Board insight into the Company's talent and succession plans.

The Board believes a culture of ethical behavior is essential to meeting the Company's goals and has adopted Business Conduct Guidelines that use plain language to make expectations more understandable and encourage a "speak up" culture for early issue identification. The Business Conduct Guidelines apply to all Directors, officers and employees.

Delivering business results and creating a sustainable business that does the right thing has guided the Company for more than 90 years. The continuing commitment to these objectives is seen in the Company's ESG initiatives. The Board believes that a thoughtfully articulated ESG approach can help build resilient processes, keep employees more engaged and enable quicker decision-making. Our commitment to ESG has served us well in the COVID-19 pandemic. Safety has been one of our key guiding pillars, and the investments we have made over time in building a sustainable supply chain have allowed us to continue to serve our customers well. Please see the section Environmental, Social and Governance / page 30.

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Corporate Governance

Collectively, the activities of the Board and its Committees in reviewing strategy, ESG, culture, talent and ethical behavior enable Grainger to help millions of customers worldwide keep their operations running and their people safe.

Corporate Governance Practices

Grainger has a history of strong corporate governance. A key priority of the Board is to set the "tone at the top." This is reflected in the Board's commitment to governance policies and practices that serve the interests of the Company and its shareholders. Key aspects include:

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Operating Principles of the Board of Directors

The Board recognizes that defining its role is an evolving process and has established Operating Principles for the Board of Directors (the Operating Principles) that provide a general framework to assist the Board in fulfilling its duties and responsibilities. Each year, the Board reviews and revises the Operating Principles, as appropriate, to address emerging needs and practices. The Operating Principles are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

DIRECTOR INDEPENDENCE

Our Board of Directors is committed to excellence in its governance practices, including director independence and Board composition. Of our current Director nominees, 12 of 13 Director nominees are independent. The Board has adopted "categorical standards" to assist it in making independence determinations of Director nominees. The categorical standards are intended to help the Board

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determine, for example, whether certain relationships between nominees and Grainger are "material relationships" for purposes of the New York Stock Exchange (NYSE) independence standards. The categorical standards adopted by the Board have more restrictive thresholds than the NYSE's bright line revenue test for independence. The categorical standards adopted by the Board are set forth in Appendix A to this proxy statement and are also available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

The Board considered a variety of factors, including any related party transactions, in assessing the independence of our Directors and the New Nominee against the NYSE's independence standards and Grainger's categorical standards. The Board also considered ordinary course business transactions and charitable donations by the Company where a Director or the New Nominee serves as an officer and/or a board member. The Board has made an affirmative determination that all 11 of our non-employee Directors and the New Nominee have no direct or indirect material relationship with Grainger within the meaning of the NYSE independence standards and Grainger's categorical standards and, accordingly, meet the applicable requirements for "independence" set forth in the NYSE's listing standards.

BOARD QUALIFICATIONS, ATTRIBUTES, SKILLS AND BACKGROUND

We determined that the Board's various experiences and viewpoints benefit us most when they are aligned with our global business needs, our strong corporate governance practices and our ESG goals. As a result of the Board's ongoing refreshment efforts, in recent years, we added Directors with expertise in technology, digital commerce and ESG. Four of our newest Directors, Rodney C. Adkins, Beatriz R. Perez, Susan Slavik Williams and Steven A. White, and the New Nominee, Katherine D. Jaspon, also enhance the diversity of our Board in addition to bringing their valuable perspectives and experiences.

The Board's varied perspectives support our business as a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with 2020 sales of approximately $11.8 billion. Grainger operates through its distribution centers, eCommerce platform, contact centers, branches and sales and service representatives with approximately 23,100 employees primarily in North America, Japan and Europe. Approximately 5,000 suppliers provide Grainger with approximately 1.5 million products stocked in Grainger's distribution centers and branches worldwide. Approximately 5 million customers worldwide rely on Grainger.

The following table highlights specific experience, qualifications, attributes, skills, and background information that the Board considered for each Director nominee. A particular Director nominee may possess additional experience, qualifications, attributes, or skills, even if not indicated below.

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Director Nominee Qualifications, Attributes, Skills and Background Matrix

Director Nominee
Qualifications,
Attributes and Skills



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Operational/Strategy                          
Experience developing and implementing operating plans and business strategy
Supply Chain/Logistics                          
Experience in supply chain management encompassing the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities          
Marketing/Sales & Brand Management                          
Experience managing a marketing/sales function, and in increasing the perceived value of a product line or brand over time in the market
International                          
Experience overseeing a complex global organization            
Real Estate                          
Experience overseeing complex real estate matters that are integral to a business
Finance/Capital Allocation                          
Knowledge of finance or financial reporting; experience with debt and capital market transactions and/or mergers and acquisitions  
Public Company/Leadership                          
"C-Suite" experience with a public company and/or leadership experience as a division president or functional leader within a complex organization

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Director Nominee Qualifications,
Attributes and Skills


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Corporate Governance/Public Company Experience                          
Experience serving as a public company director; demonstrated understanding of current corporate governance standards and best practices in public companies
Risk Assessment & Risk Management                          
Experience overseeing complex risk management matters
Government/Public Policy                          
Experience overseeing complex regulatory matters that are integral to a business          
Digital/eCommerce                          
Experience implementing digital and omni-channel strategies and/or operating an eCommerce business
Technology/Cybersecurity                          
Experience implementing technology strategies and managing/mitigating cybersecurity risks              
Human Resources/Compensation                          
Experience managing a human resources/compensation function; experience with executive compensation and broad-based incentive planning
Business Ethics
Track record of integrity, uncompromising moral principles and strength of character
Environmental, Social and Governance (ESG)                          
Informed on company issues related to ESG while monitoring emerging issues potentially affecting the reputation of the business

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Corporate Governance
Director Nominee Qualifications,
Attributes and Skills


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Director Nominee Tenure, Gender, Age
and Race/Ethnicity
                         
Board Tenure                          
Years 7 22 15 0 15 4 22 4 15 11 1 3 <1
Gender                          
Male        
Female                  
Age                          
Years Old 62 70 70 44 68 53 66 51 70 59 52 50 60
Race/Ethnicity                          
African American/Black                    
Asian, Hawaiian, or Pacific Islander                          
Caucasian /White        
Hispanic/Latino                        
Native American                          
Other                          

The following age, Board tenure, gender and race/ethnicity information of the Board nominees is current as of March 18, 2021:

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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 Directors develop a deeper understanding of the Company over time, which provides significant shareholder value, and that year-over-year Director continuity is beneficial to shareholders.

The Board plans for vacancies well before they arise and periodically evaluates whether its Directors collectively have the right mix of experience, qualifications, attributes, skills, backgrounds and diverse viewpoints necessary for it to be a good steward for the Company's shareholders. The results of these evaluations are used to identify desirable skill sets for potential Board nominees and to screen Director candidates. The Board codified this skills matrix evaluation practice into the charter of the Board Affairs and Nominating Committee of the Board (the BANC) in 2017.

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In planning for Board refreshment and Director succession, the BANC periodically considers potential Director candidates. As a result of these ongoing reviews, in the last four years, four new independent Directors have been elected.

The Board has established principles for selecting directors in the Company's Criteria for Membership on the Board of Directors (the Criteria). The Criteria list the various factors that the BANC should consider in reviewing candidates for the Board. For example, the Criteria ensures turnover by generally prescribing a retirement age of 72 for non-employee Director candidates. Within the last five years, two of our Directors did not stand for re-election based on retirement age.

Board Tenure

As a group, the average Board tenure of the 2021 nominees for election to Grainger's Board of Directors is approximately nine years, with 46% of the non-employee nominees having tenure of less than five years. See Board Qualifications, Attributes, Skills and Background / pages 5-8 of this proxy statement for a matrix reflecting tenure for each nominee.

Board Diversity—Rooney Rule

In addition to stating the desired relevant business experience, qualifications, attributes and skills for Directors, the Board's Criteria also enumerate personal characteristics that should be considered, including reputation for ethics and integrity, common sense and judgment, independent and objective thought, and respect for diverse opinions.

Regarding diversity, the Criteria specify that consideration will be given to candidates without regard to race, color, religion, gender or national origin. To ensure that the Board benefits from diverse perspectives, it proactively seeks qualified nominees from a variety of backgrounds, including candidates of gender, age, and racial diversity. We have established a long-standing relationship with Russell Reynolds Associates, Inc., a nationally recognized third-party search firm, that has assisted us over the years in identifying potential new Directors. In any retained search for Board candidates, the Board seeks candidates with gender and racial diversity and will only consider and interview slates that include both gender and racially diverse candidates.

ATTENDANCE OF DIRECTORS AT MEETINGS

As set forth in the Operating Principles, Grainger expects all Directors to attend the annual meeting of shareholders, Board and Committee meetings, and to spend the time needed to properly discharge their duties. All Directors attended the 2020 virtual annual meeting. In addition, during 2020, no Director attended fewer than 75% of the total number of meetings of the Board and of the Committees on which he or she served.

ANNUAL ELECTION OF DIRECTORS

Grainger's Directors are elected for a one-year term each year at the annual meeting of shareholders. Thirteen Director nominees, 12 current Board members and the New Nominee, have been nominated by the Board for election. Each nominee will, therefore, serve until the 2022 annual meeting of shareholders if elected.

As required under Illinois law, majority voting and cumulative voting apply to all Director elections. Under our majority voting standard, Directors are elected by vote of a majority of the shares of

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Corporate Governance

Grainger common stock present or represented by proxy and entitled to vote at the annual meeting. Under cumulative voting, shareholders have the right to cumulate their votes in the election of Directors. This means that shareholders have a number of votes in the election equal to the number of shares owned multiplied by the number of Directors being elected. Shareholders may cast those votes for the nominees as they choose. For example, all votes may be cast for one nominee, or may be apportioned among two or more nominees. For all other matters beside the election of Directors, each share is entitled to one vote.

A shareholder directing to withhold authority for re-election of a Director will have the same effect as votes against the election of that Director. Assuming a quorum is present, broker non-votes will not affect the outcome of the vote. If any of the nominees for Director mentioned below should be unavailable for election, a circumstance that is not expected, the person or persons voting your proxy may exercise discretion to vote for a substitute nominee selected by the Board.

CANDIDATES FOR BOARD MEMBERSHIP

The BANC recommends to the Board candidates for Board membership.

Before recommending candidates to the Board, the BANC reviews the results of the annual Board evaluation process and its skills matrix in determining the desired skill set for potential new candidates. The BANC then determines the preferred qualities and characteristics for potential Board nominees by periodically evaluating whether the Board members collectively have the right mix of experience, qualifications, attributes, skills, backgrounds and diverse viewpoints necessary for the Board to be a good steward for the Company's shareholders.

The BANC screens Board candidates based on a number of criteria, including ethical standards, judgment, independence and objectivity, strategic perspective, record of accomplishment, business knowledge, experience applicable to Grainger's goals, and diversity.

The BANC is assisted with its evaluation, recruitment and screening efforts by our nationally recognized third-party search firm, which helps identify candidates that satisfy the Board's criteria. In addition to Board candidates recommended by the BANC, suggestions as to nominees are received from employees, search firms, shareholders, and others.

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Corporate Governance

 

 


 


 



The proxy access provisions of our By-laws permit a qualifying shareholder or group of up to 20 qualifying shareholders who have maintained continuous qualifying ownership of 3% or more of our outstanding common stock for at least the previous three years to nominate and include in our proxy materials qualifying Director nominees constituting up to the greater of two Directors or 20% of the Directors then serving on the Board at the time of the nomination, presuming that the shareholder(s) and nominee(s) satisfy the requirements specified in our By-laws.

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 Grainger's headquarters. See Questions and Answers / pages 84-88 of this proxy statement for more information.

DIRECTOR NOMINEES' EXPERIENCE AND QUALIFICATIONS

The nominees have provided the following information about themselves, including their ages as of March 18, 2021, and his or her relevant background, including experience for at least the past five years. Grainger's nominees have varied experience, qualifications, attributes, skills, and backgrounds that assist them in providing guidance and oversight to Grainger's management.

The Board has identified experience, qualifications, attributes, skills, and backgrounds that, in light of Grainger's business, structure and challenges, are relevant to service on the Board of Directors. The Board considers nominees who have demonstrated integrity and accomplishment in their business and professional careers and who possess the necessary experience and background to contribute to the Board and Grainger. In addition, the nominees have engaged in continuing education and other programs to remain current in their particular areas of expertise, to further their understanding of corporate governance, and in other matters relevant to Grainger.

The Board believes each of the current nominees qualifies for service on the Board of Directors. Moreover, each of the current nominees has significant leadership experience in large, multifaceted organizations. This leadership experience includes developing and executing corporate strategy, overseeing operations, and managing risks in organizations similar in size or complexity to Grainger.

The summaries provided below are not a comprehensive statement of each nominee's background, but are provided to describe the primary experience, qualifications, attributes, skills, and background that led the Board to nominate each individual.

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Rodney C. Adkins

Former Senior Vice President of IBM; President of 3RAM Group LLC

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Independent Director

Age: 62

Years on Grainger's Board: 6

Director Since: 2014

Grainger Board Committees:

BANC

Chair, CCOB

Qualifications, Attributes and Skills

Operational/Strategy

Supply Chain/Logistics

Marketing/Sales & Brand Management

International

Real Estate

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Risk Assessment & Risk Management

Government/Public Policy

Digital/eCommerce

Technology/Cybersecurity

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Other Current Public Company Boards

Avnet, Inc. (Chairman of the Board; compensation committee; corporate governance committee)

PayPal Holdings, Inc. (audit committee; risk and compliance committee; corporate governance and nominating committee)

United Parcel Service, Inc. (Chair, risk committee; compensation committee)

Prior Public Company Boards

PPL Corporation (2014-2019) (audit committee; finance committee)

Pitney Bowes Inc. (2007-2013) (audit committee; executive compensation committee)

Business and Other Experience

3RAM Group LLC (2015-present), a privately held company specializing in capital investments, business consulting services and property management, where Mr. Adkins serves as President.

International Business Machines Corporation (IBM), a globally integrated technology and consulting company, where Mr. Adkins held numerous development and management roles, including Senior Vice President of Corporate Strategy (2013-2014); Senior Vice President of Systems and Technology Group (2009-2013); Senior Vice President of Development & Manufacturing (2007-2009); and Vice President of Development of IBM Systems and Technology Group (2003-2007).

Mr. Adkins served as a Senior Vice President at IBM, where he held various senior roles, including heading Corporate Strategy. Over the course of his 30-year career with IBM, he developed a broad range of experience, including extensive experience in emerging technologies, global business operations, product development, and brand management. He also gained significant experience managing and understanding corporate finance, financial statements and accounting through his many operational roles with IBM.

Additionally, Mr. Adkins managed IBM's supply chain and procurement, giving him direct insight into global trade and supply chains, and the role of distributors in those efforts.

Mr. Adkins has extensive experience in corporate governance matters, is a recognized leader in technology and technology strategy, and serves as a director of other publicly traded companies with additional responsibilities, including one board chairmanship, and two compensation committee and one audit committee assignments.

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Brian P. Anderson

Former Chief Financial Officer of OfficeMax Incorporated and Baxter International Inc.

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Independent Director

Age: 70

Years on Grainger's Board: 22

Director Since: 1999

Grainger Board Committees:

Audit

BANC

Qualifications, Attributes and Skills

Operational/Strategy

Supply Chain/Logistics

Real Estate

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Risk Assessment & Risk Management

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Other Current Public Company Boards

Pulte Group, Inc. (audit committee; finance and investment committee; nominating and governance committee; former Chair, audit committee)

Stericycle, Inc. (Chair, audit committee)

Prior Public Company Boards

A.M. Castle & Co. (2005-2016) (Chairman of the Board; Chair, audit committee)

James Hardie Industries plc (2006-2020) (Chair, audit committee; remuneration committee)

Business and Other Experience

OfficeMax Incorporated (2004-2005), a distributor of business to business and retail office products, where Mr. Anderson served as Senior Vice President and Chief Financial Officer.

Baxter International Inc. (1991-2004), a global diversified medical products and services company, where he held various roles, including Senior Vice President and Chief Financial Officer (1998-2004); Vice President, Finance (1997-1998); Corporate Controller (1993-1997); and Vice President, Corporate Audit (1991-1993).

Deloitte LLP (formerly, Deloitte & Touche LLP) (1976-1991), a global professional services firm, where Mr. Anderson served as Audit Partner, for several years.

Mr. Anderson served as the Chief Financial Officer of two large, multinational companies: OfficeMax Incorporated and Baxter International Inc. In the course of his career, he also held various finance positions, including Corporate Controller and Vice President of Audit at Baxter, and spent 15 years at an international public accounting firm, including as an Audit Partner.

As a result, Mr. Anderson has in-depth knowledge of accounting and finance, including in the preparation and review of complex financial reporting statements, as well as experience in risk management and risk assessment and the application of the Committee of Sponsoring Organizations of the Treadway Commission internal controls framework.

Mr. Anderson also has extensive experience sitting on and chairing the audit committees of public companies. He also brings to the Board meaningful experience based on his service as the Company's former Lead Director and former Chairman of the Board of A.M. Castle & Co., as well as his service as a Governing Board Member at the Center for Audit Quality. Mr. Anderson is an audit committee financial expert for purposes of the SEC's rules.



V. Ann Hailey

Former Executive Vice President and Chief Financial Officer of L Brands, Inc. (formerly, Limited Brands, Inc.)

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Independent Director

Age: 70

Years on Grainger's Board: 15

Director Since: 2006

Grainger Board Committees:

Chair, Audit

BANC

Qualifications, Attributes and Skills

Operational/Strategy

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Risk Assessment & Risk Management

Digital/eCommerce

Business Ethics

Environmental, Social and Governance (ESG)

Other Current Public Company Boards

Realogy Holdings Corp. (Chair, audit committee; nominating and corporate governance committee)

Prior Public Company Boards

TD Ameritrade Holdings, Inc. (2016-2020) (audit committee; risk committee; outside independent director's committee)

Avon Products, Inc. (2008-2016) (audit committee; finance committee)

L Brands,  Inc. (formerly, Limited Brands, Inc.) (2001-2006)

Business and Other Experience

Famous Yard Sale, Inc. (2012-2014), an online marketplace, where Ms. Hailey served as President, Chief Executive Officer and Chief Financial Officer.

Gilt Groupe, Inc. (2009-2010), an online shopping and lifestyle company, where Ms. Hailey served as Chief Financial Officer.

L Brands, Inc., a retail apparel, personal care and beauty products company, where Ms. Hailey served as Executive Vice President and Chief Financial Officer (1997-2006); Executive Vice President, Corporate Development (2006-2007); and as a board member (2001-2006).

Federal Reserve Bank of Cleveland (2004-2009) (audit committee)

PepsiCo,  Inc. (1977-1990), a global food and beverage company, where Ms. Hailey served in various leadership roles, including Vice President, Headquarters Finance, Pepsi Cola Company; and Vice President, Finance and Chief Financial Officer of Pepsi Cola Fountain Beverage and USA Divisions, as well as holding positions in the marketing and human resources functions.

Pillsbury Company (1994-1997), a manufacturer and marketer of branded consumer foods.

RJR Nabisco Foods, Inc. (1992-1994), a diversified manufacturer of consumer products.

Ms. Hailey has spent her career in consumer businesses and brings key financial and operations experience to the Company. In particular, Ms. Hailey possesses broad expertise in finance, strategic planning, branding and marketing, retailing, and sales and distribution on a global scale. Ms. Hailey's positions as chief financial officer, her current and prior service as audit committee chair at other companies and the Cleveland Federal Reserve Bank, and her accounting and financial knowledge provide significant expertise to the Board, including an understanding of financial statements, accounting and internal controls, corporate finance and capital markets. Through her experiences at Gilt Groupe and Famous Yard Sale, Ms. Hailey has experience in internet site development and selling as well as new venture management and funding. Ms. Hailey is an audit committee financial expert for purposes of the SEC's rules.

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Corporate Governance
Katherine D. Jaspon

Chief Financial Officer, Dunkin' & Baskin Robbins at Inspire Brands

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Director Nominee

Age: 44

Director Since: New Nominee

Qualifications, Attributes and Skills

Operational/Strategy

Real Estate

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Risk Assessment & Risk Management

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Business and Other Experience

Dunkin' & Baskin Robbins at Inspire Brands, formerly known as Dunkin' Brands Group, Inc. (2005-present), a quick service restaurant franchisor (Dunkin' Brands), where Ms. Jaspon has held various roles, including Senior Vice President, Chief Financial Officer (2017-present), Vice President, Finance and Treasury (2014-2017), Vice President, Controller and Corporate Treasurer (2010-2014), and Director, Assistant Controller (2005-2010). In December 2020, Dunkin' Brands was acquired by Inspire Brands.

KPMG LLP (1997-2005), a global audit, tax and advisory services firm, where Ms. Jaspon held various roles, including Senior Manager.

Ms. Jaspon is currently the Chief Financial Officer of Dunkin' Brands, a global company with approximately 20,000 restaurants in 65 countries generating approximately $12 billion in sales. From 2011 to 2020, Dunkin' Brands was publicly traded on Nasdaq until it was acquired by Inspire Brands in December 2020. Ms. Jaspon is responsible for the global financial planning and analysis, accounting, financial reporting, business analytics, tax, debt and cash management, enterprise risk management, electronic payments, insurance and demand planning functions for the domestic and international Dunkin' and Baskin-Robbins businesses, functions she had previously been responsible for when Dunkin' Brands was publicly traded. She has led Dunkin' Brands through a number of transactions, from its initial public offering to its recent going private transaction, including various equity offerings, securitizations and numerous other debt transactions, the divestiture of a brand and several system implementations. Previously, she served as an auditor at KPMG LLP for nearly nine years, including as Senior Manager.

Ms. Jaspon is a certified public accountant and an audit committee financial expert for purposes of the SEC's rules. In addition, Ms. Jaspon is a former director and audit committee chair of MOD Super Fast Pizza LLC and also serves on various non-profit boards.


Stuart L. Levenick

Former Group President of Caterpillar Inc.

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Independent Director

Lead Director

Age: 68

Years on Grainger's Board: 15

Director Since: 2005

Lead Director Since: 2014

Grainger Board Committees:

Audit

Chair, BANC

Qualifications, Attributes and Skills

Operational/Strategy

Supply Chain/Logistics

Marketing/Sales & Brand Management

International

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Risk Assessment & Risk Management

Government/Public Policy

Digital/eCommerce

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Other Current Public Company Boards

Finning International Inc. (since 2016) (Chair, audit committee; corporate governance committee)

Entergy Corporation (since 2005) (lead director (since May 2016); corporate governance committee; executive committee; nuclear committee)

Business and Other Experience

Caterpillar Inc., a multinational 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.

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. In addition, Mr. Levenick is a former chairman and director of the Association of Equipment Manufacturers and is a director of the University of Illinois Foundation. He also 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.

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D.G. Macpherson

Chairman of the Board and Chief Executive Officer of W.W. Grainger, Inc.

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Chairman of the Board

Age: 53

Years on Grainger's Board: 4

Director Since: 2016

Qualifications, Attributes and Skills

Operational/Strategy

Supply Chain/Logistics

Marketing/Sales & Brand Management

International

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Risk Assessment & Risk Management

Government/Public Policy

Digital/eCommerce

Technology/Cybersecurity

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Other Current Public Company Boards

International Paper Company (governance committee; public policy and environment committee)

Business and Other Experience

Chairman of the Board of Directors 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).

Mr. Macpherson has served Grainger in many capacities over his more than 12 years with the Company, 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. Mr. Macpherson also has experience in corporate governance matters and serves as a director of another publicly traded company with additional committee responsibilities.


Neil S. Novich

Former Chairman of the Board, President and Chief Executive Officer of Ryerson Inc.

PHOTO

Independent Director

Age: 66

Years on Grainger's Board: 22

Director Since: 1999

Grainger Board Committees:

Audit

BANC

Qualifications, Attributes and Skills

Operational/Strategy

Supply Chain/Logistics

Marketing/Sales & Brand Management

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Risk Assessment & Risk Management

Technology/Cybersecurity

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Other Current Public Company Boards

Beacon Roofing Supply, Inc. (Chair, compensation committee; former Chair, audit committee)

Hillenbrand, Inc. (Chair, audit committee; mergers and acquisitions committee; nominating and corporate governance committee; former Chair, compensation committee)

Prior Public Company Boards

Analog Devices,  Inc. (2008-2020) (audit committee; former Chair, compensation committee)

Ryerson Inc., Chairman of the Board (1999-2007)

Business and Other Experience

Ryerson, Inc. (1994-2007), a global metal distributor and fabricator, where Mr. Novich joined in 1994 as Chief Operating Officer, was named President and CEO in 1996, and was additionally appointed Chairman in 1999. He remained Chairman and CEO until 2007, when the company was sold.

Bain & Company (1981-1994), an international management consulting firm, where Mr. Novich spent several years as a partner and led the firm's Distribution and Logistics Practice.

Mr. Novich served as the Chairman of the Board, President and Chief Executive Officer of a global public company where he was deeply engaged in its distribution operations on a domestic and international basis, and also on leadership development and human resources functions. He also spent 13 years with a major management consulting firm, where he was a partner and led the firm's Distribution and Logistics Practice. As a result, Mr. Novich has in-depth operational experience in supply chain, distribution and logistics and experience in developing strategy across a variety of industries.

Mr. Novich also has extensive experience in corporate governance matters and serves as a director of other publicly traded companies with additional responsibilities, including one audit committee chairmanship, one compensation committee chairmanship, and service on various board committees. Mr. Novich is an audit committee financial expert for purposes of the SEC's rules.

Mr. Novich is a trustee of the Field Museum of Natural History and a Member of the Dean's Council to the Physical Sciences Division of the University of Chicago.

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Corporate Governance
Beatriz R. Perez

Senior Vice President and Chief Communications, Sustainability and Strategic Partnerships Officer of The Coca-Cola Company

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Independent Director

Age: 51

Years on Grainger's Board: 4

Director Since: 2017

Grainger Board Committees:

BANC

CCOB

Qualifications, Attributes and Skills

Operational/Strategy

Marketing/Sales & Brand Management

International

Public Company/Leadership

Corporate Governance/Public Company Experience

Government/Public Policy

Digital/eCommerce

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Other Current Public Company Boards

Primerica, Inc. (compensation committee)

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) (nominating and governance; risk & compliance committee; audit 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.

Ms. Perez is a Senior Vice President and named executive officer of The Coca-Cola Company, a public multinational beverage 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.


Michael J. Roberts

Former Global President and Chief Operating Officer of McDonald's Corporation; Chief Executive Officer and founder of Westside Holdings LLC

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Independent Director

Age: 70

Years on Grainger's Board: 15

Director Since: 2006

Grainger Board Committees:

BANC

CCOB

Qualifications, Attributes and Skills

Operational/Strategy

Supply Chain/Logistics

Marketing/Sales & Brand Management

International

Real Estate

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Government/Public Policy

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Other Current Public Company Boards

CenturyLink,  Inc. (human resources and compensation committee; nominating and corporate governance committee)

Prior Public Company Boards

SP Plus Corporation (formerly, Standard Parking Corporation) (2010-2013) (audit committee; compensation committee; executive committee)

Qwest Communications International, Inc. (prior to its acquisition by CenturyLink) (2009-2011) (compensation and human resources committee)

Business and Other Experience

Westside Holdings LLC (2006-present), a marketing and brand development company, where Mr. Roberts is Chief Executive Officer and founder.

McDonald's Corporation (1997-2006), a global food service retailer, where Mr. Roberts held numerous leadership roles, including President and Chief Operating Officer (2004-2006); Chief Executive Officer, McDonald's USA (2004); President, McDonald's USA (2001-2004); and President, West Division, McDonald's USA (1997-2001).

Mr. Roberts served as President and Chief Operating Officer of McDonald's Corporation, a public, multinational corporation. In his nearly 30 years with the company, he held key executive roles, including President and Chief Executive Officer of McDonald's USA. In these capacities, he acquired extensive management, and profit and loss responsibilities. He was also responsible for marketing and branding experience, and the international operations of the company. In addition, Mr. Roberts has significant experience in human resources and corporate governance matters and serves as a director of another publicly traded company with additional responsibilities, including service on the human resources and compensation committee.

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E. Scott Santi

Chairman and Chief Executive Officer of Illinois Tool Works Inc.

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Independent Director

Age: 59

Years on Grainger's Board: 11

Director Since: 2010

Grainger Board Committees:

Audit

BANC

Qualifications, Attributes and Skills

Operational/Strategy

Marketing/Sales & Brand Management

International

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Risk Assessment & Risk Management

Government/Public Policy

Technology/Cybersecurity

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Other Current Public Company Boards

Illinois Tool Works Inc. (Chairman of the Board, 2015-present); director (2012-present)

Business and Other Experience

Illinois Tool Works Inc. (2004-present), a worldwide manufacturer of engineered components and systems, where Mr. Santi has served as Chief Executive Officer, since November 2012. Previously, Mr. Santi held various senior management roles with ITW, including Vice Chairman of ITW (2008-2012) and Executive Vice President (2004-2008).

Mr. Santi is the Chairman and Chief Executive Officer of ITW, a global public company. In the course of his more than 30 years with ITW, he has served in various management roles for ITW including positions requiring significant operational and financial responsibility. During his tenure he has had extensive international responsibility including operating responsibility for a business with annual international revenues of several billion dollars. Mr. Santi has significant experience with mergers and acquisitions and integrating acquired companies. He has also had significant strategic marketing responsibilities and human resource experience including compensation policy, leadership development and succession planning. Mr. Santi is an audit committee financial expert for purposes of the SEC's rules. In addition, Mr. Santi is the current Chairman of the board of directors of the Federal Reserve Bank of Chicago is Chairman of the Civic Committee of the Commercial Club of Chicago. He also serves as a trustee or director on various civic and nonprofit boards, including the boards of trustees of Northwestern University, the Museum of Science and Industry, Rush University Medical Center and the Art Institute of Chicago.


Susan Slavik Williams

President, Four Palms Ventures; Director, Mark IV Capital, Inc.; President, The Donald Slavik Family Foundation

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Independent Director

Age: 52

Years on Grainger's Board: 11

Director Since: 2020

Grainger Board Committees:

BANC

CCOB

Qualifications, Attributes and Skills

Operational/Strategy

Marketing/Sales & Brand Management

Real Estate

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Risk Assessment & Risk Management

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Business and Other Experience

Four Palms Ventures, a venture capital firm founded by Ms. Slavik Williams focused on investing in early stage agtech and other technology companies, where Ms. Slavik Williams serves as President (2019-present).

The Donald Slavik Family Foundation, a nonprofit organization supporting programs that preserve wildlife and the environment, where Ms. Slavik Williams presently serves as President and a member of its Board of Directors (1995-present).

Mark IV Capital, Inc., a private commercial real estate development and investment company, where Ms. Slavik Williams serves on its Board of Directors and presently chairs its compensation committee (1989-present).

Ernst & Young Consulting (now Capgemini), a global consulting and technology services company, where Ms. Slavik Williams was a Manager (1994-1998).

Ms. Slavik Williams is a private investor who has been a long-term significant shareholder of the Company as well as an entrepreneur and environmentalist. She has expansive knowledge in investments, financing, and real estate, including as a result of her 30 years of service on the board of directors of Mark IV Capital, Inc., where she presently chairs the compensation committee. She also has a deep understanding of environmental and social matters, working for 25 years as President and member of the board of directors of a foundation focused on wildlife preservation in the United States, Africa, South America, and Asia. Since 2017, Ms. Slavik Williams has served as a member of the board of directors of iSelect Fund, a venture capital investment firm. For 12 years, Ms. Slavik Williams was a director of the Saint Louis Zoo and currently serves on the conservation committee of its strategic planning group. As a longstanding significant shareholder of the Company, she possesses extensive knowledge of the Company's business, organization, and culture.

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Corporate Governance
Lucas E. Watson

Senior Vice President, Go To Market at Cruise LLC

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Independent Director

Age: 50

Years on Grainger's Board: 3

Director Since: 2017

Grainger Board Committees:

BANC

CCOB

Qualifications, Attributes and Skills

Operational/Strategy

Supply Chain/Logistics

Marketing/Sales & Brand Management

International

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Government/Public Policy

Digital/eCommerce

Technology/Cybersecurity

Business Ethics

Environmental, Social and Governance (ESG)

Business and Other Experience

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.

Procter & Gamble Company (1994-2011), a global consumer products company, where Mr. Watson served in various sales, marketing and digital business roles.

Mr. Watson is currently Senior Vice President, Go To Market at Cruise LLC, an autonomous vehicle technology company owned by General Motors company. Previously, he served as Executive Vice President and Chief Marketing and Sales Officer at Intuit, where he 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. At Procter & Gamble, a global consumer products company, he served as a Digital Marketing executive and held a variety of other roles across the globe. While at P&G, Mr. Watson drove P&G's digital initiatives for 75 brands across 200 countries. During his tenure of more than two decades at these multinational public companies, Mr. Watson has held several leadership roles while acquiring a deep understanding of sales, marketing, technology and digital business.


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Steven A. White

President, Special Counsel to the CEO, Comcast Cable

PHOTO

Independent Director

Age: 60

Years on Grainger's Board: <1

Director Since: 2020

Grainger Board Committees:

BANC

CCOB

Qualifications, Attributes and Skills

Operational/Strategy

Supply Chain/Logistics

Marketing/Sales & Brand Management

Real Estate

Finance/Capital Allocation

Public Company/Leadership

Corporate Governance/Public Company Experience

Risk Assessment & Risk Management

Government/Public Policy

Digital/eCommerce

Technology/Cybersecurity

Human Resources/Compensation

Business Ethics

Environmental, Social and Governance (ESG)

Other Current Public Company Boards

Hormel Foods Corporation (compensation committee; governance committee)

Shaw Communications Inc. (human resources and compensation committee)

Business and Other Experience

Comcast Corporation, a global media and technology company, where prior to assuming his current position in December 2020, Mr. White held various roles, including President, Comcast West Division (2009-2020), Regional Senior Vice President, Comcast California (2007-2009), and Regional Senior Vice President, Comcast Mid-South Region (2002-2007).

AT&T Broadband, LLC, a leading provider of global telecommunications, media and technology services that merged with Comcast in 2002, where Mr. White was Senior Vice President from 2000 to 2002.

Regional Vice President of Tele-Communications, Inc., a cable television and telecommunications provider that merged with AT&T in 2000 (1997 to 2000).

Colgate-Palmolive Company, a global consumer products company, where Mr. White held various marketing positions (1991 to 1997).

Mr. White brings over 30 years of experience in eCommerce, sales, marketing, operations, and general management across multiple industries. Now in his 18th year at Comcast Corporation, a global public company, Mr. White has served in various senior management roles with significant operating and financial responsibility over a number of states, thousands of employees, millions of customers, and billions of dollars in revenue. Before his current role as President, Special Counsel to the CEO, Comcast Cable, Mr. White most recently served for 11 years as President, Comcast West. In that capacity, he was responsible for all Comcast cable operations in 13 states, leading nearly 28,000 employees, serving more than nine million customers, and driving annual revenue of nearly $17 billion. Prior to that, Mr. White was responsible for Comcast's operations in California. Before joining the cable industry, Mr. White held various positions at Colgate-Palmolive, including Marketing Director of Colgate-Palmolive's Toothbrush Products Division.

Mr. White also has experience in corporate governance matters and serves as a director of two other public companies, where he serves on various committees. Mr. White also serves on the board of directors of the Comcast Foundation and is a member of the Executive Leadership Council.

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2020 BOARD MEETINGS AND COMMITTEE MEMBERSHIP

The Operating Principles provide for the Board's Committees and the process for selecting Committee leadership. The BANC's recommendations are considered by the Board following each annual meeting of shareholders. The Committees are appointed by the Board based on recommendations of the BANC. As required by each Committee's charter, all members of each Committee must be "independent" Directors.

Five meetings of the Board were held in 2020. Each Board meeting included at least one executive session, during which only independent Directors were present. In total, 18 Committee meetings were held in 2020. During each Committee meeting, Committee members met in closed session, without management present. The Committees report regularly to the full Board on their activities and actions.

The Board has delegated certain responsibilities and authority to its standing Committees, as described below.

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GRAPHIC    Chair     GRAPHIC  Member    LD Lead Director    FE Audit Committee Financial Expert as defined under SEC rules


(1)
Subject to election at the annual meeting, will be appointed to the Audit Committee and the Board Affairs and Nominating Committee.

Each Committee has a charter that it reviews annually and then makes recommendations to our Board for charter revisions that may be needed to reflect evolving best practices. Copies of each Committee charter are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

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AUDIT COMMITTEE

Members
All Independent

PHOTO

V. Ann Hailey (Chair)

Brian P. Anderson

Katherine D. Jaspon*

Stuart L. Levenick

Neil S. Novich

E. Scott Santi

Oversees the Company's accounting, financial reporting processes and audits of financial statements and internal controls.

* Subject to election at the annual meeting, will be appointed to the Audit Committee.

The Audit Committee of the Board (the Audit Committee) met eight times in 2020. The Board has determined that each of the members of the Audit Committee is "independent," as that term is defined in the independence requirements for audit committee members contained in the applicable rules of the U.S. Securities and Exchange Commission (the SEC) and in the listing standards of the NYSE. The Board has determined that each of the members of the Audit Committee is financially literate and that each of Ms. Hailey, Mr. Anderson, Mr. Novich, and Mr. Santi is an "audit committee financial expert," as that term is defined in the applicable rules of the SEC.

The Audit Committee assists the Board in its oversight responsibility with respect to the following:

Grainger's financial reporting process;

Grainger's systems of internal accounting, financial, and disclosure controls;

the integrity of Grainger's financial statements;

Grainger's compliance with legal and regulatory requirements;

Grainger's enterprise risk management systems and processes as to business continuity, cybersecurity, privacy, legal and other risks, other than ESG risks, which are also addressed at the meetings of the Board Affairs and Nominating Committee and the Compensation Committee of the Board;

the qualifications and independence, as well as the appointment, compensation, retention, evaluation, and termination, of Grainger's independent auditor, the resolution of disagreements between management and the independent auditor regarding financial reporting, and the selection of the auditor's lead audit partner;

the performance of Grainger's internal audit function and the independent auditor;

the pre-approval of audit and permissible non-audit services and fees to be provided by the independent auditor;

activities and amendments relative to the Company's ERISA plans that involve the investment of funds, subject to coordination with the Compensation Committee where appropriate;

the establishment of procedures for the receipt, retention, and treatment of complaints regarding accounting, internal accounting controls, and auditing matters; and

compliance with Grainger's Business Conduct Guidelines, including reviews of potential violations communicated through the Company's confidential reporting channels.

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BOARD AFFAIRS AND NOMINATING COMMITTEE

Members
All Independent

PHOTO

Stuart L. Levenick (Chair)

Rodney C. Adkins

Brian P. Anderson

V. Ann Hailey

Katherine D. Jaspon*

Neil S. Novich

Beatriz R. Perez

Michael J. Roberts

E. Scott Santi

Susan Slavik Williams

Lucas E. WatsonSteven A. White

Oversees the Company's corporate governance practices and processes and ESG programs and reporting.

* Subject to election at the annual meeting, will be appointed to the Board Affairs and Nominating Committee.

The Board Affairs and Nominating Committee of the Board (the BANC) met five times in 2020. The Board has determined that each of the members of the BANC is "independent," as defined in the independence requirements for members of nominating committees contained in the applicable NYSE listing standards.

The BANC assists the Board in its oversight responsibility as follows:

Board Composition and Renewal

makes recommendations to the Board regarding the makeup and size of the Board and the types and functions of its Committees and their initial respective charters;

setablishes specific written criteria by which Director nominees shall be qualified;

periodically evaluates whether the Board members collectively have the right mix of experience, qualifications, attributes, skills, backgrounds and diverse viewpoints necessary for the Board to be a good steward for the Company's shareholders;

determines the preferred qualifications and characteristics for potential Board nominees, which are shared with our third-party search firm;

identifies and screens potential nominees, consistent with the Board-approved criteria;

Governance

makes recommendations concerning Director and nominee independence, attendance and performance;

reviews transactions between Grainger and related persons;

evaluates in its annual review the overall performance of the Board and its Committees;

oversees corporate governance, including:

o

making initial assessments regarding corporate governance issues or proposals,

o

recommending corporate governance guidelines, including annual review of the Committee charters, the Operating Principles for the Board, and the Criteria for Membership on the Board,

o

recommending the Lead Director,

o

recommending Board Committee responsibilities, Committee Chairs, and members,

o

determining policies regarding rotation of Directors among the Committees,

o

evaluating the Board's corporate governance, including the adequacy of information supplied to the Board,

o

evaluating the Board's performance of its oversight responsibilities related to Grainger management, and

o

recommending retirement, compensation, and other policies applicable to Directors;

Environmental, Social and Governance (ESG)

oversees annually the Company's ESG programs and reporting, including environmental and sustainability, social responsibility to its communities, governance, the Company's culture, talent strategy, and diversity, equity and inclusion, and any related enterprise risk management (ERM) reviews (other than human capital management ERM reviews, which are overseen by the Compensation Committee);

Succession Planning and Management Development

works with the Compensation Committee to annually review senior management organization, career paths, and succession; and

leads the annual review of management's performance, including the CEO to the extent necessary to supplement the Compensation Committee's review of CEO performance relative to CEO compensation goals and objectives.

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COMPENSATION COMMITTEE OF THE BOARD

Members
All Independent

PHOTO

Rodney C. Adkins (Chair)

Beatriz R. Perez

Michael J. Roberts

Susan Slavik Williams

Lucas E. Watson

Steven A. White

Oversees the Company's compensation philosophy and compensation and human capital management policies and programs.

The Compensation Committee of the Board (the Compensation Committee) met five times in 2020. The Board has determined that each member of the Compensation Committee is "independent," as defined in the independence requirements for members of compensation committees in the applicable SEC rules, the NYSE listing standards, and under the Internal Revenue Code.

The Compensation Committee assists the Board in its oversight responsibility as follows:

oversees the Company's compensation and benefits to ensure that:

o

the Board appropriately discharges its responsibilities relating to senior management compensation,

o

the Company maintains a market competitive compensation structure designed to attract, motivate, develop, and retain key talent,

o

compensation and benefits policies and practices reflect the highest level of transparency and integrity,

o

compensation is aligned with shareholder value creation and strategic objectives,

o

senior management compensation is linked to personal and Company performance and provides appropriate incentives to increase shareholder value,

o

compensation policies and practices for all employees are designed with appropriate incentives that do not encourage unnecessary or excessive risk taking and are administered in a transparent manner,

o

the interests of shareholders are protected, and

o

equity-based plans and incentive plans are appropriately designed and administered, including review and approval of performance measures applicable to short-term and long-term incentive plans;

provides independent oversight of the administration of the Company's shareholder-approved equity plans;

annually reviews and approves CEO compensation, as follows:

o

reviews and approves corporate goals and objectives relevant to CEO compensation,

o

evaluates CEO performance in light of those corporate financial goals and objectives, with assistance from the Lead Director and the other Board Committees, as appropriate, and

o

together with the other independent Directors, determines and approves, in its sole discretion, the CEO's total compensation based on the above evaluation, in executive session without members of management present;

reviews and recommends to the Board for approval the compensation paid to the CEO's direct reports, including the other Named Executive Officers (NEOs);

o

Members of management (including some NEOs and the CEO's other direct reports) assist the Compensation Committee in providing recommendations for Grainger's NEO compensation program design, and for other officers and employees. Management also recommends salary and award levels for the Committee's review and recommendation, except those related to the CEO;

together with the other independent Directors as directed by the Board, determines, in their sole discretion, the appropriate compensation design and level of CEO compensation in executive session without members of management present;

approves annual grants of equity-based compensation awards (including, restricted stock units (RSUs) and performance stock units (PSUs) to NEOs, other officers and employees under approved shareholder plans;

may delegate to management limited authority to grant "off-cycle" equity-based compensation awards of stock options and RSUs to non-officer employees and to CEO direct reports that are new hires; and, awards under this authority are granted pursuant to terms and conditions approved by the Compensation Committee. Management informs the Compensation Committee of the awarded grants at the Compensation Committee's next meeting. The pool of shares available to management under this delegation is approved annually by the Compensation Committee. The Compensation Committee may terminate this delegation of authority at its discretion;

retains, terminates, and approves the compensation for an independent compensation consultant who reports directly to the Compensation Committee; determines the independence of such independent compensation consultant; and, routinely meets in executive session with the independent compensation consultant, without management present; and

oversees the Company's programs and policies for human capital management and assists the BANC in its oversight of the Company's programs and policies with respect to employee engagement and leadership effectiveness, and any related enterprise risk management reviews.

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LEADERSHIP STRUCTURE

The Board has strong governance structures and processes in place to ensure the independence of the Board. These structures and processes, which are reflected in the Operating Principles and the Committees' charters, allow for the independent Directors to effectively exercise the Board's authority in overseeing critical matters of strategy, operations, enterprise risk management, and financial reporting.

The Board carefully considers its leadership structure and believes that a combined Chairman/CEO position, coupled with an independent Lead Director appointed by the Board, represents the best leadership structure for Grainger. In the Board's view, having a single individual serving as both the Chairman and CEO assists in the timely flow of relevant information, which supports effective Board decision-making and provides a useful connection between the Board and management so that Board actions are appropriately and efficiently executed.

In deciding that a combined Chairman and CEO position is the appropriate leadership structure for Grainger, the Board also recognized the need for independent leadership and oversight. The Lead Director is responsible for facilitating Board involvement in major issues and/or proposals, ensuring that the Board is addressing major strategic and operational initiatives, reviewing meeting agendas and information to be provided to the Board, consulting with Directors, the CEO and management, and presiding at executive sessions of the Board. With the Lead Director performing these important duties, the Board does not believe that separating the role of the Chairman and CEO would result in strengthening Grainger's corporate governance or in creating or enhancing long-term value for our shareholders.

The duties performed by the independent Directors, either collectively or through Committees comprised solely of independent Directors, include selecting the Chairman and CEO and evaluating his or her performance, and setting his or her compensation.

The Board believes that given Grainger's corporate governance structures and processes, a combined Chairman and CEO position in conjunction with an independent Lead Director provides effective oversight of management by the Board and results in a high level of management accountability to shareholders.

LEAD DIRECTOR

Under Grainger's By-Laws and the Operating Principles, the Lead Director is elected by and from the Board's independent Directors. The current Lead Director, Mr. Stuart L. Levenick, was appointed to

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serve in this capacity after the April 2014 annual meeting of shareholders. Among the duties assigned to the Lead Director is the responsibility for:

Board Matter
  Responsibility
Agendas  

Soliciting feedback from the independent Directors on agenda items for Board meetings and collaborating with the Chairman in developing and approving Board meeting agendas.

Reviewing and approving meeting schedules to ensure that there is sufficient time for discussion of all agenda items.

Communicating with Directors  

Serving as the primary liaison between the Chairman and the independent Directors.

Communicating with Shareholders  

Being available, as necessary, for consultation and communication with major shareholders.

Executive Sessions  

Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent Directors.

Calling meetings of the independent Directors, if appropriate, to review and approve the types of information sent to the Board.

Leading the Board in its annual review of the Board and management's performance, including the CEO, to the extent necessary to supplement the Compensation Committee's review of the CEO's performance relative to applicable compensation goals and objectives.

Board Meetings  

Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent Directors.

Calling meetings of the independent Directors, if appropriate, to review and approve the types of information sent to the Board.

Board and Management Evaluations  

Coordinating with the Board Affairs and Nominating Committee and the applicable Board Committee Chairs the annual self-evaluation of the performance and effectiveness of the Board, its Committees and individual Directors.

Leading the Board in its annual review of the Board's and management's performance, including the CEO, to the extent necessary to supplement the Compensation Committee's review of the CEO's performance relative to applicable compensation goals and objectives.

Director Search  

Coordinating with the BANC the Director recruitment and interview process.

BOARD, COMMITTEE AND DIRECTOR EVALUATIONS

The Board recognizes that a rigorous, ongoing evaluation process is an essential component of strong corporate governance practices and promoting continuing Board effectiveness. Each year, the Board conducts a three-part evaluation process coordinated by the Lead Director and the Committee Chairs: full Board evaluation, Committee evaluations, and Director self-assessments. To help make sure the

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evaluations are useful and that we are implementing best practices, we routinely review the evaluation process with an external governance expert.

Process

Our historic approach had been to ask each Director to respond to written survey questions on how the Board performs. We had also sought written feedback on more open-ended topics, including Board and Committee processes and effectiveness.

In reviewing our approach to evaluation, including the actions that resulted from past surveys, in 2019 we adopted a new approach designed to facilitate conversation focused on the Board's challenges and opportunities. We made the following changes, which also formed the basis of the 2020 evaluations:

    1)
    Rather than relying on written questionnaires, there were one-on-one discussions of open-ended questions on Board, Committee, and individual Director engagement and effectiveness.

    2)
    We included questions related to (a) Board composition dynamics, operations, structure, performance and composition and (b) the Board's engagement in strategy, enterprise risk management, reputation/culture, and the Company's business.

    3)
    As before, the Lead Director conducted the Board evaluation and individual Director self-evaluations, while the Committee Chairs conducted evaluations for their respective Committees.

    4)
    Management's feedback on the Board's operation and engagement was provided to the Board.

    5)
    We also adopted an "after action" process that reviews routine matters such as information flow, meeting content, and management interaction following each meeting in executive session.

We believe that this open-ended question/interview approach helps elicit thoughtful and useful responses that encourage more valuable conversations and actionable insights. Supplementing the annual surveys is a continuous feedback loop that does not rely solely on a single, formal event at the end of the year.

As before, the results of the evaluations/interviews were compiled anonymously. The Lead Director discussed with the Board the results of the Board evaluations, individual Director self-assessments, and the management leadership team feedback, while the Committee Chairs discussed the results of the

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Committee evaluations with their respective Committees. Below is an overview of the key steps in the annual evaluation process:

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The information gained through this process helps shape the content of educational presentations to the Board and identify the skill sets desirable in Director searches conducted from time-to-time by the Board.

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Actions

Among the actions taken as a result of the 2020 Board evaluation processes were an analysis of the desired skill sets and backgrounds for future directors, changes to Board meeting agenda and content format to create more time for in-depth discussions, alignment around guiding principles to help management implement the Grainger Edge more effectively, and giving the Board greater visibility into ERM deep dives conducted by the Audit Committee in relation to areas of the business that may carry more significant risk.

BOARD OVERSIGHT

The Board oversees, counsels, and directs management in the long-term interests of the Company and its shareholders. The Board's oversight responsibilities include:

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Board's Role in Shareholder Engagement

The Board believes it is important for the Company to maintain active engagement with its shareholders in order to effectively communicate the Company strategy and to ensure that shareholders' perspectives are understood and considered by the Board. On a regular basis, as part of its oversight role, the Board routinely receives reports and briefings from the Company's Investor Relations team summarizing ongoing engagement as well as any shareholder concerns, questions and trends.

Grainger has a comprehensive shareholder engagement program to reach a significant cross-section of our shareholder base, including large institutional investors, pension funds, and other investors. Our CEO, CFO and VP, Investor Relations, and other members of our Investor Relations team, maintain regular contact throughout the year with a broad base of shareholders to understand their concerns on various topics, including financial performance, strategy, competitive environment, and ESG and executive compensation matters.

Contact with shareholders includes quarterly earnings calls, the annual meeting of shareholders, investor conferences, individual meetings and other channels of communication. Consistent with prior years, in 2020, the Company proactively reached out to shareholders representing over 53% of current shares outstanding and met with shareholders representing 38% of shares outstanding. Continuing its practice begun in 2017, the Company also proactively made the Board's Lead Director available in 2020 to explain and discuss the Company's ESG and executive compensation practices and policies.

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Succession Planning, Talent and Human Capital Management

The Board recognizes that it has an important duty to ensure senior leadership continuity by overseeing the development of executive talent and planning for the efficient succession of the CEO and other key leadership positions. The Board has delegated primary oversight responsibility for management development and leadership succession planning to the BANC. The BANC reports on its activities to the full Board, which routinely addresses planned succession scenarios and also has developed emergency succession plans reviewed annually.

Recruiting, developing, promoting and retaining top diverse talent is a key priority for the Company. The Board annually reviews our talent strategy to ensure we have the right culture and people to support our strategic imperatives well into the future. This strategy has four pillars:

    Evolving our culture

    Empowering our people leaders

    Building our talent pipeline

    Developing our future leaders

While the BANC has oversight of the Company's talent strategy, including as to diversity, equity and inclusion, the CCOB has oversight of the Company's programs and policies for human capital management and supports the BANC in its oversight of employee engagement and leadership effectiveness.

Consistent with this framework, the BANC routinely conducts in-depth reviews of senior leader development. This review addresses the Company's management development initiatives, assesses senior management resources, and identifies individuals who should be considered as potential future senior executives. To ensure that the succession planning and management development process supports and enhances Grainger's strategic objectives, the Board and the BANC also regularly consult with the Chairman of the Board and CEO on the Company's organizational needs, the leadership potential and related development plans for key managers and plans for future development and emergency situations.

To supplement these efforts, throughout the year, the senior management team, as well as a broader array of executives throughout our businesses, make presentations to the Board and its Committees and also interact in more informal settings with the Directors. This engagement between Directors and our

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current and future leaders gives our Directors meaningful insight into our current pool of talent, what attracts and retains our executives, and the Company's culture.

Board's Role in Risk Oversight

The Board has overall responsibility for risk oversight, with its Committees assisting the Board in performing this function based on their respective areas of expertise. The Board's role is to oversee the Company's enterprise risk management (ERM) programs, including risk assessment and risk management processes and policies used by Grainger to identify, assess, monitor and address potential financial, compensation, operational, strategic and legal risks on an enterprise-wide basis.

The risk landscape associated with the COVID-19 pandemic has been, and continues to be, discussed with the full Board as well as each of its Committees through formal and informal updates as needed. Over the course of 2020, management regularly updated the Board on the pandemic's impacts to our business and the related strategic, operational and financial risks. Discussions with the Board and Committees have also included, among other topics, business continuity, employee health and safety, customer demand, operational challenges, financial resources and liquidity, Company strategy, executive compensation, technology, shareholder engagement and succession plans. Management continues to report to the Board and its Committees on its response to the pandemic as appropriate and will seek to identify new risks as they may arise in light of the continuing effects of the COVID-19 pandemic.

As part of its ERM oversight, the Board oversees and reviews the Company's programs and processes for cybersecurity risk, including the Company's framework for preventing, detecting, and addressing cybersecurity incidents. To help inform its approach to devising an appropriate governance framework, cadence, metrics, and reporting to discharge its cybersecurity oversight responsibilities, the Board appointed an Ad Hoc Committee on Cybersecurity constituted of Grainger Directors with technology and cybersecurity experience. The Board's cybersecurity oversight framework—full Board ownership and oversight, with Audit Committee support, and quarterly informational updates and annual briefings—was implemented upon the recommendation of the Ad Hoc Committee, which remains available to provide strategic advice as needed.

Both the Board and the Audit Committee regularly review Grainger's risk assessment and management processes and policies, including receiving regular reports from the Company's Chief Information Security Officer, and the members of Grainger's management who are responsible for the effectiveness of Grainger's ERM program. As an output of these reviews, in 2020 the Board revised Committee Charters to specifically assign ERM reviews of the Company's ESG programs and reporting to the BANC and the Company's human capital management programs and policies to the Compensation Committee. In addition, as part of its existing oversight responsibility, the Compensation Committee assesses the relationship between potential risk created by Grainger's compensation programs and their impact on long-term shareholder value.

Environmental, Social and Governance (ESG)

Grainger is committed to being a responsible corporate citizen and strives to integrate ESG principles into the daily operation of its business. Grainger's ESG strategy includes its commitment to governance, operating sustainably and valuing its people. These commitments shape our focus on corporate citizenship and fuel our determination to make a positive difference today and in the future.

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Governance

The Company integrates ESG initiatives into its strategy and daily operations at each level of its business. This begins with general ESG oversight by the BANC, which is comprised of all independent Directors. The BANC annually reviews the Company's ESG programs and reporting, including environmental and sustainability, social responsibility to its communities, governance, the Company's culture, talent strategy, and diversity, equity and inclusion. In turn, the Compensation Committee oversees the Company's programs and policies for human capital management and assists the BANC in its oversight of the Company's programs and policies with respect to employee engagement and leadership effectiveness. The Board includes one Director with expertise in corporate sustainability and one Director with expertise in environmental matters.

ESG Leadership Council

The Company's ESG efforts are led by the Chairman and CEO who chairs management's ESG Leadership Council. The key objectives of the ESG Leadership Council include identifying ways to incorporate the appropriate ESG initiatives into operations and strategy, overseeing the overall ESG program, and making regular reports to the BANC. The ESG Leadership Council is supported by a cross-functional steering committee providing subject matter expertise, implementing day-to-day programs and driving progress toward the success of our strategy. Core initiatives relating to culture and talent, including human capital management and diversity, equity and inclusion, are led by the Grainger Human Resources team in coordination with the ESG Leadership Council.

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Sustainability

Grainger incorporates sustainability best practices across the business, improving supply chain efficiency, practicing best-in-class facilities construction and maintenance, and measuring and mitigating climate-related risk. Grainger has set a carbon target to reduce its absolute scope 1 and scope 2 emissions to align with the goal of limiting global warming to well below 2 degrees Celsius. Grainger also provides sustainability solutions for its customers through an environmentally preferred portfolio (EPP) of products and sustainability services offerings.

 

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Supply Chain

To help ensure the products Grainger distributes are manufactured and delivered with high ethical standards, its Supplier Code of Ethics focuses on responsible sourcing along the dimensions of human rights, labor, environment and anti-corruption. Grainger's Human Rights Principles include the company's commitment to providing a safe and fair workplace that upholds and respects international human rights standards. These principles are applicable to all Grainger team members and are approved and monitored regularly by Grainger's senior leadership.

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Valuing our People

Grainger strives to ensure its team members reflect its increasingly global and diverse customer base. Diversity, equity and inclusion are integral to Grainger's business success. The Company is committed to creating a welcoming culture where all team members can bring their whole selves to work, have opportunities to grow and feel a sense of belonging, regardless of sex, gender, race, color, religion, national origin, age, disability, veteran status, sexual orientation, gender expression or experiences. As of December 31, 2020, within Grainger's U.S. workforce, approximately 38.5% of team members were women and approximately 34.2% of team members were racially and ethnically diverse. Grainger has taken several actions to improve inclusion in its recruiting process, which include how its approaches job postings, develop position requirements, conduct interviews and evaluate candidates in general.

ESG Reporting

The Company began reporting with reference to the Global Reporting Initiative's Sustainability Reporting Standards in 2016 and, since 2017, has been a member of the Dow Jones Sustainability Index. Grainger also reports to CDP and EcoVadis, with respective A- and silver ratings. Grainger continues to evolve its ESG program in a manner that is beneficial to the Company and its investors.

As part of this commitment, Grainger has aligned its ESG reporting to the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD) frameworks.

Grainger publishes an annual ESG report that is periodically updated and, while it is available under "Corporate Citizenship" in the Investor Relations section of our website at www.GraingerESG.com it is not being incorporated by reference into this proxy statement.

POLITICAL ACTIVITY

Grainger's Business Conduct Guidelines prohibit the use of Company funds or assets for political purposes, including for contributions to any political party, candidate or committee. In accordance with this policy, we do not maintain a political action committee (PAC). Given a particular issue, it is prudent for the Company to understand the legislative and regulatory environments at both the Federal and State levels. We have, from time-to-time, engaged advisors to assist us in advocacy, mainly related to government procurement. In 2020, Grainger was also a member of three trade associations.

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OTHER COMMUNICATIONS WITH DIRECTORS

Grainger has established a process by which shareholders and other interested parties may communicate with the Board, its Committees, and/or individual Directors on matters of interest. Such communications should be sent in writing to:

[Name(s) of Director(s)]
or
[Non-management Directors]
or
[Board of Directors]
W.W. Grainger, Inc.
P.O. Box 66
Lake Forest, Illinois 60045-0066

If the matter is confidential in nature, please mark the correspondence accordingly. Additional information concerning this process is available in the are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

AVAILABLE INFORMATION

All the documents below are available to shareholders and under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/ or in print, free of charge, upon request to the Corporate Secretary at Grainger's headquarters, 100 Grainger Parkway, Lake Forest, Illinois 60045-5201.

Business Conduct Guidelines

Grainger has adopted Business Conduct Guidelines for Directors, officers, and employees, which incorporate the Code of Ethics required by the SEC to apply to a company's chief executive officer, chief financial officer, and chief accounting officer or controller. The Company provides annual Business Conduct Guidelines training and all Directors, officers, and employees are required to certify annually that they have read, understand and are in compliance with the Business Conduct Guidelines. Our Business Conduct Guidelines are posted in the Governance section on Grainger's website at http://invest.grainger.com/.

Operating Principles for the Board of Directors

Grainger also has adopted Operating Principles for the Board of Directors, which represents its corporate governance guidelines. The Operating Principles are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

Committee Charters

The charters, as adopted by the Board and amended from time to time, of the Audit Committee, the BANC, and the Compensation Committee are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

ESG Report

Grainger publishes an ESG report that is periodically updated and, while it is available under "Corporate Citizenship" in the Investor Relations section of our website at http://www.GraingerESG.com, it is not being incorporated by reference into our proxy statement.

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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 $145,000. The Lead Director and Directors serving as Committee Chairs receive an additional annual cash retainer.

Grainger's non-employee Directors are compensated at a level that approximates median market practice. In benchmarking Director pay, Grainger uses the same compensation comparator group that is used to benchmark compensation for Grainger's executives as described in the Compensation Discussion and Analysis / page 46. The Compensation Committee's independent compensation consultant periodically reviews and updates the comparator group as well as comparative compensation information and advises on Director compensation.

The Directors' compensation program, which was last adjusted in April 2018, consists of the following:




GRAPHIC


 



Additional Annual Cash Retainers:

$25,000—Lead Director

$20,000—Audit Committee Chair

$15,000—Compensation Committee Chair

$10,000—Board Affairs and Nominating Committee Chair

All non-employee Directors receive an annual DSU grant worth $145,000. In 2020, the number of shares covered by each grant was equal to $145,000 divided by the 20-day average stock price through March 31 (a methodology consistent with the calculation used for equity awards to grant-eligible employees), rounded up to the next whole share. For non-employee Directors elected at the 2020 annual meeting of shareholders, the DSU formula resulted in payment of 576 DSUs based on a 20-day average stock price as of March 31, 2020 of $251.89 per share. The DSUs are settled in shares upon termination of service as a Director. Directors may defer their annual cash retainers, Lead Director retainer, and Committee Chair retainers (as applicable), into a DSU account.

Stock ownership guidelines applicable to non-employee Directors were established in 1998. These guidelines provide that within five years after election, a Director must own Grainger common stock and common stock equivalents having a value of at least five times the annual cash retainer fee for serving on the Board. The hedging or pledging of Company shares by Directors or executive officers is prohibited by Company policy (see Hedging and Pledging Prohibition / page 64). No Directors (or executive officers) have hedged or pledged any of the shares beneficially owned by them and all Directors are currently in compliance with the ownership guidelines.

Grainger matches Directors' charitable contributions on a three-to-one basis up to a maximum Company contribution of $7,500 per Director annually and provides discounts on product purchases, both on the same basis as provided to U.S. Grainger employees.

Mr. Macpherson, who is an employee of Grainger, does not receive any compensation for serving as a Director.

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2020 Director Compensation

 

Name


  Fees Earned
or Paid in
Cash (1)



  Stock
Awards (2)


  All Other
Compensation (3)


  Total

 

Rodney C. Adkins

      $115,000       $164,748       $7,500       $287,248    

 

Brian P. Anderson

    $100,000     $164,748     $0     $264,748  

 

V. Ann Hailey

      $120,000       $164,748       $0       $284,748    

 

Stuart L. Levenick

    $135,000     $164,748     $0     $299,748  

 

Neil S. Novich

      $100,000       $164,748       $7,500       $272,248    

 

Beatriz R. Perez

    $100,000     $164,748     $7,500     $272,248  

 

Michael J. Roberts

      $100,000       $164,748       $0       $264,748    

 

E. Scott Santi

    $100,000     $164,748     $7,500     $272,248  

 

Susan Slavik Williams

      $100,000       $164,748       $0       $264,748    

 

Lucas E. Watson

    $100,000     $164,748     $7,500     $272,248  

 

Steven A. White

      $50,000       $104,049       $0       $154,049    
(1)
Represents the annual cash retainer received in 2020 by all non-employee Directors. Mr. White's 2020 annual cash retainer was pro-rated to 50% to reflect his appointment to the Board on October 27, 2020.

(2)
Represents the fair value as of the grant date of DSUs paid to non-employee Directors using the closing price of Grainger's common stock as of the immediately preceding trading day. For non-employee Directors other than Mr. White, represents the fair value of their respective 2020 award of 576 DSUs on the grant date of April 29, 2020, using the closing price of $286.02 per share of Grainger's common stock as of April 28, 2020. For Mr. White, who was appointed to the Board on October 27, 2020, represents the fair value of his 2020 award of 288 DSUs (reflecting pro-ration of 50% given his appointment to the Board mid-way through the 2020-2021 Director term) on the grant date of October 27, 2020, using the closing price of $361.28 per share of Grainger's common stock as of October 26, 2020. 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.

(3)
Represents amount paid by the Company to charitable organizations as part of the Company's matching gift program with respect to donations made and matched in 2020. The Directors receive no direct or indirect benefit from the matching contributions.

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OWNERSHIP OF GRAINGER STOCK

Security Ownership of Certain Beneficial Owners

The following table sets forth information concerning any person known to Grainger to beneficially own more than 5% of Grainger's common stock, as of December 31, 2020 except as otherwise noted below. The information in the table and the related notes are based on statements filed by the respective beneficial owners with the SEC pursuant to Sections 13(d) and 13(g) under the Securities Exchange Act of 1934, as amended.

Name and Address of Beneficial Owner


  Amount and Nature of
Beneficial Ownership (1)


  Percent of Class

The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355

      5,398,750(2)       10.06%

Susan Slavik Williams
4450 MacArthur Blvd., Second Floor
Newport Beach, CA 92660



 
  4,728,153(3)     8.81%

Longview Partners (Guernsey) Limited
PO Box 559
Mill Court
La Charroterie
St Peter Port
Guernsey
GY1 6JG
United Kingdom

      2,689,371(4)       5.12%

BlackRock, Inc.
55 East 52nd Street
New York, NY 10055



 
  3,728,861(5)     6.9%
(1)
Unless otherwise indicated, percentages calculated are based upon Grainger common stock outstanding as set forth in the statements on Schedule 13G or 13G/A filed by the respective beneficial owners with the SEC.

(2)
Based on information provided in a Schedule 13G/A filed on February 10, 2021, The Vanguard Group has shared voting power with respect to 75,488 shares, sole dispositive power with respect to 5,200,457 shares, and shared dispositive power with respect to 198,293 shares. The Vanguard Group is the parent of several subsidiaries; no one subsidiary's beneficial ownership interest in the Grainger common stock being reported is five percent or more of the total outstanding common shares. The Schedule 13G/A certifies that the securities were acquired in the ordinary course of business and not with the purpose or effect of changing or influencing the control of Grainger.

(3)
Based on information provided in a Schedule 13G/A filed on February 8, 2021, Ms. Slavik Williams has sole voting power with respect to 4,719,811 shares, shared voting power with respect to 8,342 shares, sole dispositive power with respect to 3,084,051 shares and shared dispositive power with respect to 1,644,102 shares. Ms. Slavik Williams' aggregate beneficial ownership of 4,728,153 shares excludes 742,743 shares held in trusts over which Ms. Slavik Williams has no dispositive or voting power. The 8.81% calculation is based on the number of shares shown to be outstanding as of September 30, 2020 on Grainger's Quarterly Report on Form 10-Q filed on October 22, 2020.

(4)
Based on information provided in a Schedule 13G filed on February 16, 2021, Longview Partners (Guernsey) Limited, Longview Partners LLP, and Longview Partners (UK) Limited (collectively referred to hereafter as "Longview Partners") each has (i) shared voting power with respect to 1,719,568 shares and (ii) shared dispositive power with respect to 2,689,371 shares. Longview Partners (Guernsey) Limited is an investment advisor registered under section 203 of the Investment Advisors Act of 1940. Longview Partners (UK) Limited is 100% owned by Longview Partners (Guernsey) Limited. Longview Partners (UK) Limited is the managing member of Longview Partners LLP. The shares reported herein have been acquired on behalf of discretionary clients of Longview Partners. Persons other than Longview Partners are entitled to receive dividends from, and proceeds from the sale of, those shares. None of those persons to the knowledge of Longview

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    Partners has an economic interest in more than 5% of the class. The Schedule 13G certifies that the securities were acquired and held in the ordinary course of business and not with the purpose or effect of changing or influencing the control of Grainger.

(5)
Based on information provided in a Schedule 13G/A filed on February 1, 2021, BlackRock, Inc. has sole dispositive power with respect to all of the shares, and sole voting power with respect to 3,152,526 shares. Various non-person entities have the right to receive or the power to direct the receipt of dividends or the proceeds from the sale of Grainger's common stock. No one person's interest in the Grainger common stock is more than five percent of the total outstanding common shares. The Schedule 13G/A certifies that the securities were acquired and held in the ordinary course of business and not with the purpose of changing or influencing the control of Grainger.

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Security Ownership of Management

The table below shows the ownership of Grainger common stock by each Director nominee, each of our NEOs, and all Director nominees and all executive officers as a group, as of March 1, 2021 except as otherwise noted below.

Beneficial ownership is broadly defined by the SEC. In general, a person beneficially owns securities if the person, alone or with another, has voting power or investment power (the power to sell) over the securities. Being able to acquire either voting or investment power within 60 days, such as by exercising stock options, also results in beneficial ownership of securities. Unless otherwise indicated in the footnotes following the table, each of the named persons had sole voting and investment power with respect to the indicated number of Grainger shares.

 

Name of Beneficial Owner


  Shares
  Stock Option
Shares Exercisable
within 60 Days (1)



  Stock
Units (2)


  Percent of
Class (3)


 

Rodney C. Adkins

      400             4,416       *    

 

Brian P. Anderson

    3,340         19,827     *  

 

V. Ann Hailey

      200             13,672       *    

 

John L. Howard (4)

    234,676     43,688     20,000     *  

 

Katherine D. Jaspon

                        *    

 

Stuart L. Levenick

    400         20,349     *  

 

D.G. Macpherson

      44,560       169,134       9,925       *    

 

Deidra C. Merriwether

    1,757     14,483     3,398     *  

 

Neil S. Novich

      4,605             29,529       *    

 

Thomas B. Okray(5)

                *  

 

Beatriz R. Perez

                  3,170       *    

 

Paige K. Robbins

    7,114     20,016     4,079     *  

 

Michael J. Roberts

      1,000             24,133       *    

 

E. Scott Santi

    303         8,649     *  

 

Susan Slavik Williams(6)

      4,728,153             586       8.81%    

 

Lucas E. Watson (7)

    157         3,360     *  

 

Steven A. White

                  431       *    

 

Director Nominees and Executive Officers as a Group

    5,029,320     253,766     171,971     10.04%  
(1)
In computing the percentage of shares owned by each person and by the group, these shares were added to the total number of outstanding shares for the separate calculations.

(2)
Represents the number of stock units credited to the accounts of non-employee Directors, and the number of RSUs credited to the accounts of executive officers. Each stock unit is intended to be the economic equivalent of a share of Grainger common stock. These units are excluded from the computations of percentages of shares owned.

(3)
An asterisk (*) indicates less than 1%.

(4)
Includes 19,567 shares as to which Mr. Howard has sole voting and investment power, and 215,109 shares as to which Mr. Howard may be deemed to have shared voting and investment power, by virtue of his serving as a director of The Grainger Foundation, Inc. The Grainger Foundation was established in 1949 by William Wallace Grainger, the founder of Grainger, and is not affiliated with Grainger.

(5)
Mr. Okray resigned as Senior Vice President and Chief Financial Officer of the Company effective December 31, 2020 to pursue an opportunity at another publicly-traded company.

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(6)
Based on information provided in a Schedule 13G/A filed on February 8, 2021, Ms. Slavik Williams has sole voting power with respect to 4,719,811 shares, shared voting power with respect to 8,342 shares, sole dispositive power with respect to 3,084,051 shares and shared dispositive power with respect to 1,644,102 shares. Ms. Slavik Williams' aggregate beneficial ownership of 4,728,153 shares excludes 742,743 shares held in trusts over which Ms. Slavik Williams has no dispositive or voting power. The 8.81% calculation is based on 53,571,736 shares of common stock outstanding as of September 30, 2020.

(7)
Includes 157 shares as to which Mr. Watson has shared voting and/or investment power.

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REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board of Directors assists the Board in fulfilling its oversight responsibilities. The Board has determined that each of the members of the Audit Committee is "independent," as that term is defined in the independence requirements for audit committee members contained in the applicable rules of the Securities and Exchange Commission (the SEC) and corporate governance standards of the New York Stock Exchange. The Audit Committee acts under a charter that is reviewed annually; and, it was last amended by the Board on December 9, 2020. The charter is available on the Governance section of Grainger's website at http://invest.grainger.com/.

Management is responsible for the Company's internal controls and the financial reporting process and for compliance with applicable laws and regulations. Ernst & Young LLP (EY), the Company's independent auditor, was responsible for performing an independent audit of the Company's most recent consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States, as well as expressing an opinion on the effectiveness of the Company's internal control over financial reporting. The Audit Committee's responsibility is to monitor and oversee these processes.

In performing these responsibilities, the Audit Committee reviewed and discussed the Company's audited consolidated financial statements and the effectiveness of internal control over financial reporting with management and EY. The Audit Committee discussed with EY matters required to be discussed under Statement on Auditing Standards No. 1301 "Communications with Audit Committees" adopted by the Public Company Accounting Oversight Board (PCAOB). EY also provided to the Audit Committee the letter and written disclosures required by PCAOB standards concerning EY's independence and the Audit Committee discussed with EY the matter of the firm's independence.

Based on the review and discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC.

V. Ann Hailey, Chair
Brian P. Anderson
Stuart L. Levenick
Neil S. Novich
E. Scott Santi

Members of the Audit Committee of
the Board of Directors

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AUDIT FEES AND AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

The following table sets forth the fees for professional services rendered by Ernst & Young LLP (EY) with respect to fiscal years 2020 and 2019, respectively:

Fee Category


2020
2019

Audit Fees (1)

  $ 6,081,000   $ 5,329,700  

Audit-Related Fees (2)

177,000 177,000

Tax Fees (3)

  282,300   372,300  

All Other Fees (4)

7,000 7,000

Total Fees

  $ 6,547,300   $ 5,886,000  
(1)
Audit Fees.    Consists of fees billed for professional services rendered for the audit of Grainger's annual financial statements and internal control over financial reporting, review of the interim financial statements included in Grainger's quarterly reports on Form 10-Q, and other services normally provided in connection with Grainger's statutory and regulatory filings or engagements. Fees for the fiscal year ended December 31, 2019 were originally reported to the Company by EY as $6,075,000. The amount reported in this table has been corrected to reflect the final fees as reported to the Company by EY following the filing of the Company's 2019 Annual Notice of Meeting and Proxy Statement.

(2)
Audit-Related Fees.    Consists of fees billed for professional services rendered for assurance and related services that are reasonably related to the performance of the audit or a review of Grainger's financial statements and are not reported under "Audit Fees." These services include the audits of Grainger's employee benefit plans and various attest services.

(3)
Tax Fees.    Consists of fees billed for professional services rendered for tax compliance, tax advice and tax planning. These services include assistance with the preparation of various tax returns.

(4)
All Other Fees.    Consists of fees billed for all other professional services rendered to Grainger, other than those reported as "Audit Fees," Audit-Related Fees" and "Tax Fees."

Pre-Approval Policy for Audit and Non-Audit Services

The Audit Committee has adopted a policy for the pre-approval of all audit and permitted non-audit services to be provided to Grainger by its independent auditor and is responsible for the review and approval of any fees associated with those services. Also, specific pre-approval by the Audit Committee is required for any proposed services exceeding pre-approved fee levels.

Pre-approvals for categories of services are granted at the start of each fiscal year and are applicable for 12 months from the date of pre-approval. In considering these pre-approvals, the Audit Committee reviews detailed supporting documentation from the independent auditor for each proposed service to be provided. Unused pre-approval amounts are not carried forward to the next year.

The Company's Controller monitors services provided by the independent auditor and overall compliance with the pre-approval policy. The Corporate Controller reports periodically to the Audit Committee about the status of outstanding engagements, including actual services provided and associated fees, and must promptly report any noncompliance with the pre-approval policy to the Chairman of the Audit Committee.

The Audit Committee may delegate pre-approval authority for audit and non-audit services to one or more of its members, and such authority has been delegated to the Chair of the Audit Committee. The decisions of any member to whom such authority is delegated must be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management its responsibilities to pre-approve services performed by the Company's independent auditor. The Audit Committee periodically reviews reports summarizing all services provided by the independent auditor.

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The Audit Committee is directly responsible for the appointment, compensation, retention, evaluation, termination and oversight of the independent external audit firm that performs audit services. In considering Ernst & Young LLP's (EY) appointment for the 2021 fiscal year, the Audit Committee reviewed the firm's qualifications and competencies, including the following factors:

EY's historical performance and its recent performance during its engagement for the 2020 fiscal year;

EY's capability and expertise in handling the breadth and complexity of the Company's operations;

the qualifications and experience of key members of the engagement team, including the lead audit partner, for the audit of the Company's financial statements;

the quality of EY's communications with the Audit Committee regarding the conduct of the audit, and with management with respect to issues identified in the audit;

external data on audit quality and performance, including recent PCAOB reports on EY; and

EY's reputation for integrity and competence in the fields of accounting and auditing.

EY has been retained as the Company's independent auditor continuously since 2005. To ensure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent auditor. The Audit Committee ensures that the mandated rotation of EY's personnel occurs routinely and the Audit Committee is directly involved in the review, selection and evaluation of EY's lead engagement partner.

The Audit Committee and the Board of Directors believe that the continued retention of EY to serve as the Company's independent auditor for the year ending December 31, 2021 is in the best interests of the Company and its shareholders, and the Board is asking shareholders to ratify this appointment. Representatives of EY are expected to be present at the meeting to respond to appropriate questions of shareholders and to make any desired statements.

Approval of the proposal requires the affirmative votes of a majority of the shares of Grainger common stock present or represented by proxy and entitled to vote at the annual meeting. Abstentions will have the same effect as votes against the proposal. In the event the proposal is not approved, the Board will consider the negative vote as a mandate to appoint another independent auditor for the next year.

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