Pat Gallagher
Arthur J. Gallagher &About Pat Gallagher
J. Patrick Gallagher, Jr. (“Pat Gallagher”) is Chairman and CEO of Arthur J. Gallagher & Co. (AJG), age 73, with 51 years at the company and 39 years on the board; he has served as Chairman since 2006 and has held prior roles including President & COO, VP of Operations, and Production Account Executive . In 2024 AJG delivered adjusted revenue growth of 14.3% to $11.3B, adjusted EBITDAC growth of 20.7% to $3.8B, organic revenue growth of 7.6%, and adjusted EBITDAC margin expansion of 94 bps to 33.3%; TSR for 2024 was 27.3% and adjusted EBITDAC per share grew 17.6% . The board’s say‑on‑pay received 90.3% approval in 2024 .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Arthur J. Gallagher & Co. | Chairman; Chief Executive Officer; President & Chief Operating Officer; Vice President of Operations; Production Account Executive | 1974–present | Led organic growth and acquisitions (48 in 2024, AssuredPartners agreement), margin expansion and capital returns |
| InnerWorkings, Inc. | Director; Compensation Committee; Nominating/Governance Committee | 2011–2019 | Governance oversight; compensation and nominating committee service |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| The Institutes (American Institute for CPCU) | Board of Trustees | 2003–present | Industry standards and education leadership |
| City of London | Freedom of the City of London | 2007 | Recognition for Lloyd’s market contributions and scholarship support |
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary ($) | 1,300,000 | 1,300,000 | 1,300,000 |
| Target Annual Cash Incentive (% of Salary) | 225% (policy prior to 2024) | 225% (policy prior to 2024) | 265% (raised in 2024) |
| Actual Annual Cash Incentive ($) | 5,850,000 | 5,850,000 | 6,890,000 |
Notes:
- In 2024, the Compensation Committee increased the CEO’s annual cash incentive target from 225% to 265% of salary and long‑term incentive target from 435% to 500% of salary to align with market and performance .
Performance Compensation
Annual Cash Incentive Structure and Outcomes (2024)
| Metric | Weighting | Target | Actual | Payout | Vesting |
|---|---|---|---|---|---|
| Adjusted Revenue Growth | N/A (grid‑based with EBITDAC growth) | Company‑set grid | 14.3% | 200% of target award (CEO; $6.89M) | Cash, paid April 2025 |
| Adjusted EBITDAC Growth | N/A (grid‑based with revenue growth) | Company‑set grid | 20.7% | 200% of target award | Cash, paid April 2025 |
| Committee Discretion (organic growth, margin, divisional/individual results) | Overlay | N/A | Considered | Applied to final awards | N/A |
Program mechanics: maximum opportunity capped at 200% of target; grid combines adjusted revenue and adjusted EBITDAC growth; Committee considers organic growth, margin, divisional performance, and individual achievements .
Long‑Term Incentives (2024 grants)
| Instrument | Weighting | Grant Detail | Vesting | Performance Basis |
|---|---|---|---|---|
| Performance Share Units (PSUs) | 75% of CEO LTIP | 20,408 PSUs; grant date value $4,970,164 | Cliff vest after 3 years (Mar 1, 2027) | 3‑yr average adjusted EBITDAC per share growth; 200% earned at ≥14% growth |
| Stock Options | 25% of CEO LTIP | 27,210 options; strike $243.54; grant date value $1,892,456 | 1/3 on each of the 3rd, 4th, 5th anniversaries; expire 3/1/2031 |
Recent PSU outcomes:
- 2022 PSU cycle earned at 200% based on 2022–2024 average adjusted EBITDAC per share growth of 16.1%; vested Mar 15, 2025 .
Exercises and Vesting (2024)
| Activity | Quantity | Value Realized |
|---|---|---|
| Options Exercised | 58,300 shares | $10,741,775 |
| Stock Vested (RSUs/PUPs/PSUs) | 56,008 shares | $14,253,016 |
Clawbacks and Award Practices
- NYSE‑mandated Incentive Compensation Recovery Policy; plan‑level clawbacks for misconduct or policy violations; uniform annual grant date (generally March 1); minimum vesting standards; no option repricing/cash buyouts .
Equity Ownership & Alignment
| Item | Amount/Detail |
|---|---|
| Total Beneficial Ownership (shares) | 1,177,228; <1% of 255,734,802 shares outstanding |
| Ownership Breakdown | Includes 59,640 notional stock units; multiple family trusts and entities; 418 shares in 401(k) |
| Options (exercisable/unexercisable) | Multiple tranches; latest grant 27,210 options at $243.54 expiring 3/1/2031; vesting on years 3–5 |
| Unvested/Earned PSUs at FY‑end | 85,864 unearned PSUs potential (max) across 2023/2024 grants; 45,100 earned PSUs vesting 3/15/2025 |
| Stock Ownership Guidelines | CEO required to hold ≥6x base salary; all executive officers in compliance |
| Hedging/Pledging | Hedging prohibited; no pledges of common stock by directors/executive officers |
| Section 16 compliance | All directors/executive officers filed timely in 2024 |
Employment Terms
| Provision | Key Terms |
|---|---|
| Employment Agreements | No employment agreement with named executive officers |
| Change‑in‑Control (CIC) | Double‑trigger required; CIC defined at ≥50% voting power change, board composition change, or sale/merger; similar (non‑liberal) definitions in equity plans/DEPP |
| Severance (CIC) | Lump sum equal to two years of salary, bonus, and annual cash incentive; continued welfare benefits up to 2 years; payment within 7 days of termination |
| Excise Tax Gross‑ups | No new gross‑ups post‑2008; legacy agreements may include gross‑ups |
Potential Payments Table (Pat Gallagher; triggers assumed at 12/31/2024; stock at $283.85)
| Scenario | Severance Pay | Stock Options | PSUs | DEPP | Benefits | Excise Tax Gross‑Up | Total |
|---|---|---|---|---|---|---|---|
| Voluntary Resignation | — | 18,104,870 | 22,964,829 | 36,704,295 | — | — | 77,773,994 |
| Death or Disability | — | 21,310,766 | 35,842,926 | 38,702,050 | — | — | 95,855,742 |
| Termination with Cause | — | — | — | 36,704,295 | — | — | 36,704,295 |
| Termination without Cause | 1,300,000 | 18,104,870 | 22,964,829 | 38,702,050 | — | — | 81,071,749 |
| Change in Control (no termination) | — | 21,310,766 | 35,842,926 | 38,702,050 | — | — | 95,855,742 |
| Termination w/o Cause or Resignation for Good Reason Following CIC | 16,380,000 | 21,310,766 | 35,842,926 | 38,702,050 | 44,449 | 22,143,305 | 134,423,496 |
Notes: Option/PSU acceleration upon CIC or near‑CIC requires Board approval; PSUs vest at target or pro‑rata based on achievement; DEPP vests at age 62, death, disability, severance, or CIC, subject to service until trigger date .
Deferred Compensation and Perquisites (2024)
| Item | Amount |
|---|---|
| DEPP (Company contributions) | $1,700,000 |
| DEPP Aggregate Balance | $38,702,050 |
| SS&T (Executive contributions) | $715,000 |
| SS&T (Company match) | $340,250 |
| SS&T Aggregate Balance | $34,166,142 |
| 401(k) Match | $17,250 |
| Private Aircraft (personal use incremental cost) | $99,707 |
| Corporate Auto & Insurance | $8,664 |
| Other Perquisites | $230,096 (includes club memberships, event tickets; $106,283 non‑business entertainment) |
| Non‑U.S. Tax Reimbursements on perqs | None (company does not gross‑up perqs) |
Board Governance
- Board service: Director since 1986; Chairman since 2006; age 73; only management director (with Coldman non‑independent; other directors independent) .
- Dual role mitigation: AJG employs an Independent Lead Director (David Johnson) with defined responsibilities including agenda approval, executive sessions, evaluation of the Chairman, and liaison to shareholders; regular executive sessions at each board meeting .
- Committee structure and meetings in 2024: Audit (8 meetings; Nicoletti Chair; members Clarke, Harries, Rosenthal; all independent; multiple “financial experts”), Risk & Compliance (4; Rosenthal Chair; members Clarke, Coldman, Harries, Johnson), Compensation (5; Barrat Chair; members Caplan, Johnson, Miskel), Nominating/Governance (3; Miskel Chair; members Barrat, Caplan, Johnson; all independent) .
- Attendance: Board met 12 times; all current directors attended ≥75% of board/committee meetings; all directors attended 2024 Annual Meeting .
- Independence: All directors except Pat Gallagher and John Coldman are independent under NYSE and company standards .
- Stockholder engagement and say‑on‑pay: >50% of shares engaged; say‑on‑pay approval 90.3% in 2024 .
Director Compensation (context; non‑management only)
| Component | 2024 Level |
|---|---|
| Annual cash retainer | $130,000 (raised from $125,000) |
| Annual equity grant | Target $200,000; 850 RSUs vesting in 1 year (prorated grants for mid‑year appointees) |
| Lead Independent Director fee | $40,000 |
| Audit Chair fee | $35,000; Compensation Chair $25,000; Risk & Compliance Chair $25,000; Nominating/Gov Chair $20,000 |
| Ownership guidelines | Directors with ≥5 years expected to hold ≥5x cash retainer; all such directors are compliant |
Compensation Structure Analysis
- Shift in pay mix: 2024 increases to CEO targets (cash to 265%; LTIP to 500% of salary) and higher PSU emphasis (75% of CEO LTIP) strengthen at‑risk pay linkage to long‑term performance .
- Performance metrics: Strong reliance on adjusted revenue growth, adjusted EBITDAC growth, and adjusted EBITDAC per share growth; PSU caps at 200%; annual cash incentive capped at 200% .
- Clawbacks: NYSE‑compliant recovery policy and expanded misconduct clawbacks; no option repricing; hedging prohibited; no pledging .
- Peer group calibration: 2025 peer group broadened to reflect scale (adds AIG, Chubb, FIS, Fiserv, State Street, Travelers; removes AFG, Arch, CNA, Markel, Robert Half); target levels adjusted after market assessment showed prior target incentives below median .
Related Party Transactions (governance risk indicators)
- AJG disclosed multiple family members of the CEO and other executives employed in 2024, with compensation approved by the Compensation Committee and represented as commensurate with roles; CEO’s relatives include Jennifer Gallagher ($1,289,219), Shannon Gallagher ($566,195), Sean Gallagher ($1,286,733), Brendan Gallagher ($1,409,666); COO Patrick Gallagher (son) is an NEO; President Tom Gallagher (brother) is an NEO; other relatives of executives also disclosed .
- Company process: Formal related‑party transactions policy; Nominating/Governance Committee review and approval criteria include arm’s‑length terms and impact on independence .
Performance & Track Record (recent qualitative signals)
- 2024 achievements cited by Compensation Committee: organic growth (7.6%), 48 acquisitions ($387M annualized revenue), AssuredPartners definitive agreement, adjusted EBITDAC margin expansion (+94 bps), $525.4M dividends, and TSR 27.3% .
- Q3 2025 earnings call highlights under Pat’s leadership: 20% revenue growth; 22% adjusted EBITDA growth; sustained double‑digit growth streak; integration of AssuredPartners progressing; pipeline visibility; segment margin expansion bridge .
Employment & Contracts (additional terms)
- Non‑compete/non‑solicit terms and garden leave provisions are not specified in the proxy; equity acceleration for CIC requires Board approval; DEPP vests at age 62 or upon stated triggers with continuous employment .
Say‑on‑Pay & Shareholder Feedback
- 2024 say‑on‑pay approval: 90.3%; extensive shareholder engagement (>50% of shares) on governance, sustainability, and compensation .
Equity Compensation Plan Information (context)
| Plan Detail | Amount/Notes |
|---|---|
| Securities to be issued on exercise (options/warrants/rights) | 7,340,613 options; 171,084 earned PSUs/unearned PSUs at target; 1,928,358 unvested RSUs |
| Weighted average option exercise price | $148.26 |
| Shares available for future issuance | 15,791,197 (2022 LTIP and ESPP) |
Compensation Committee Analysis & Consultant
- Pearl Meyer engaged as independent advisor; peer group assessment supported raising targets; Committee assessed consultant independence per SEC/NYSE .
Board Service History, Committee Roles, and Dual‑Role Implications
- Board service: Pat is Chairman and CEO; director since 1986; Chairman since 2006; not independent .
- Committee roles: Pat is not listed as a standing committee member; committee oversight is by independent directors (chairs noted above) .
- Dual‑role implications: Independent Lead Director with robust authorities; regular executive sessions; majority independent board; board believes structure enhances communication while maintaining independent oversight .
Investment Implications
- Alignment: High equity exposure via PSUs, options, DEPP, stock ownership guidelines compliance, and clawbacks support pay‑for‑performance; metrics tied to adjusted EBITDAC/revenue and per‑share growth are closely linked to value creation .
- Retention and selling pressure: Significant deferred balances (DEPP $38.7M; SS&T $34.2M) and vesting structures (PSUs 3‑year cliff; options vest in years 3–5) encourage tenure; option exercises and PSU vesting in 2024/2025 may create episodic liquidity needs but are programmatic rather than opportunistic; no hedging/pledging permitted .
- Governance risks: Dual role mitigated by strong lead independent director and executive sessions; nepotism/related‑party employment is monitored but remains a reputational risk; legacy excise tax gross‑up exposure under CIC is shareholder‑unfriendly though no new gross‑ups post‑2008 .
- Comp package inflation risk: 2024 target increases for CEO cash and LTIP reflect market benchmarking and performance; say‑on‑pay support suggests investor acceptance, but continued scrutiny warranted given elevated total “compensation actually paid” .
- Strategic execution: Strong organic/M&A engine under Pat’s leadership (AssuredPartners integration, synergy targets, international specialty breadth) and margin discipline support continued EPS/EBITDA growth; performance metrics’ design should continue to reinforce that trajectory .