Tom Gallagher
Arthur J. Gallagher &About Tom Gallagher
Tom Gallagher is President of Arthur J. Gallagher & Co. (effective January 1, 2024) and a named executive officer with 44 years of service at the company as of December 31, 2024 . In 2024 he helped oversee the integration of Willis Re into the global P/C brokerage business, supported AJG’s reorganization of divisional leadership, and advanced M&A execution, contributing to a year in which AJG delivered 14.3% adjusted revenue growth, 20.7% adjusted EBITDAC growth, 7.6% organic revenue growth, and a 94 bps margin expansion to 33.3% in core segments; AJG’s 2024 TSR was 27.3% . He is the brother of CEO J. Patrick Gallagher, Jr., with related-party employment disclosures addressed by the company’s governance framework .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Arthur J. Gallagher & Co. | President – P/C Brokerage (prior role before 2024) | Through 2023 | Led strong global P/C brokerage performance, completed 43 acquisitions ($500.9mm est. annualized revenue), and progressed Willis Re integration . |
| Arthur J. Gallagher & Co. | President (Company) | Effective Jan 1, 2024 | Oversaw divisional leadership reorg, Willis Re integration, and supported company-wide M&A in 2024 . |
Fixed Compensation
| Year | Base Salary ($) | Target Annual Bonus (% of Salary) | Actual Annual Cash Incentive ($) |
|---|---|---|---|
| 2024 | 1,125,000 | 150% (NEOs other than CEO) | 3,375,000 |
| 2023 | 1,000,000 | 125% (raised to 150% for 2024) | 2,500,000 |
| 2022 | 1,000,000 | Not disclosed | 2,500,000 |
- 2024 annual cash incentive determination was based on achieving 14.3% adjusted revenue growth and 20.7% adjusted EBITDAC growth (matrix delivered 200% of target), with Committee discretion confirming the payout .
- Perquisites (select 2024 items): DEPP award $600,000; SS&T match $164,000; 401(k) match $17,250; private aircraft $126,854; non‑U.S. tax reimbursement $119,509; other $150,578 .
Performance Compensation
Annual Incentive Design and 2024 Outcome
- Metrics: Adjusted revenue growth and adjusted EBITDAC growth (matrix; caps at 200% of target) .
- 2024 result: Adjusted revenue growth 14.3% and adjusted EBITDAC growth 20.7% → max 200% of target; Tom’s payout $3,375,000 (target 150% of salary) .
| Metric | Target | Actual | Payout Factor | Notes |
|---|---|---|---|---|
| Adjusted Revenue Growth | Matrix input | 14.3% | 200% of target | Company-wide input to matrix |
| Adjusted EBITDAC Growth | Matrix input | 20.7% | 200% of target | Company-wide input to matrix |
Long-Term Incentives (LTI)
- Target LTI value (2024): 200% of salary; mix 60% PSUs / 40% stock options .
- PSU metric: 3-year adjusted EBITDAC per share growth; <4% forfeited; 4–9% → 50–100%; 9–14% → 100–200%; ≥14% → 200%; cliff-vest at 3 years .
- 2024 grants (Tom): 5,651 target PSUs (max 11,302) and 15,070 options @ $243.54; grant date 3/1/2024 .
- Earned PSUs (prior cycle): 2022 grant earned at 200% on 2022–2024 average adjusted EBITDAC/share growth of 16.1%; those PSUs (9,640 for Tom) vested March 15, 2025 .
| Grant | Grant Date | Instrument | Quantity/Terms | Vesting |
|---|---|---|---|---|
| 2024 LTI | 3/1/2024 | PSUs | 5,651 target (max 11,302) | Cliff-vest 3/1/2027; payout on 2024–2026 adjusted EBITDAC/share growth |
| 2024 LTI | 3/1/2024 | Stock Options | 15,070 @ $243.54 | 1/3 on each of 3rd, 4th, 5th anniversaries |
| 2023 LTI | 3/15/2023 | PSUs | 9,560 unearned as of 12/31/2024 (max basis) | Cliff-vest 3/15/2026; payout on 2023–2025 performance |
| 2022 LTI | 3/15/2022 | PSUs | 9,640 earned (200%) | Vested 3/15/2025 |
Equity Ownership & Alignment
Beneficial Ownership Snapshot (as of March 17, 2025)
| Holder | Shares of Common Stock | Stock Options (within 60 days) | RSUs (within 60 days) | Total Beneficial Ownership | % Outstanding |
|---|---|---|---|---|---|
| Tom Gallagher | 635,067 | 86,575 | — | 721,642 | <1% |
- Footnote details include 11,387 notional stock units; multiple trusts and spousal holdings; and 401(k) shares (see footnote (7)) .
- Stock ownership guidelines: 3× salary for executive officers other than CEO/CFO; company states all executive officers are in compliance .
- Hedging and pledging: Hedging prohibited; no pledges of common stock by directors or executive officers; robust clawback policies in place .
Outstanding Equity Awards (12/31/2024)
- Options (selected grants and status):
- 20,894 exercisable / 10,446 unexercisable @ $86.17 (exp. 3/12/2027); 10,966 exercisable / 21,929 unexercisable @ $127.90 (exp. 3/16/2028); 15,310 unexercisable @ $158.56 (exp. 3/15/2029); 12,744 unexercisable @ $177.09 (exp. 3/15/2030); 15,070 unexercisable @ $243.54 (exp. 3/1/2031) .
- Options vest one-third on each of the 3rd, 4th, and 5th anniversaries; retirement-age provisions can allow continued vesting; change-in-control acceleration requires Board approval .
- PSUs/RSUs: 9,640 PSUs vesting 3/15/2025 (earned); unearned PSUs outstanding: 9,560 (2023 grant) and 11,302 (2024 grant at max basis) as of 12/31/2024 .
Deferred Compensation and Pension
- DEPP: Company contribution $600,000 in 2024; aggregate DEPP balance $4,440,500 at 12/31/2024; participants over age 61 have minimum 13‑month vesting on awards, which applies to Tom .
- SS&T Plan: 2024 executive contributions $181,250; company match $164,000; year-end balance $3,999,342 .
- Pension: Present value of accumulated benefit $513,394; 25 years of credited service (plan frozen since 2005) .
Employment Terms
- No employment agreement: AJG discloses it has no employment agreements with named executive officers .
- Change-in-control (CIC) agreements: Double-trigger (CIC plus qualifying termination within 24 months) with lump-sum severance equal to two times salary, bonus, and annual cash incentive; two years of welfare benefits continuation; no new excise tax gross-ups (policy since 2008) .
- Equity treatment on termination/CIC:
- Options: Retirement-age provisions allow continued vesting; death/disability accelerates; CIC acceleration requires Board approval .
- PSUs: Death/disability vest at target; certain age/tenure conditions mitigate forfeiture on voluntary/no‑cause exits; CIC acceleration at target or pro‑rata actual (Board approval) .
- RSUs: For applicable NEOs, forfeiture on cause; death/disability accelerates; CIC acceleration requires Board approval .
- Estimated payments table (Tom Gallagher, as of 12/31/2024, stock at $283.85):
- Termination without cause: Severance $1,125,000; options $8,010,454; PSUs $5,549,660; DEPP $4,440,500; total $19,125,614 .
- Termination without cause or resignation for good reason following CIC: Severance $9,000,000; options $9,371,004; PSUs $8,282,625; DEPP $4,440,500; benefits $52,434; total $31,146,563 .
- Clawback: NYSE-compliant incentive compensation recovery policy plus misconduct/insider-trading violations and reputational harm provisions .
Compensation Structure Analysis
- Increased at-risk pay: For 2024, target annual cash incentive for NEOs (ex‑CEO) raised from 125% to 150% of salary, and target LTI increased from 150% to 200% of salary—aligning pay competitiveness and strengthening pay-for-performance .
- Equity mix emphasizes performance: 60% PSUs tied to 3‑year adjusted EBITDAC/share growth; options vest over years 3–5, promoting retention and multi‑year value creation .
- Discretion and caps: Annual incentive and PSUs capped at 200% of target; Committee retains downward discretion .
- Governance safeguards: No option repricing/cash buyouts; no hedging/pledging; stock ownership guidelines; uniform grant dates; strong clawbacks .
Related Party Transactions and Red Flags
- Family relationships: Tom Gallagher (President) is CEO’s brother; Tom’s sons were employed in 2024 (compensation disclosed) with Compensation Committee oversight; AJG’s policy reviews related-party transactions for arm’s-length terms .
- Say‑on‑pay support: 2024 say‑on‑pay approval was 90.3%, indicating broad shareholder support for executive compensation practices .
- No pledging and hedging banned for insiders, reducing alignment risk; no new excise tax gross‑ups under CIC agreements .
Investment Implications
- Alignment and retention: High proportion of performance-based equity (PSUs) and multi-year option vesting, combined with DEPP deferrals (vesting at age 62/13 months for >61), align incentives to long-term TSR and mitigate near-term selling pressure; however, large PSU vests (e.g., 2022 grant at 200% vesting in March 2025) can create episodic supply .
- Execution track record: Tom’s role in integrating Willis Re, reorganizing divisional leadership, and supporting M&A in 2024 dovetails with strong financial performance (adj. revenue +14.3%, adj. EBITDAC +20.7%, margin +94 bps; TSR 27.3%), reinforcing pay-for-performance integrity .
- Governance risk offset by disclosure: Related-party employment is fully disclosed and overseen by the Compensation Committee; no hedging/pledging and robust clawback reduce governance red flags .
- Downside protection: Double-trigger CIC agreements (two-year severance and benefits, with no new gross‑ups) are market-standard and help retain senior leadership through strategic transactions .