Jeffery M. Watts
FASTENALAbout Jeffery M. Watts
Jeffery M. “Jeff” Watts is President and Chief Sales Officer of Fastenal. He joined Fastenal on February 5, 1996 and was appointed President effective August 1, 2024, continuing his CSO role held since May 2023; previously he served as EVP – International Sales (2016–2023), VP – International Sales (2015–2016), and Regional VP for Canada, among other sales leadership positions . Company performance context during his NEO tenure: Fastenal’s total shareholder return (TSR) on a $100 base reached $222 in 2024 (vs $137 in 2020), with net income of $1,150.6 million in 2024 (vs $859.1 million in 2020) .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Fastenal | President and Chief Sales Officer | Aug 2024–present | Leads global sales across 25 countries; elevated from CSO to align sales execution with corporate leadership . |
| Fastenal | Chief Sales Officer | May 2023–Jul 2024 | Set priorities, goals, and oversight for global sales activities . |
| Fastenal | EVP – International Sales | Dec 2016–Apr 2023 | Led international expansion and performance in global markets . |
| Fastenal | VP – International Sales | Mar 2015–Dec 2016 | Directed international sales strategy and execution . |
| Fastenal | Regional VP – Canada | Jun 2005–Feb 2015 | Built Canadian business performance and team leadership . |
| Fastenal | Various sales leadership roles | Pre-2005 | Field and district roles grounding customer and frontline execution . |
External Roles
- Not disclosed in company filings reviewed.
Fixed Compensation
- Base salary was increased upon promotion to President/CSO: 2024 annual base set at $550,000 (pro‑rated from Aug 1, 2024) . The Summary Compensation Table (SCT) shows $516,090 salary paid in 2024 (paid in CAD; USD amounts reflect exchange rates at payment dates) .
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary (USD) | 358,631 | 451,503 | 516,090 |
Notes: 2024 pay in CAD converted to USD per disclosed exchange rates; 2024 presidential base set at $550,000 pro‑rated from Aug 1, 2024 .
Performance Compensation
Annual/Quarterly Cash Incentives (Pay-for-performance design)
- Formula: Quarterly bonus equals a fixed payout percentage applied to the amount by which company pre‑tax income (and for CFO, net income) exceeds 100% of the same quarter in the prior year; no thresholds or maximums for 2024 .
- Watts’ 2024 payout percentages: 1.00% of company pre‑tax income growth before August; increased to 1.25% upon becoming President/CSO in August 2024 .
- Actual 2024 bonus earned (NEIP): $60,746 (SCT) .
- 2024 company performance vs minimum targets (context for payouts): Q1 and Q3 slightly above; Q2 and Q4 below 2023 comps, constraining payouts .
| Quarter (2024) | Actual Pre‑tax Income ($000) | Minimum Target Pre‑tax ($000) | Actual Net Income ($000) | Minimum Target Net ($000) |
|---|---|---|---|---|
| Q1 | 389,844 | 389,734 | 297,740 | 295,139 |
| Q2 | 386,364 | 392,640 | 292,682 | 298,050 |
| Q3 | 387,627 | 385,389 | 298,041 | 295,367 |
| Q4 | 344,293 | 354,226 | 262,090 | 266,429 |
| Cash Incentive Detail (2024) | Metric | Weighting | Target | Actual | Payout |
|---|---|---|---|---|---|
| Quarterly bonus | Company pre‑tax income growth over 2023 baseline | 100% | >100% of 2023 per quarter | Mixed (Q1/Q3 above; Q2/Q4 below) | $60,746 (annual total) |
| Payout % (pre‑Aug 1) | Company pre‑tax income growth | — | — | — | 1.00% |
| Payout % (from Aug 1) | Company pre‑tax income growth | — | — | — | 1.25% |
Long-Term Incentives (Stock Options only)
- Fastenal grants only stock options to executive officers; no RSUs/PSUs. Options vest over five years (general schedules below), with 10‑year terms; grants are typically on first trading day of the fiscal year at exercise price rounded up to nearest dollar .
| 2024 Option Grant (Watts) | Grant Date | Options (#) | Exercise Price | Vesting | Expiration | Grant Date Fair Value ($) |
|---|---|---|---|---|---|---|
| Annual LTI award | Jan 2, 2024 | 31,250 | $64.00 | 20% annually over 5 years | 12/31/2033 | 495,938 |
Vesting schedules for NEO option grants:
- Pre‑2023 grants: 40% vests at 2 years, then 20% annually thereafter .
- 2023+ grants: 20% vests annually starting 1 year after grant .
Equity Ownership & Alignment
Beneficial Ownership and Option Exercise Activity
| Item | Value |
|---|---|
| Beneficial ownership as of Feb 1, 2025 (shares) | 92,356 |
| Immediately exercisable options included in above | 86,416 |
| Implied owned shares (beneficial less options) | ~5,940 (derived from ) |
| Ownership as % of outstanding (573,434,554 shares) | ~0.016% (derived from ) |
| 2024 options exercised (shares) | 19,420 |
| 2024 value realized on exercise ($) | 916,469 |
Outstanding Equity Awards (Dec 31, 2024 snapshot)
| Grant Date | Exercise Price | Exercisable (#) | Unexercisable (#) | Expiration |
|---|---|---|---|---|
| Jan 2, 2018 | $27.50 | 16,362 | — | 12/31/2027 |
| Jan 2, 2019 | $26.00 | 17,306 | — | 12/31/2028 |
| Jan 2, 2020 | $38.00 | 14,737 | 3,684 | 12/31/2029 |
| Jan 4, 2021 | $48.00 | 8,749 | 5,834 | 12/31/2030 |
| Jan 3, 2022 | $62.00 | 4,774 | 7,161 | 12/31/2031 |
| Jan 3, 2023 | $48.00 | 4,625 | 18,500 | 12/31/2032 |
| Jan 2, 2024 | $64.00 | — | 31,250 | 12/31/2033 |
Policies and alignment:
- Stock ownership guidelines require President to hold shares equal to 1.0x base salary at 5 years and 2.0x at 10 years; all Section 16 officers are currently in compliance .
- Hedging by directors and Section 16 officers is prohibited; securities trading policy in place; filings do not state a pledging policy, and no pledging disclosures were identified in the materials reviewed .
Employment Terms
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Appointment: Board appointed Watts as President and CSO effective Aug 1, 2024; 2024 base set at $550,000 (pro‑rated from Aug 1) and quarterly bonus at 1.25% of company pre‑tax income growth starting Q3 2024; no additional options granted at appointment (regular 2025 options anticipated) .
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Term: Role expires concurrently with the terms of other executive officers; no related‑party transactions disclosed under Item 404(a) .
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Contracts/Severance: Fastenal has no employment, severance, or change‑in‑control agreements with any employees, including executive officers .
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Change‑in‑control equity treatment: Option vesting/exercisability accelerates only if Fastenal is not the surviving/acquiring company and options are not assumed or replaced; also accelerates upon dissolution/liquidation . Illustrative value for Watts’ options if acceleration had occurred at $71.91/share on Dec 31, 2024 (assuming full exercise):
- 2018 $27.50: $726,636; 2019 $26.00: $794,518; 2020 $38.00: $624,656; 2021 $48.00: $348,680; 2022 $62.00: $118,276; 2023 $48.00: $552,919; 2024 $64.00: $247,188; Total ≈ $3,412,873 (sum of disclosed line items) .
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Clawback: Compensation committee administers a Compensation Forfeiture and Recovery Policy (clawback) and related policies .
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Perquisites/Deferred comp/Pension: No perquisites; no non‑qualified deferred compensation plans; no defined benefit pension .
Multi‑Year Compensation (SCT)
| Component (USD) | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary | 358,631 | 451,503 | 516,090 |
| Stock Awards (RSUs/PSUs) | — | — | — |
| Option Awards (Grant‑date FV) | 163,271 | 268,713 | 495,938 |
| Non‑Equity Incentive Plan Comp (Cash) | 1,167,365 | 749,716 | 60,746 |
| All Other Compensation | — | — | — |
| Total Compensation | 1,689,267 | 1,469,932 | 1,072,774 |
Notes: Salary/bonus were paid in CAD in 2022–2024 and converted to USD at contemporaneous exchange rates per proxy .
Compensation Structure Analysis
- Mix shift: 2024 saw a markedly lower cash incentive payout ($60,746) given company pre‑tax comparisons, increasing the relative share of equity in the mix; option grant value rose to ~$496k in 2024 from ~$269k in 2023 .
- Metric rigor: Quarterly bonuses pay only on growth over prior‑year quarters, with no maximums, and are paid soon after results are known, emphasizing line‑of‑sight performance; Watts’ payout rate stepped up to 1.25% upon promotion in Aug 2024 .
- LTI design: Options only (no RSUs/PSUs); longer vesting (5 years) and 10‑year terms align wealth creation with TSR while avoiding re‑pricing and backdating; grants occur on a pre‑set annual cadence with exercise price rounded up to market .
- Governance: No employment/severance/CIC agreements; CIC acceleration only if awards aren’t assumed/replaced; anti‑hedging policy and ownership guidelines in force; clawback policy administered by the compensation committee .
Investment Implications
- Alignment: Option‑only LTI with 5‑year vesting and rising grant size in 2024 increases long‑term alignment to TSR and earnings growth; anti‑hedging and ownership guidelines (with compliance) reduce misalignment risk .
- Retention: Absence of employment/severance/CIC agreements shifts retention levers to unvested options; as of year‑end 2024, Watts had sizable unvested tranches (e.g., 2021–2024 grants) plus 86,416 options immediately exercisable as of Feb 1, 2025, balancing retention with liquidity optionality .
- Selling pressure: 19,420 options were exercised in 2024 (value realized ~$916k), indicating some liquidity events; ongoing vesting creates periodic potential supply, but policy prohibits hedging; no pledging disclosures identified .
- Pay-for-performance: Bonuses are tightly linked to quarterly pre‑tax comps; 2024’s mixed results produced low cash payouts ($60.7k), underscoring sensitivity to near‑term operating momentum; the promotion to President raises variable comp leverage via a higher payout percentage .
- CIC economics: If options were accelerated (only if not assumed/replaced), illustrative in‑the‑money value for Watts’ options would have been ~ $3.41 million at $71.91/share, highlighting meaningful equity value tied to continuity/assumption of awards in strategic events .