D.G. Macpherson

About D.G. Macpherson

D.G. Macpherson, age 57, is Chairman of the Board (since October 2017) and Chief Executive Officer (since October 2016) of W.W. Grainger, Inc., and has served on the Board since 2016. He previously led Grainger’s supply chain globally, launched the U.S. Endless Assortment business (Zoro Tools), and was a Partner and Managing Director at The Boston Consulting Group (2002–2008) . Under his leadership, 2024 results included $17.2B sales (+4.7% daily, organic constant currency), adjusted ROIC of 41.6%, adjusted operating margin of 15.5% (-20 bps), adjusted diluted EPS +6.2%, and TSR of 28.2% (1-year) and 109.8% (3-year) .

Past Roles

Organization	Role	Years	Strategic Impact
W.W. Grainger	Chairman of the Board	Oct 2017–present	Oversees Board strategy and governance; combined Chair/CEO facilitates information flow .
W.W. Grainger	Chief Executive Officer	Oct 2016–present	Led strategy execution, supply chain scale-up, Zoro launch, and U.S. business realignment .
W.W. Grainger	Chief Operating Officer	2015–2016	Operational leadership across Grainger’s businesses .
W.W. Grainger	SVP & Group President, Global Supply Chain & International	2013–2015	Built global supply chain capabilities .
W.W. Grainger	SVP & President, Global Supply Chain & Corporate Strategy	2012–2013	Drove corporate strategy and supply chain initiatives .
W.W. Grainger	SVP, Global Supply Chain	2008–2012	Developed U.S. and global logistics capabilities .

External Roles

Organization	Role	Years	Strategic Impact
International Paper Company	Director	2021–2024	Contributed to oversight at a global materials company .
The Boston Consulting Group	Partner & Managing Director	2002–2008	Member of Industrial Goods Leadership Team; advised Grainger pre-2008 .

Fixed Compensation

Metric	2022	2023	2024
Salary ($)	$1,100,000	$1,100,000	$1,137,568
Stock Awards (Grant-Date Fair Value, $)	$5,734,290	$6,631,385	$7,817,946
Non-Equity Incentive Plan Comp (MIP, $)	$2,920,500	$2,112,000	$1,673,250
All Other Comp ($)	$212,868	$317,288	$252,925
Total ($)	$9,967,658	$10,160,673	$10,881,689

Notes: 2024 “All Other” includes company retirement/SPSP contributions $194,912, frozen EDBP incremental cost $53,047, and executive physical $4,966 . CEO receives no separate director compensation .

Performance Compensation

2024 Annual Incentive (MIP) – Metrics, Targets, Results

Metric	Target (payout scale)	Actual	Payout component	ESG Modifier	Final Payout
Total Company daily, organic constant currency sales growth	11.3% => 100% payout; threshold bands disclosed	4.5%	45%	0% (scope 1/2 emissions and diverse leadership met expectations)	97% of target
Total Company adjusted ROIC	44.0% => 100% payout; threshold bands disclosed	41.4%	53%	—	—

Additional program details: CEO target bonus 150% of base salary; MIP capped at 200% of target; Committee made no discretionary adjustments in 2024 .

Long-Term Incentives – Design and Outcomes

Award	Weight	Vesting	Metrics	Targets/Payout Curve	Actual 2022–2024 Outcome	Payout
PSUs (2022–2024 cycle)	60% (CEO)	3-year cliff	U.S. share gain; Endless Assortment daily sales growth; Total Co. adjusted operating margin (equally weighted)	Metric-specific bands from 0–200% payout	Share gain: 465 bps; Endless Assortment growth: 14.2%; Operating margin change: +119 bps avg	118% of target
RSUs	40% (CEO)	3-year graded	Stock price performance	—	—	—

No dividend equivalents on PSUs; equity grants sized using 20-day average price through March 31 .

Vesting Schedules and Option Profile

Stock options: 10-year term; 3-year cliff vesting (through 2018 grants) and 3-year graded vesting (2019 grants); upon retirement unvested options vest and are exercisable up to the lesser of six years or remaining term .
Macpherson option lot: 30,663 options at $311.26 exercise price, expiring 3/31/2029 .

Equity Ownership & Alignment

Category	Amount	Notes
Shares owned	90,951	Beneficial ownership; sole voting/investment unless noted .
Stock option shares exercisable within 60 days	30,663	Matches 2019 option grant lot .
Stock units (RSUs/DSUs)	7,616	Excluded from % ownership .
Unvested RSUs	14,300	Market value $15,072,915 at $1,054.05 year-end price .
Unearned PSUs outstanding (max)	21,102	Max payout basis; market value $22,242,563 .
Percent of class	<1%	Per beneficial ownership table .

Policies and alignment:

Stock ownership guideline: CEO required minimum 6x base salary; all NEOs in compliance as of Dec 31, 2024 .
Hedging and pledging of company stock: prohibited; no directors/officers have hedged or pledged shares .
Counting toward guidelines: RSUs count; stock options and PSUs do not .

Insider trading arrangements indicating potential selling pressure:

Rule 10b5-1 plan adopted Sept 4, 2025 to exercise and sell shares from 30,663 options; plan expires Sept 1, 2026 .
Rule 10b5-1 plan adopted Aug 29, 2023 to sell 4,995 shares from vesting (expired Dec 31, 2023) .

Employment Terms

Topic	Current Treatment
Employment agreement	Historically none for NEOs; no employment contracts maintained .
Severance plan	Executive Severance Plan approved Oct 29, 2025 (effective Dec 31, 2025): severance equal to 2x or 1.5x base salary + target annual incentive; pro-rata annual incentive; pro-rata equity vesting; portion of COBRA costs; outplacement .
Change-in-control (CIC)	Executive CIC Severance Plan (effective Dec 31, 2025): 2x base + target annual incentive; pro-rata annual incentive; double-trigger vesting for outstanding equity; COBRA costs .
CIC equity vesting	2015 Incentive Plan requires double-trigger (CIC plus involuntary termination within 1 year) for equity acceleration .
Clawbacks	Equity award agreement clawbacks; NYSE-compliant clawback policy; recoupment for financial fraud/material inaccuracies and non-compete/non-solicit violations .
Tax gross-ups	No excise tax gross-ups on CIC agreements; no perquisite tax gross-ups .
Non-compete / Non-solicit	Violations covered in clawback provisions (durations not disclosed) .

Board Governance

Board service history: Director since 2016; Chairman since 2017; CEO since 2016 .
Independence: Board determined all nominees except Mr. Macpherson are independent . Committees are 100% independent (Audit, BANC, Compensation) .
Leadership structure: Combined Chair/CEO with annual election of an independent Lead Director; Board rationale emphasizes efficient information flow and accountability, with independent oversight .
Executive sessions: Each Board meeting had at least one executive session in 2024; Committees held 15 executive sessions across 16 meetings .
Attendance: No Director attended fewer than 75% of Board/Committee meetings in 2024; all Directors attended the 2024 annual meeting .
Director pay: Macpherson receives no separate compensation for Board service .

Say-on-Pay & Shareholder Feedback

Year	Approval (approx.)	Source
2018	97%
2019	83% (prompted program changes)
2022	91.5%
2023	93%
2024	~94%

The company regularly engages shareholders, including Lead Director meetings, to review strategy, compensation design, and governance .

Compensation Structure Analysis

Mix and sizing: CEO LTIP target increased from $6.65M (2023) to $7.75M (2024), reflecting desired market positioning and performance; 2024 LTI mix 60% PSUs and 40% RSUs for CEO .
Options: Outstanding legacy options remain; current LTI design emphasizes PSUs/RSUs with double-trigger CIC protection; no option repricing or cash buyouts of underwater options .
Pay-for-performance integrity: 2024 MIP paid 97% of target based on disclosed scales; Committee did not exercise discretion; PSU cycle paid 118% based on three-year metrics .

Related Party Transactions

Board Affairs & Nominating Committee reported no related person transactions from Jan 1, 2024 through the proxy date; ordinary-course transactions with director-affiliated organizations were arm’s-length and immaterial .

Risk Indicators & Red Flags

Hedging/pledging: Prohibited; none reported .
Dual role (Chair/CEO): Mitigated by independent Lead Director and fully independent committees .
Trading plans: Rule 10b5-1 plans for option exercise/sales indicate scheduled insider selling; monitor execution cadence vs award vesting to assess supply overhang .
Program integrity: No repricing; strong recent say-on-pay support; robust clawbacks and ownership requirements .

Equity Ownership & Alignment Details

Guideline	Requirement	Status
CEO stock ownership	≥6x base salary	In compliance (as of Dec 31, 2024) .
Retention/holding	Retain net shares until guideline met; 25% after-tax share retention policy historically applied	Policy in place; PSUs/options not counted toward ownership .
Hedging/pledging	Prohibited	No hedging/pledging by directors/officers .

Investment Implications

Alignment: High equity-based mix (PSUs/RSUs), rigorous ROIC and share-gain metrics, and strong ownership requirements support long-term alignment; clawbacks and anti-hedging/pledging reduce agency risk .
Near-term supply technicals: The 2025 Rule 10b5-1 plan to exercise and sell 30,663 options through Sep 2026 could create intermittent selling pressure; monitor execution pace and upcoming vesting events .
Governance: Combined Chair/CEO structure is balanced by an independent Lead Director and fully independent committees; recent say-on-pay approvals (~94% in 2024) indicate investor support for pay design .
Pay-for-performance: 2024 results produced slightly sub-target annual incentive (97%) and above-target PSU payout (118%), consistent with disclosed operating trends; continued delivery on share gain and ROIC will be key to sustaining PSU outcomes and valuation .