E. Scott Santi
ILLINOIS TOOL WORKSAbout E. Scott Santi
E. Scott Santi, age 63, is Non-Executive Chairman of Illinois Tool Works (ITW) and has served on ITW’s Board since 2012; he was CEO from November 2012 to January 1, 2024 and became Non-Executive Chairman on March 1, 2024, bringing deep operating and strategic expertise in the ITW Business Model and long-tenured leadership of the enterprise . He is classified as not independent by ITW and serves on the Board’s Executive Committee; he also sits on W.W. Grainger’s Board (Audit and Board Affairs & Nominating Committees), adding external governance exposure in industrial distribution .
Past Roles
| Organization | Role | Tenure | Committees/Impact |
|---|---|---|---|
| Illinois Tool Works (ITW) | Executive Vice President | Oct 2004 – Dec 2008 | Senior leadership across segments |
| Illinois Tool Works (ITW) | Vice Chairman | Dec 2008 – Oct 2012 | Enterprise leadership, succession track |
| Illinois Tool Works (ITW) | President & Chief Operating Officer | Oct 2012 – Nov 2012 | Transition role prior to CEO |
| Illinois Tool Works (ITW) | President & Chief Executive Officer | Nov 2012 – May 2015; CEO through Jan 1, 2024 | Led Enterprise Strategy and margin/ROIC expansion |
| Illinois Tool Works (ITW) | Chairman (Executive) | May 2015 – Mar 1, 2024 | Board leadership |
| Illinois Tool Works (ITW) | Non-Executive Chairman | Mar 1, 2024 – present | Executive Committee member; governance oversight |
External Roles
| Organization | Role | Tenure | Committees/Impact |
|---|---|---|---|
| W.W. Grainger, Inc. | Director | Current | Audit; Board Affairs & Nominating |
| Civic/Non-profit organizations | Board roles | Not specified | Various civic and not-for-profit boards (general disclosure) |
Board Governance
- Independence status: Not independent (former CEO, current Non-Executive Chairman) .
- Committee assignment: Executive Committee .
- Board attendance: 100% attendance by all directors and all committees in 2024; Board met five times with five executive sessions of independent directors .
- Governance practices: Majority voting, director resignation policy, regular independent director executive sessions, annual Board and committee evaluations, stock ownership requirements, anti-hedging/anti-pledging, clawback policy for restatements regardless of misconduct .
- Lead Independent Director present (Richard H. Lenny) and executive sessions held regularly .
Fixed Compensation
- Non-employee director program: Retainer-only (no meeting fees); annual cash retainer $140,000; committee chair retainers ($25,000 Audit/Comp; $20,000 Governance & Nominating; $15,000 Finance; $5,000 Executive), Lead Director $45,000; annual stock grant $185,000; Non-Executive Chairman received an additional annual stock grant of $250,000 in 2024 (issued May 3, 2024) .
- Santi’s 2024 director compensation is reported within NEO SCT due to his status change; see SCT below .
| Component ($) | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary | $1,393,269 | $1,400,000 | $235,115 |
| Bonus | — | — | — |
| Stock Awards | $3,337,430 | $3,587,441 | $434,909 |
| Option Awards | $6,674,976 | $7,174,971 | $0 |
| Non-Equity Incentive Plan | $7,350,403 | $7,574,565 | $3,747,832 |
| Change in Pension Value & Nonqualified Def. Comp. Earnings | $3,296,378 | $2,648,569 | $278,540 |
| All Other Compensation | $181,774 | $122,271 | $153,026 |
| Total | $22,234,230 | $22,507,817 | $4,849,422 |
Notes:
- Non-employee director stock grants in 2024: 758 shares, ~ $185,000 value per director; Non-Executive Chairman: additional $250,000 stock grant .
- Directors may defer cash/stock; deferred cash credited quarterly at 120% of applicable federal long-term rate; deferred stock credited as stock units with dividend equivalents; units payable in cash upon retirement/resignation .
Performance Compensation
- Annual Executive Incentive Plan (EIP) metrics (Company-level for Santi): 60% Operating Income Growth; 40% Organic Revenue Growth (0–200% payout scale) .
- 2024 Company actuals: Operating Income Growth 103.6% (payout 94.2%); Organic Revenue Growth -0.7% (payout 0%); Total payout 56.5% of target .
- Santi’s 2024 EIP: Target 27% of base salary; payout 56.5% of target; payout amount $211,008; pro-rated to his March 1, 2024 retirement date (the table references final 2024 salary $1,400,000 for payout determination) .
- Long-term incentives design: 2024 awards for NEOs were 50% stock options, 25% PSUs, 25% performance cash; metrics equally weighted: three-year average Operating Margin, After-tax ROIC, EPS Growth; payout range 50–200% of target; options vest over 4 years ending 2028; 10-year term; PSUs/cash vest after 3 years upon certification .
- 2022–2024 PSU/performance cash results (applied to NEOs): OM 25.0% avg (150% payout), After-tax ROIC 29.9% avg (200% payout), EPS Growth 8.0% avg (90% payout); total 146.7% of target .
| 2024 EIP Payout (Company) | Threshold | Target | Maximum | Actual Achievement | Payout % |
|---|---|---|---|---|---|
| Operating Income Growth vs. Prior Year | 85% (50%) | 106% (100%) | 116% (200%) | 103.6% | 94.2% |
| Organic Revenue Growth | 0.0% (0%) | 2.0% (100%) | 5.0% (200%) | -0.7% | 0.0% |
| Total Payout Percent | — | — | — | — | 56.5% |
| 2024–2026 LTI Metrics & Payout Scale | Threshold (50%) | Target (100%) | Maximum (200%) |
|---|---|---|---|
| Operating Margin (avg) | 20% | 25% | 27% |
| After-tax ROIC (avg) | 20% | 25% | 27% |
| EPS Growth (avg) | 4% | 9% | 12% |
| 2022–2024 LTI Outcomes | FY 2022 | FY 2023 | FY 2024 | 3-Year Avg | Payout % of Target |
|---|---|---|---|---|---|
| Operating Margin (1/3) | 23.8% | 25.1% | 26.1% | 25.0% | 150.0% |
| After-tax ROIC (1/3) | 28.9% | 30.3% | 30.4% | 29.9% | 200.0% |
| EPS Growth (1/3) | 11.7% | 7.2% | 5.1% | 8.0% | 90.0% |
| Total Payout % of Target | — | — | — | — | 146.7% |
- 2025 change in LTI mix: performance awards to be PSUs only (elimination of performance cash), 50% PSUs and 50% stock options for long-term awards issued Feb 2025 .
Other Directorships & Interlocks
| Company | Role | Committees |
|---|---|---|
| W.W. Grainger, Inc. | Director | Audit; Board Affairs & Nominating |
- Potential interlocks/conflicts: None specifically disclosed; ITW maintains anti-hedging/anti-pledging policies and a Code of Conduct for directors; related-party transactions not indicated in proxy extracts reviewed .
Expertise & Qualifications
- Proven CEO and Chairman with extensive operational, finance, and strategy leadership at ITW; deep application of ITW Business Model; external board experience at W.W. Grainger .
- Track record includes driving record operating margin and after-tax ROIC (2024 OM 26.8%, ROIC 31.2%) and EPS growth through the Enterprise Strategy framework (2012–2024 transformation highlights) .
Equity Ownership
| Holder | Shares Beneficially Owned | Shares Outstanding Reference | Percent of Class |
|---|---|---|---|
| E. Scott Santi | 1,058,568 | 294,018,784 | <1% (proxy table note) |
Notes:
- Beneficial ownership includes shares exercisable/vestable within 60 days and applicable stock units/options per proxy methodology .
- Phantom stock units discontinued in May 2012; directors joining after are not awarded phantom units; NEO holdings not shown as phantom units .
- Stock ownership guidelines: Non-employee directors 5× annual cash retainer; executives have role-based multiples; anti-hedging/anti-pledging policy in place .
Fixed/Variable Pay Protections and Arrangements
| Provision | Terms |
|---|---|
| Change-in-Control Severance Policy | Double trigger; cash severance capped at 2× annual cash comp (base salary + 3-year average bonus) plus prorated current-year bonus; no tax gross-ups . |
| Award Treatment on CIC | Options not continued/replaced vest; continued/replaced options vest only upon involuntary termination post-CIC; PSUs/perf cash vest at greater of target or actual achievement; replaced awards vest on involuntary termination within 2 years; prorated payments per performance period . |
| Retirement/Termination Treatment | Defined retirement criteria; post-retirement vesting rules for options and pro-rata PSU/perf cash; forfeiture for competition, misconduct or disclosure . |
| Clawback | Mandatory clawback for financial restatement regardless of misconduct . |
| Insider Trading | Pre-clearance, blackout periods; policy attached to 10-K as Exhibit 19 . |
| Employment Contracts | No individual employment or severance agreements for U.S.-based executives (includes CEO/CFO) . |
Director Compensation Structure (Program)
| Element | Amount |
|---|---|
| Annual Cash Retainer | $140,000 |
| Annual Stock Grant (standard) | $185,000 (758 shares in 2024) |
| Lead Director Fee | $45,000 |
| Committee Chair Fees | Audit $25,000; Compensation $25,000; Governance $20,000; Finance $15,000; Executive $5,000 |
| Non-Executive Chairman Additional Stock Grant | $250,000 (issued May 3, 2024) |
| Matching Gifts | Up to $15,000 per director per year |
Say-on-Pay & Shareholder Feedback
- Say-on-Pay support averaged 93.9% over last five years, indicating strong investor endorsement for pay practices .
- 2024 shareholder proposal for ratification of “excessive golden parachutes” (>2.99× salary+bonus) was rejected by >65% votes; Board opposed repeating proposal in 2025, citing competitive disadvantages and existing CIC limits .
Governance Assessment
- Not independent: Santi’s classification as non-independent Non-Executive Chairman (former CEO) raises typical independence considerations, though the Board maintains a strong Lead Independent Director structure and regular executive sessions to mitigate influence risks .
- Attendance and engagement: 100% meeting attendance suggests high engagement and board effectiveness; executive sessions held five times in 2024 enhance independent oversight .
- Pay-for-performance alignment: EIP metrics and rigorous LTI goals (OM, ROIC, EPS) with multi-year evaluation and no time-vested RSUs for NEOs demonstrate discipline; 2024 EIP payout at 56.5% reflects performance variability and restraint .
- Severance risk controls: Double-trigger CIC, 2× cash cap, and no gross-ups reduce parachute risk; clawback policy and forfeiture conditions for competition/misconduct strengthen accountability .
- Ownership alignment: Significant personal share ownership (<1% of class) and strict stock ownership and anti-hedging/pledging policies support alignment; phantom unit grants discontinued years ago .
RED FLAGS
- Independence: Non-independent status as Non-Executive Chairman after long CEO tenure; ongoing Executive Committee membership. Mitigants include Lead Independent Director and executive sessions .
- Potential interlocks: External directorship at W.W. Grainger (industrial distribution) could create ecosystem ties; no related-party transactions disclosed in proxy extracts reviewed .
Positive Signals
- Strong oversight architecture (Lead Independent Director, majority voting, executive sessions, board/committee evaluations) .
- Robust performance metrics tied to incentives with multi-year focus (OM, ROIC, EPS; EIP OI and organic growth) and restrained payouts in weaker growth year .
- Shareholder support for compensation (five-year Say-on-Pay ~93.9%) and rejection of expansive parachute proposal .