Michael M. Larsen
ILLINOIS TOOL WORKSAbout Michael M. Larsen
Senior Vice President and Chief Financial Officer of Illinois Tool Works (ITW) since 2013. Previously President & CEO (2012–2013) and CFO (2010–2013) of Gardner Denver; CFO at GE Water & Process Technologies (2009–2010); earlier global finance leadership roles at GE (1995–2009) . Joined ITW in September 2013 . Also serves on A. O. Smith’s board (Audit Committee; Audit Chair by 2025) . Under ITW’s Enterprise Strategy (2012–2024), operating margin rose from 15.9% to 26.8%, After‑tax ROIC from 14.5% to 31.2%, EPS from $3.21 (adjusted) to $11.71 (reported), and TSR reached 449% vs 433% for proxy peers and 415% for the S&P 500 .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Gardner Denver, Inc. | CFO; President & CEO | 2010–2013; 2012–2013 | Led finance and then overall strategy/operations during public-to-private transition; board director until acquisition by KKR |
| GE Water & Process Technologies | CFO | 2009–2010 | Drove budgeting, reporting systems and M&A integration in an industrial process business |
| General Electric (GE) | Global finance leadership roles | 1995–2009 | Progressive finance roles across global operations; experience in M&A, IT/cybersecurity, ESG |
External Roles
| Organization | Role | Years | Committee/Position |
|---|---|---|---|
| A. O. Smith Corporation (NYSE:AOS) | Director | 2021–present | Audit Committee; Audit Chair by 2025 |
Fixed Compensation
Multi-year compensation (CFO – ITW):
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary ($) | $875,320 | $909,761 | $942,227 |
| All Other Compensation ($) | $332,736 | $244,616 | $235,926 |
| Total Compensation ($) | $6,214,348 | $6,223,293 | $5,975,153 |
Perquisites and company retirement contributions included in “All Other Compensation”; 2024 perqs (financial planning/tax prep and executive physical) and plan contributions totaled $235,926 .
Deferred compensation (ECRIP):
| Item | 2024 Value ($) |
|---|---|
| Executive Contributions | $91,803 |
| Company Contributions | $190,318 |
| Aggregate Earnings | $305,173 |
| Aggregate Balance at 12/31/2024 | $5,833,247 |
Performance Compensation
Annual Executive Incentive Plan (EIP) – Company metrics and payout:
| Metric | Weight | Target | Actual | Payout (% of Target) |
|---|---|---|---|---|
| Operating Income Growth vs prior year | 60% | 106% | 103.6% | 94.2% |
| Organic Revenue Growth | 40% | 2.0% | -0.7% | 0.0% |
| Total Company Payout | — | — | — | 56.5% |
CFO annual cash incentive outcomes:
| Item | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| EIP Target (% of Salary) | 100% | 100% | 110% |
| EIP Payout ($) | $1,444,024 | $804,573 | $588,460 |
Long-Term Incentives (mix and vesting):
- ITW LTI mix: 50% stock options; 25% PSUs; 25% Performance Cash (2024 awards); options vest over 4 years and expire in 10 years; PSUs/Performance Cash vest after 3 years, subject to certified performance .
- Beginning with 2025 awards, performance awards will be 100% stock-based (50% PSUs, 50% options) and add CBI Yield as a fourth PSU metric, equally weighted with Operating Margin, After‑tax ROIC, and EPS Growth .
2022–2024 PSU & Performance Cash cycle results (applies to CFO’s grants):
| Metric (weight) | FY 2022 | FY 2023 | FY 2024 | 3‑Yr Avg | Payout (% of Target) |
|---|---|---|---|---|---|
| Operating Margin (1/3) | 23.8% | 25.1% | 26.1% | 25.0% | 150.0% |
| After‑tax ROIC (1/3) | 28.9% | 30.3% | 30.4% | 29.9% | 200.0% |
| EPS Growth (1/3) | 11.7% | 7.2% | 5.1% | 8.0% | 90.0% |
| Total Payout | — | — | — | — | 146.7% |
CFO LTI outcomes (cash performance and equity components):
| Item | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Performance Cash Payout ($) | $937,500 | $1,452,000 | $1,283,625 |
| Stock Awards (Grant Date FV, $) | $874,799 | $937,370 | $974,919 |
| Option Awards (Grant Date FV, $) | $1,749,969 | $1,874,973 | $1,949,996 |
2024 grant specifics (CFO):
- PSUs: Target 3,812 units; threshold 1,906; max 7,624; grant-date FV $974,919 .
- Options: 28,269; exercise price $255.75; grant-date FV $1,949,996 .
Equity Ownership & Alignment
| Item | Value |
|---|---|
| Beneficial Ownership (12/31/2024) | 192,913 shares; includes 140,180 options exercisable within 60 days and 6,329 PSUs vesting within 60 days; <1% of class |
| Stock Ownership Guideline | CFO: 3× salary; 5-year compliance window; executives not meeting must retain 100% of net-after-tax vested shares |
| Compliance Status | All execs in role ≥5 years meet/exceed guidelines (includes CFO) |
| Hedging/Pledging | Prohibited; pledged shares excluded from guideline calculations |
Vesting and insider activity indicators:
- Options vest annually over 4 years; PSUs cliff-vest at 3 years post-grant upon performance certification .
- CFO exercised 37,167 options in 2024 (value realized $3,779,715) and had 12,247 shares vest (value $3,140,376), indicating realized gains and potential selling pressure around vesting windows .
- Annual LTI grants and option awards historically occur in February following earnings release; grant timing in open window mitigates MNPI concerns .
Employment Terms
- No U.S. employment or severance agreements; at-will employment for U.S. executives .
- Clawback: SEC‑compliant policy (2023) mandates reimbursement of incentive compensation upon material restatement; equity forfeiture for restrictive covenant violations or misconduct .
- Forfeiture: Committee may cancel awards for competition, misconduct, or divulging confidential information .
Change-in-control and termination economics (CFO, as of 12/31/2024):
| Scenario | Severance ($) | Benefits ($) | Current Year EIP ($) | Accelerated Options ($) | PSUs/Perf Cash ($) | Total ($) |
|---|---|---|---|---|---|---|
| Retirement | — | — | $588,460 | — | $0 PSUs; $0 Perf Cash (pro‑rata vest payable post‑performance) | $588,460 |
| Involuntary (w/o Cause) | $218,424 | $6,945 | $588,460 | — | — | $813,829 |
| Death/Disability | — | — | $588,460 | $1,586,551 | $3,120,077 PSUs; $2,787,500 Perf Cash | $8,082,588 |
| Termination upon CIC (double-trigger) | $4,524,853 | — | $588,460 | $1,586,551 | $2,114,784 PSUs; $2,429,167 Perf Cash | $11,243,815 |
Policy features:
- CIC cash severance capped at 2× (base salary + 3‑year average bonus) plus pro‑rated current-year bonus; all equity uses double-trigger vesting if replaced/continued .
Investment Implications
- Pay-for-performance alignment: CFO’s variable pay is driven by stringent enterprise metrics (Operating Margin, After‑tax ROIC, EPS Growth), with PSU cycles paying above target when multi-year results are strong (146.7% for 2022–2024) . Stock options ensure value realization only if share price appreciates .
- Ownership alignment: CFO meets 3× salary guideline, cannot hedge/pledge, and must retain net shares until compliant—mitigating misalignment risk .
- Selling pressure windows: February grant/vesting cadence and notable 2024 option exercises/PSU vesting suggest periodic liquidity events; monitor Form 4s around February–March and annual performance certification dates .
- Future comp drivers: Addition of CBI Yield to 2025–2027 PSUs increases emphasis on organic growth innovation, potentially affecting payout sensitivity to new-product revenue contributions .
- Governance/Say-on-Pay: Strong shareholder support (≈93–94% in recent years) and no tax gross‑ups; no single‑trigger vesting; independent comp consultant (Meridian) underscores disciplined oversight .
No red flags identified on hedging/pledging, tax gross-ups, or repricing. Double-trigger CIC and clawback coverage reduce downside governance risk .