T. Kenneth Escoe
ILLINOIS TOOL WORKSAbout T. Kenneth Escoe
T. Kenneth Escoe, age 49, has served as Executive Vice President (EVP) at Illinois Tool Works (ITW) since 2020, overseeing segment operations following prior leadership of Specialty Products and the Hi‑Cone division . Company performance context under his EVP tenure includes record 2024 EPS of $11.71, operating margin of 26.8%, and after-tax ROIC of 31.2%, with total shareholder return materially above peers over the last decade . ITW’s pay-for-performance design ties executive incentives to operating margin, ROIC, EPS growth, and organic growth, aligning compensation with long-term value creation .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| ITW – Specialty Products | Group President | 2019–2020 | Led Specialty Products segment prior to EVP appointment . |
| ITW – Specialty Products | Vice President/General Manager | 2016–2019 | Managed Specialty Products businesses with operational responsibility . |
| ITW – Hi‑Cone (Specialty Products) | Vice President & General Manager | 2018 (remarks) | Presented execution of ITW’s 80/20 front‑to‑back and sales excellence initiatives in beverage packaging equipment and ring carriers . |
External Roles
No external public company directorships or outside roles disclosed for Escoe in company filings reviewed.
Fixed Compensation
| Metric | 2024 |
|---|---|
| Base Salary ($) | $551,655 |
| Target Bonus (% of base) | 90% |
| Actual EIP (Annual Cash Incentive) Payout ($) | $639,285 |
| Performance Cash Payout (2022–2024 cycle) ($) | $385,088 |
| Stock Awards (PSUs, grant date FV) ($) | $312,271 |
| Option Awards (grant date FV) ($) | $624,959 |
| All Other Compensation ($) | $175,929 |
| Perquisites ($) | $21,105 (financial planning/tax services and executive physical) |
| Company Retirement Contributions ($) | $154,824 |
Performance Compensation
Annual Executive Incentive Plan (EIP) – Design and 2024 Results
- Escoe’s EIP payout is based 50% on company performance and 50% on his segment; company metrics are Operating Income Growth (60% weight) and Organic Revenue Growth (40% weight) .
- 2024 company results: Operating Income Growth vs prior year 103.6% (payout 94.2%); Organic Revenue Growth −0.7% (payout 0%); weighted company payout 56.5% .
- Segment performance payout for Escoe: 200.0% (driving total payout 128.3%) .
| EIP Metric | Weight | Target | Actual | Payout % |
|---|---|---|---|---|
| Operating Income Growth (Company) | 60% of company half | 106% | 103.6% | 94.2% |
| Organic Revenue Growth (Company) | 40% of company half | 2.0% | −0.7% | 0.0% |
| Segment performance (Escoe’s segment) | 50% of total | — | — | 200.0% |
| Total EIP payout percent | — | — | — | 128.3% |
Long-Term Incentives – Structure, Metrics, and Grants
- LTI mix (2024 awards): 50% stock options; 25% PSUs; 25% Performance Cash .
- PSU/Performance Cash metrics equally weighted: three-year average Operating Margin, After-tax ROIC, EPS Growth (threshold/target/maximum of 20%/25%/27%, 20%/25%/27%, and 4%/9%/12%, respectively) with 50–200% payout range .
- Company-level 2022–2024 PSU/Performance Cash payout: 146.7% of target based on metric achievement .
| LTI Component | Grant specifics (2024) | Vesting | Performance Metrics/Scale |
|---|---|---|---|
| Stock Options | 9,060 options at $255.75 strike | Equal annual vesting over 4 years; expire 2/9/2034 | Options create value only with share price appreciation . |
| PSUs | Target 1,221 units (threshold 611; max 2,442) | Cliff vest at ~3 years (subject to Committee certification) | 3-year avg Operating Margin / After-tax ROIC / EPS Growth; 50–200% payout . |
| Performance Cash | Target $312,500 (threshold $156,250; max $625,000) | Vest at 3 years, subject to certification | Same metrics and scale as PSUs . |
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total beneficial ownership (shares) | 47,569 (includes 39,033 options exercisable within 60 days and 1,898 PSUs vesting within 60 days; 1,331 Savings Plan shares) |
| Ownership as % of shares outstanding | Less than 1% |
| Outstanding awards (12/31/2024) | Unexercisable options: 9,060 (2024 grant), 6,142 (2023), 5,814 (2022); Unvested PSUs: 1,242 (2024), 1,214 (2023), 1,286 (2022) |
| Insider option exercises in 2024 | None; stock awards vested: 2,295 shares valued at $588,484 |
| Stock ownership guidelines | EVPs must hold 3× salary; 5+ year incumbents meet/exceed guidelines per Board review |
| Hedging/pledging | Prohibited for executives and directors |
| Clawback | Mandatory recovery for financial restatement; forfeiture for restrictive covenant violations/misconduct |
| Deferred compensation (ECRIP) | 2024: $71,437 executive deferrals; $130,205 company contributions; $40,926 earnings; balance $823,863 |
Employment Terms
| Provision | Details |
|---|---|
| Employment agreement | No U.S. executive employment agreements; at‑will |
| Severance (involuntary without cause) | As of 12/31/2024 scenario: $117,152 severance; $2,493 benefits; EIP payout $639,285; total $758,930 |
| Change‑in‑control (CIC) policy | Double‑trigger; cash severance capped at 2× (base + 3‑year avg bonus), plus prorated current year bonus and performance cash |
| CIC example (Escoe) | Severance $2,047,703; EIP $639,285; options acceleration $471,868; PSUs $636,233; performance cash $729,167; total $4,524,256 |
| Retirement criteria | Combined age + service ≥70 (min age 55 and 5 years); PSU/Cash pro‑rated; options continue vesting beyond 1 year window; otherwise forfeitures apply |
| Garden leave / non‑compete | Awards may be canceled for competing, misconduct, or divulging confidential information |
| Tax gross‑ups | None for CIC benefits |
Performance & Track Record (Company Context)
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Total Shareholder Return – value of $100 | $116.40 | $143.87 | $131.72 | $160.11 | $158.55 |
| Net Income ($mm) | $2,109 | $2,694 | $3,034 | $2,957 | $3,488 |
| After‑tax ROIC (%) | 26.2% | 29.5% | 29.1% | 30.4% | 31.2% |
Additional 2024 highlights: EPS $11.71, revenue $15.9B, operating margin 26.8% .
Compensation Structure Analysis
- Pay mix: Escoe’s 2024 total compensation $2.69M was weighted to performance elements (EIP $1.02M; Options $0.62M; PSUs $0.31M; Performance Cash $0.39M), consistent with ITW’s design where ~80% of NEO target pay is performance‑based .
- Shift in LTI design: From 2025 onwards, the cash portion of performance awards is eliminated; LTI comprises 50% PSUs and 50% stock options, adding Customer‑Back Innovation (CBI) Yield as a fourth PSU metric (equally weighted) .
- Governance quality: Anti‑hedging/pledging policy, robust clawback, no tax gross‑ups, double‑trigger CIC, and strong shareholder support (93.9% say‑on‑pay in 2024) reduce governance risk .
Say‑on‑Pay & Peer Benchmarking
- Say‑on‑Pay approvals: 93.4% (2022), 93.1% (2023), 93.9% (2024) .
- Peer group used for benchmarking includes diversified industrials (e.g., 3M, Caterpillar, Parker‑Hannifin, Honeywell, Trane) with target total compensation aligned to median peers .
Investment Implications
- Alignment and retention: Material unvested PSUs and multi‑year option vesting, plus strong segment performance (200% segment payout driving Escoe’s 128.3% EIP result), create retention incentives and potential periodic vesting‑related supply but with disciplined anti‑hedging/pledging controls .
- Pay‑for‑performance linkage: EIP driven by operating income and organic growth; LTI by margin, ROIC, EPS (and CBI Yield from 2025), aligning incentives with high‑quality growth and returns—consistent with ITW’s record operating margin and ROIC levels .
- Downside protection: Conservative CIC framework (double‑trigger, capped severance, no gross‑ups) and robust clawback reduce adverse governance/tail risks for shareholders .
- Ownership: Beneficial ownership <1% but subject to 3× salary guideline for EVPs; Board indicates 5+ year incumbents meet/exceed guidelines, supporting long‑term alignment .