Proxy Statement (definitive) (def 14a)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

Filed by the Registrant ý
Filed by a Party other than the Registrant o
Check the appropriate box:
o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
ý		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material under §240.14a-12

 

W.W. Grainger, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
ý		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
		(1)		Title of each class of securities to which transaction applies:
		(2)		Aggregate number of securities to which transaction applies:
		(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
		(4)		Proposed maximum aggregate value of transaction:
		(5)		Total fee paid:
o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
		(1)		Amount Previously Paid:
		(2)		Form, Schedule or Registration Statement No.:
		(3)		Filing Party:
		(4)		Date Filed:

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Table of Contents

		W.W. GRAINGER, INC. 100 GRAINGER PARKWAY LAKE FOREST, ILLINOIS 60045-5201 [phone]

March 19, 2020

Dear Grainger Shareholders:

We are pleased to invite you to attend the 2020 annual meeting of shareholders of W.W. Grainger, Inc. on Wednesday, April 29, 2020, at 10 a.m. Central Daylight Time. This year's annual meeting will be held at our headquarters located at 100 Grainger Parkway in Lake Forest, Illinois 60045.

At the meeting, we will report on our operations and other matters of current interest. Shareholders will also vote on the matters described in the accompanying Notice of Annual Meeting and Proxy Statement and any other matters properly brought before the meeting.

As in prior years, we have elected to deliver our proxy materials to the majority of our shareholders over the Internet. This delivery process allows us to provide shareholders with the information they need, while at the same time conserving natural resources and lowering the cost of delivery. The Notice of Annual Meeting of Shareholders on the following page contains instructions on how to:

•

vote by Internet, by telephone or by mail; and

•

receive a paper copy of the proxy materials by mail.

Please take the time to carefully read the Notice of Annual Meeting and Proxy Statement that follow. Whether or not you plan to attend the meeting, please ensure that your shares are represented by giving us your proxy. You can do so by telephone, by Internet, or by signing and dating the enclosed proxy form and returning it promptly in the envelope provided.

We look forward to seeing you at the meeting.

		Sincerely,
		D.G. Macpherson Chairman of the Board and Chief Executive Officer

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Meeting Agenda

		Proposal				Board Recommendation		For more information
​	​	​	​	​	​	​	​	​	​	​
		1.		to elect 11 Directors for the ensuing year		FOR (all nominees)		Page 10
		2.		to ratify the appointment of Ernst & Young LLP as independent auditor for the year ending December 31, 2020; and		FOR		Page 36
		3.		to approve on a non-binding advisory basis the compensation of Grainger's Named Executive Officers		FOR		Page 76
​	​	​	​	​	​	​	​	​	​	​

We will also consider any other matters that may properly be brought before the meeting (and any postponements or adjournments of the meeting). As of the date of this proxy statement, we have not received notice of any such matters.

Voting

Shareholders of W.W. Grainger, Inc. (Grainger), as of the record date, are entitled to vote, as follows:

•

Shareholders have the right to cumulative voting in the election of Directors. For a definition of cumulative voting, see Questions and Answers—Voting Information / What is cumulative voting? How many votes do I have? / page 80, and

•

Each share of Grainger common stock is entitled to one vote for each of the other proposals.

Internet		Telephone		Mail
www.proxyvote.com for beneficial ownership		1-800-690-6903 for beneficial ownership		Mark, sign and date your proxy card and return it in the pre-addressed postage-paid envelope we have provided or return it to:
up until 11:59 p.m. EDT April 26, 2020		or 1-800-652-8683		For beneficial ownership: Vote Processing		For registered ownership: Proxy Services
www.investorvote.com/GWW for registered ownership up until 1:00 a.m. CDT April 29, 2020		for registered ownership up until 1:00 a.m. CDT, on April 29, 2020		c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717		c/o Computershare Investor Services PO Box 505008 Louisville, KY 40233-9814

Regardless of whether you plan to attend the annual meeting, we hope you will vote as soon as possible. You may vote your shares in person, over the Internet or via a toll-free telephone number. If you received a paper copy of a proxy or voting instruction card by mail, you also may submit your proxy or voting instruction card for the annual meeting by completing, signing, dating and returning your proxy or voting instruction card in the pre-addressed envelope provided. For specific instructions on voting, please refer to the section, Questions and Answers—Voting Information / page 79.

In the event that public health concerns make it inadvisable to hold the annual meeting in person, we will announce alternative arrangements for the meeting in advance, which may include a change in venue or holding the meeting by means of remote communication. Please monitor our website at http://invest.grainger.com for updated information. As always, we encourage you to vote your shares prior to the annual meeting.

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Proxy Materials

This Notice of Annual Meeting, Proxy Statement and Form of Proxy were first distributed or made available to shareholders on or about March 19, 2020.

By order of the Board of Directors.

Hugo Dubovoy, Jr.
Vice President, Corporate Secretary

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 29, 2020

This Notice of Annual Meeting, Proxy Statement and Form of Proxy and our 2019 Annual Report on Form 10-K are available under "Financials" in the Investor Relations section of our website at http://invest.grainger.com/ and also may be obtained free of charge on written request to the Corporate Secretary at Grainger's headquarters, 100 Grainger Parkway, Lake Forest, Illinois 60045-5201.

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Table of Contents

​	​	​
TABLE OF CONTENTS

 

CORPORATE GOVERNANCE		1
​	​	​
The Role of the Board		1
​	​	​
Operating Principles of the Board of Directors		2
Director Independence		2
​	​	​
Board Qualifications, Attributes, Skills and Background		3
​	​	​
Board Refreshment		5
Board Tenure		6
Board Diversity		6
Attendance of Directors at Meetings		7
​	​	​
Annual Election of Directors		7
​	​	​
Candidates for Board Membership		7
​	​	​
Director Nominees' Experience and Qualifications		8
​	​	​
Proposal 1: Election of Directors		10
​	​	​
2019 Board Meetings and Committee Membership		16
​	​	​
Audit Committee		17
​	​	​
Board Affairs and Nominating Committee		18
​	​	​
Compensation Committee		19
​	​	​
Leadership Structure		21
​	​	​
Lead Director		21
​	​	​
Board, Committee and Director Evaluations		22
​	​	​
Board Oversight		24
​	​	​
Board's Role in Shareholder Engagement		24
Succession Planning and Employee Development		25
Board's Role in Risk Oversight		25
Corporate Social Responsibility		26
Other Communications with Directors		26
​	​	​
Available Information		27
​	​	​
Business Conduct Guidelines		27
Operating Principles for the Board of Directors		27
Committee Charters		27
Corporate Social Responsibility		27

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Table of Contents

Director Compensation		28
​	​	​
2019 Director Compensation		29
Ownership of Grainger Stock		30
​	​	​
Security Ownership of Certain Beneficial Owners		30
Security Ownership of Management		32
Report of the Audit Committee		34
​	​	​
Audit Fees and Audit Committee Pre-Approval Policies and Procedures		35
​	​	​
Pre-approval Policy for Audit and Non-Audit Services		35
Proposal 2: Ratify the Independent Auditor		36
​	​	​
Report of the Compensation Committee of the Board		37
​	​	​
Independent Compensation Consultant; Fees		37
​	​	​
COMPENSATION DISCUSSION AND ANALYSIS		39
​	​	​
Introduction		39
​	​	​
2019 Say on Pay and Shareholder Engagement		39
Our Review Process		39
Feedback on Compensation		40
Actions Taken		40
Executive Summary—2019 Executive Compensation Program		42
​	​	​
Compensation Philosophy		42
Compensation Overview		43
Compensation Pay Mix		44
Determination of Total Target Compensation		45
Risk Mitigating Actions		46
Compensation Philosophy, Plans, and Practices		46
​	​	​
Compensation Committee of the Board		47
Risk Assessment		50
Role of Management		50
Compensation Comparator Group		51
Base Salaries		53
Annual Incentives		54
Long-Term Incentives		55
Stock Ownership Guidelines		59
Hedging and Pledging Prohibition		59
Other Benefits		59
Compensation Tables		61
​	​	​
Summary Compensation Table		61
Grants of Plan-Based Awards Table		62
Outstanding Equity Awards at Fiscal Year-End Table		63
Option Exercises and Stock Vested Table		64
Nonqualified Deferred Compensation Table		65

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Table of Contents

Employment Contracts, Change in Control Agreements, and Termination of Employment Arrangements		66
​	​	​
Change in Control—Equity Plans		66
Change in Control Agreements		66
Deductibility of Executive Compensation		66
Accounting Considerations		67
Compensation Recoupment Policy (Claw-backs)		67
Termination		68
Retirement		68
Other Potential Post-Employment Payments		69
CEO Pay Ratio Disclosure		74
​	​	​
Proposal 3: Say on Pay		76
​	​	​
Equity Compensation Plans		77
​	​	​
Transactions with Related Persons		78
​	​	​
QUESTIONS AND ANSWERS		79
​	​	​
Proxy Materials		79
​	​	​
Voting Information		79
​	​	​
APPENDIX A—CATEGORICAL STANDARDS FOR DIRECTOR INDEPENDENCE		A-1
​	​	​
APPENDIX B—DEFINITIONS AND NON-GAAP FINANCIAL MEASURES		B-1
​	​	​

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​

C		orporate Governance
​	​	​

THE ROLE OF THE BOARD

The Board of Directors of the Company (the Board) acts as the steward of the Company for the benefit of the Company's shareholders. Our Directors bring to the Board a wealth of business experience and a track record of good business judgment in situations relevant to the Company's operations.

Our Board recognizes the importance of ensuring that our business strategy is designed to create long-term value for Grainger's shareholders. The Board maintains an active role in formulating, planning and overseeing the implementation of Grainger's strategy. Each year, for example, the Board travels as a group to at least one of our strategic operating locations. In 2019, the Board met with employees and held its formal Board and Committee strategy meetings at the Company's new offices at The Merchandise Mart in Chicago, Illinois, which house the Company's enterprise systems and digital architecture and operations functions.

The Board has a robust annual strategic planning process during which key elements of our business and financial plans, strategies and near- and long-term initiatives are developed and reviewed. This process culminates with a full-day Board session with our senior leadership team to review Grainger's overall strategy, opportunities, challenges, and capabilities. The annual strategy process also helps shape the strategic content presented in our communications with the investment community. In addition to business strategy, the Board reviews Grainger's short-term and long-term financial plans, which serve as the basis for the annual operating and capital plans for the upcoming year. The Board evaluates progress made, as well as related challenges and risks with respect to our strategy and plans throughout the year.

The Board strongly believes that the business strategy must be aligned with the Company's culture to create value. To that end, the Board is engaged with senior management in developing and reviewing Grainger's purpose and culture. The Board believes that a purpose-driven culture is an asset of the Company that creates a sustainable competitive advantage and is critical to Grainger's future success. Last year, Grainger's CEO introduced the Grainger Edge, a new strategic framework that defines who Grainger is, why Grainger exists, and how team members will work together to achieve Grainger's objectives.

The Grainger Edge includes a set of principles that define the behaviors expected from team members as they work with each other, customers and suppliers. They support the Company's commitment to having an inclusive culture where all team members operate with the highest ethics in and outside of the Company's industry. All team members hold each other and themselves accountable to these principles and believe they will help execute the Company strategy and create value for its shareholders.

The Grainger Edge also is the foundational structure for the Company's strategy, which is to consistently gain share through two distinct business models that allow it to leverage its scale and supply chain to support customers with different needs.

​

Proxy Statement         1

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Table of Contents

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​	​	​
​	​ ​	​	​ Corporate Governance

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The Grainger Edge principles are:

•

Start with the Customer



•

Embrace Curiosity



•

Act with Intent



•

Compete with Urgency



•

Win as one Team



•

Invest in our Success



•

Do the Right Thing

The Board is committed to helping the Company make the Grainger Edge a successful foundational framework for Grainger and its employees as the Company works to consistently serve customers and gain share. The Board understands that top talent is necessary to achieve these goals. A priority of the Board is ensuring that the Company recruits, develops, promotes and retains top diverse talent across the Company. The Board routinely conducts in-depth reviews of senior leaders and their development. This engagement gives the Board insight into the Company's talent and succession plans.

The Board believes a culture of ethical behavior is also essential to meeting the Company's goals. Last year, under the Board's direction, management revised Grainger's Business Conduct Guidelines to better reflect emerging risks, including as to data privacy and workplace behaviors, use plain language to make expectations more understandable, and encourage a "speak up" culture for early issue identification. The Business Conduct Guidelines apply to all Directors, officers, and employees.

Delivering business results and creating a sustainable business that does the right thing has guided the Company for more than 90 years. To ensure the Company continues to deliver on these objectives, the Board carefully reviews the Company's corporate social responsibility initiatives.

Collectively, the Board's activities in reviewing strategy, culture, talent, ethical behavior and corporate responsibility enable Grainger to help millions of customers worldwide keep their operations running and their people safe.

Operating Principles of the Board of Directors

The Board recognizes that defining its role under the Company's operating principles is an evolving process. The Board established the W.W. Grainger, Inc. Operating Principles for the Board of Directors (the Operating Principles) to provide a general framework of reference to assist the Board in the performance of its duties and responsibilities. Each year, the Board reviews and revises the Operating Principles, as appropriate, to address emerging needs and practices. The Operating Principles are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

DIRECTOR INDEPENDENCE

Our Board of Directors is committed to excellence in its governance practices, including Board composition. Of our current Board, 10 of 11 Directors are independent. The Board has adopted "categorical standards" to assist it in making independence determinations of Director nominees. The categorical standards are intended to help the Board determine, for example, whether certain

​

2         www.grainger.com

​

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​	​	​
​ Corporate Governance	​ ​	​	​
​	​	​

​

relationships between nominees and Grainger are "material relationships" for purposes of the New York Stock Exchange (NYSE) independence standards. The categorical standards adopted by the Board have more restrictive thresholds than the NYSE's bright line revenue test for independence. The categorical standards adopted by the Board are set forth in Appendix A to this proxy statement and are also available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

Grainger's Board currently consists of eleven Directors. After more than 30 years of service, James D. Slavik is retiring from the Board effective immediately following the 2020 annual meeting of shareholders of the Company (the Annual Meeting) and is not standing for re-election at the Annual Meeting. In addition, the Board is proposing one new independent nominee, Susan Slavik Williams, for election as a Director (the New Nominee).

The Board considered a variety of factors, including any related party transactions, in assessing the independence of our Directors and the New Nominee against the NYSE's independence standards and Grainger's categorical standards. The Board considered ordinary course business transactions and charitable donations by the Company where a Director or the New Nominee serves as an officer and/or a board member. The Board has made an affirmative determination that all ten of our non-employee directors and the New Nominee have no direct or indirect material relationship with Grainger within the meaning of the NYSE independence standards and Grainger's categorical standards and, accordingly, meet the applicable requirements for "independence" set forth in the NYSE's listing standards.

BOARD QUALIFICATIONS, ATTRIBUTES, SKILLS AND BACKGROUND

In addition to independence, the Board and the Board Affairs and Nominating Committee (the BANC) believe that a diverse, experienced and vibrant board is of utmost importance for the broad-based thinking needed to reach the sound decisions that drive shareholder value. As evidence of this commitment to a diversity of perspectives, our Board slate is comprised of 11 Director nominees of varying experience and background, including two new Directors appointed in 2017, and the New Nominee.

We determined that the Board's various experiences and viewpoints benefit us most when they are aligned with our global business needs, reflective of our strong corporate governance practices, and consistent with our corporate social responsibility goals. As a result of the Board's ongoing refreshment efforts, we added Directors with expertise in the technology and digital space as well as in leading corporate social responsibility initiatives for a global business. Our three newest Directors, Rodney Adkins, Beatriz Perez and Lucas Watson, and the New Nominee, enhance the diversity of our Board in addition to bringing their valuable perspectives and experiences.

A breadth of Board perspectives supports our business as a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with 2019 sales of approximately $11.5 billion. Grainger operates through its distribution centers, eCommerce platform, contact centers, branches and sales and service representatives with approximately 25,300 employees primarily in the United States and Canada, and with a presence in Europe, Asia, and Latin America. Approximately 5,000 suppliers provide Grainger with approximately 1.6 million products stocked in Grainger's distribution centers and branches worldwide. Approximately 3.5 million customers worldwide rely on Grainger for products such as safety, gloves, ladders, motors and janitorial supplies, along with services like inventory management and technical support.

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Proxy Statement         3

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Table of Contents

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​	​	​
​	​ ​	​	​ Corporate Governance

​

The following table highlights specific experience, qualifications, attributes, skills, and background information that the Board considered for each Director nominee. A particular Director nominee may possess additional experience, qualifications, attributes, or skills, even if not indicated below.

Director Nominee Qualifications, Attributes, Skills and Background Matrix

Director Nominee Qualifications, Attributes and Skills

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Operational/Strategy

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​

​

​

​

​

​

​

​

​

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Experience developing and implementing operating plans and business strategy

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

Finance/Capital Allocation

​

​

​

​

​

​

​

​

​

​

​

Knowledge of finance or financial reporting; experience with debt and capital market transactions and/or mergers and acquisitions

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

​

✓

​

✓

​

✓

​

✓

Supply Chain/Logistics

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​

​

​

​

​

​

​

​

​

​

Experience in supply chain management encompassing the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities

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✓

​

✓

​

​

​

✓

​

✓

​

✓

​

​

​

✓

​

​

​

​

​

✓

Digital/eCommerce

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​

​

​

​

​

​

​

​

​

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Experience implementing digital and omni-channel strategies and/or operating an eCommerce business

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​

​

✓

​

✓

​

✓

​

​

✓

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​

​

​

✓

Marketing/Sales & Brand Management

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​

​

​

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Experience managing a marketing/sales function, and in increasing the perceived value of a product line or brand over time in the market

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✓

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​

​

​

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✓

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✓

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✓

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✓

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✓

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✓

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✓

​

✓

Human Resources/Compensation

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​

​

​

​

​

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Experience managing a human resources/compensation function; experience with executive compensation and broad-based incentive planning

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✓

​

✓

​

​

✓

​

​

✓

​

✓

​

✓

​

✓

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✓

​

Public Company/Leadership

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​

​

​

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​

​

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​

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"C-Suite" experience with a public company and/or leadership experience as a division president or functional leader within a complex organization

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✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

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✓

​

✓

Corporate Governance/Public Company Experience

​

​

​

​

​

​

​

​

​

​

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Experience serving as a public company director; demonstrated understanding of current corporate governance standards and best practices in public companies

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

​

✓

International

​

​

​

​

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​

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Experience overseeing a complex global organization

​

✓

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​

​

​

​

✓

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✓

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​

​

✓

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✓

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✓

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​

​

✓

Risk Assessment & Risk Management

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​

​

​

​

​

​

​

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Experience overseeing complex risk management matters

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✓

​

✓

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✓

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✓

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✓

​

✓

​

​

​

✓

​

✓

​

​

4         www.grainger.com

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​	​	​
​ Corporate Governance	​ ​	​	​
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Director Nominee Qualifications, Attributes and Skills (continued)

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Technology/Cybersecurity

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​

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Experience implementing technology strategies and managing/mitigating cybersecurity risks

​

✓

​

​

​

​

​

​

​

✓

​

✓

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​

​

​

​

✓

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​

​

✓

Government/Public Policy

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Experience overseeing complex regulatory matters that are integral to a business

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✓

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✓

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✓

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✓

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✓

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✓

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✓

Real Estate

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Experience overseeing complex real estate matters that are integral to a business

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✓

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✓

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​

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​

​

​

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​

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✓

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✓

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Business Ethics/Corporate Social Responsibility

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Track record of integrity, uncompromising moral principles and strength of character; informed on company issues related to corporate social responsibility, sustainability and philanthropy while monitoring emerging issues potentially affecting the reputation of the business

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✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

​

✓

 

Director Nominee Tenure, Gender, Age and Race/Ethnicity

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Board Tenure

​

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Years

​

6

​

21

​

14

​

14

​

4

​

21

​

3

​

14

​

10

​

0

​

2

Gender

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Male

​

✓

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✓

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✓

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✓

​

✓

​

​

✓

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✓

​

​

✓

Female

​

​

​

✓

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​

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✓

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​

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✓

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Age

​

​

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Years Old

​

61

​

69

​

69

​

67

​

52

​

65

​

50

​

69

​

58

​

51

​

49

Race/Ethnicity

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African American/Black

​

✓

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✓

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Asian, Native Hawaiian, or Pacific Islander

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​

​

​

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​

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Caucasian /White

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​

​

✓

​

✓

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✓

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✓

​

​

✓

​

✓

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✓

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✓

Hispanic/Latino

​

​

​

​

​

​

​

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Board Refreshment

The Board believes that a fully engaged Board is a strategic asset of the Company, and fresh viewpoints and perspectives are important for informed decision-making. At the same time, the Company believes that Directors develop a deeper understanding of the Company over time, which

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provides significant shareholder value, and that year-over-year Director continuity is beneficial to shareholders.

Even before Board vacancies arise, the Board periodically evaluates whether its Directors collectively have the right mix of experience, qualifications, attributes, skills, backgrounds and diverse viewpoints necessary for it to be a good steward for the Company's shareholders. The results of these evaluations are used to identify desirable skill sets for potential Board nominees and to screen Director candidates. In 2017, the Board codified this skills matrix evaluation practice into the BANC's charter.

Also, as part of the planning for Board refreshment and Director succession, the BANC periodically considers potential Director candidates. As a result of these ongoing reviews, in the last five years, four new Directors have been elected.

The Board previously disclosed its membership expectations in the Company's Criteria for Membership on the Board of Directors (the Criteria). The Board's Criteria list the various factors that the BANC should consider in reviewing candidates for the Board. For example, the Criteria ensures turnover by generally prescribing a retirement age of 72 for non-employee Director candidates. Within the last four years, two of our non-employee Directors did not stand for re-election based on retirement age, and this year Mr. Slavik has opted to retire from the Board prior to reaching age 72.

Age		0-50		51-59		60+
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Number of Director Nominees		2		3		6

Board Tenure

As a group, the average tenure of the 2020 nominees for election to Grainger's Board of Directors is approximately 10 years, with 36% of the non-employee nominees having Board tenure of less than five years. See Board Qualifications, Attributes, Skills and Background / page 3-5 of this proxy statement for a matrix reflecting tenure for each nominee.

Years of Service		0-5		6-10		11-15		16-25
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Number of Director Nominees		4		2		3		2

Board Diversity

In addition to relevant business experience, qualifications, attributes, skills, and the willingness to become a Director, the Board's Criteria also enumerate personal characteristics that the Board should consider, including reputation for ethics and integrity, common sense and judgment, independent and objective thought, and the consideration of diverse opinions.

Regarding diversity, the Criteria specify that consideration will be given to candidates without regard to race, color, religion, gender or national origin. To ensure that the Board benefits from diverse perspectives, it proactively seeks qualified nominees from a variety of backgrounds, including candidates of gender, age, and racial diversity. We have established a standing relationship with a nationally recognized third-party search firm to assist us in identifying potential new Directors. In any retained search for Board candidates, the Board is seeking candidates with gender and racial diversity and will only consider and interview slates that include gender and racially diverse candidates.

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The diversity of the Director nominees is set forth below.

Gender		Female		Male
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Number of Director Nominees		3		8
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Number of Committee Chairs		1 (Audit Committee)		2 (BANC; Compensation Committee)

 

Race/Ethnicity		African American/Black		Caucasian/White		Hispanic/Latino		Other
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Number of Director Nominees		2		8		1		—

ATTENDANCE OF DIRECTORS AT MEETINGS

As set forth in the Operating Principles, Grainger expects all Directors to attend the annual meeting of shareholders, Board meetings, and meetings of committees on which they serve, and to spend the time needed to properly discharge their duties. All Directors attended the 2019 annual meeting. In addition, during 2019, no Director attended fewer than 75% of the total number of Board meetings and meetings of the Committees on which he or she served.

ANNUAL ELECTION OF DIRECTORS

Grainger's Directors are elected for a one-year term each year at the annual meeting of shareholders. Eleven Directors, 10 current Board members and the New Nominee, have been nominated by the Board for election. Each nominee will, therefore, serve until the 2021 annual meeting of shareholders if elected.

As required under Illinois law, majority voting and cumulative voting apply to all Director elections. Under our majority voting standard, Directors are elected by vote of a majority of the shares of Grainger common stock represented and entitled to vote in person or by proxy at the meeting. Under cumulative voting, shareholders have the right to cumulate their votes in the election of Directors. This means that shareholders have a number of votes in the election equal to the number of shares owned multiplied by the number of Directors being elected. Shareholders may cast those votes for the nominees as they choose. For example, all votes may be cast for one nominee, or may be apportioned among two or more nominees. In any matter other than the election of Directors, each share is entitled to one vote.

A shareholder directing to withhold authority for re-election of a Director will have the same effect as votes against the election of that Director. Assuming a quorum is present, broker non-votes will not affect the outcome of the vote. If any of the nominees for Director mentioned below should be unavailable for election, a circumstance that is not expected, the person or persons voting your proxy may exercise discretion to vote for a substitute nominee selected by the Board.

CANDIDATES FOR BOARD MEMBERSHIP

The BANC recommends to the Board candidates for Board membership.

Before recommending candidates to the Board, the BANC reviews the results of the annual Board evaluation process and its skills matrix in determining the desired skill set for potential new candidates.

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The BANC then determines the preferred qualities and characteristics for potential Board nominees, which is then shared with our third-party search firm, by periodically evaluating whether the Board members collectively have the right mix of experience, qualifications, attributes, skills, backgrounds and diverse viewpoints necessary for the Board to be a good steward for the Company's shareholders.

The BANC screens Board candidates based on a number of criteria, including ethical standards, judgment, independence and objectivity, strategic perspective, record of accomplishment, business knowledge, experience applicable to Grainger's goals, and diversity.

The BANC is assisted with its recruitment efforts by a nationally recognized third-party search firm, which helps identify candidates that satisfy the Board's criteria. In addition to Board candidates recommended by the BANC, suggestions as to nominees are received from employees, search firms, shareholders, and others.

The proxy access provisions of our By-laws permit a qualifying shareholder or group of up to 20 qualifying shareholders who have maintained continuous qualifying ownership of 3% or more of our outstanding common stock for at least the previous three years to nominate and include in our proxy materials qualifying Director nominees constituting up to the greater of two Directors or 20% of the Directors then serving on the Board at the time of the nomination, presuming that the shareholder(s) and nominee(s) satisfy the requirements specified in our By-laws.

Any shareholder who would like the BANC to consider a candidate for Board membership should send a letter of recommendation containing the name and address of the proposing shareholder and of the proposed candidate and setting forth the business, professional and educational background of the proposed candidate, as well as a description of any agreement or relationship between the proposing shareholder and proposed candidate. A written consent of the proposed candidate to be identified as a nominee and to serve as a Director if elected must also be provided. The communication should be sent by mail or other delivery service to the attention of the Corporate Secretary at Grainger's headquarters.

DIRECTOR NOMINEES' EXPERIENCE AND QUALIFICATIONS

The nominees have provided the following information about themselves, including their ages as of March 19, 2020. Each nominee has provided information on his or her relevant background that includes the nominee's experience for at least the past five years. Grainger's nominees have varied

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experience, qualifications, attributes, skills, and backgrounds that assist them in providing guidance and oversight to Grainger's management.

The Board has identified experience, qualifications, attributes, skills, and backgrounds that, in light of Grainger's business, structure and challenges, are relevant to service on the Board of Directors. The Board considers nominees who have demonstrated integrity and accomplishment in their business and professional careers and who possess the necessary experience and background to contribute to the Board and Grainger. In addition, the nominees have engaged in continuing education and other programs to remain current in their particular areas of expertise, to further their understanding of corporate governance, and in other matters relevant to Grainger.

The Board believes each of the current nominees qualifies for service on the Board of Directors. Moreover, each of the current nominees has significant leadership experience in large, multifaceted organizations. This leadership experience includes developing and executing corporate strategy, overseeing operations, and managing risks in organizations similar in size or complexity to Grainger.

The summaries provided below are not a comprehensive statement of each nominee's background, but are provided to describe the primary experience, qualifications, attributes, skills, and background that led the Board to nominate each individual.

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Rodney C. Adkins ​ Former Senior Vice President of IBM; President of 3RAM Group LLC Independent Director Age: 61 Director Since: 2014 Grainger Board Committees: BANC CCOB	​	Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Supply Chain/Logistics • Marketing/Sales & Brand Management • Human Resources/Compensation • Public Company/Leadership • Corporate Governance/Public Company Experience • International • Risk Assessment & Risk Management • Technology/Cybersecurity • Government/Public Policy • Real Estate • Business Ethics/Corporate Social Responsibility Other Current Public Company Boards • Avnet, Inc. (Chairman of the Board; compensation committee; corporate governance committee) • PayPal Holdings, Inc. (audit, risk and compliance committee; corporate governance and nominating committee) • United Parcel Service, Inc. (Chair, risk committee; compensation committee) Prior Public Company Boards • Pitney Bowes Inc. (2007-2013) (audit committee; executive compensation committee) • PPL Corporation (2014-2019) (audit committee; finance committee) Prior Business and Other Experience • International Business Machines Corporation (IBM), a globally integrated technology and consulting company, where Mr. Adkins held numerous development and management roles, including Senior Vice President of Corporate Strategy (2013-2014); Senior Vice President of Systems and Technology Group (2009-2013); Senior Vice President of Development & Manufacturing (2007-2009); and Vice President of Development of IBM Systems and Technology Group (2003-2007). • 3RAM Group LLC (2015-present), a privately held company specializing in capital investments, business consulting services and property management, where Mr. Adkins serves as President. Mr. Adkins served as a Senior Vice President at IBM, where he held various senior roles, including heading Corporate Strategy. Over the course of his 30-year career with IBM, he developed a broad range of experience, including extensive experience in emerging technologies, global business operations, product development, and brand management. He also gained significant experience managing and understanding corporate finance, financial statements and accounting through his many operational roles with IBM. Additionally, Mr. Adkins managed IBM's supply chain and procurement, giving him direct insight into global trade and supply chains, and the role of distributors in those efforts. Mr. Adkins has extensive experience in corporate governance matters, is a recognized leader in technology and technology strategy, and serves as a director of other publicly traded companies with additional responsibilities, including one board chairmanship, and two compensation committee and one audit committee assignments.

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Brian P. Anderson ​ Former Chief Financial Officer of OfficeMax Incorporated and Baxter International Inc. Independent Director Age: 69 Director Since: 1999 Grainger Board Committees: Audit BANC	​	Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Supply Chain/Logistics • Human Resources/Compensation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Real Estate • Business Ethics/Corporate Social Responsibility Other Current Public Company Boards • James Hardie Industries plc (Chair, audit committee; remuneration committee) • Pulte Group, Inc. (Chair, audit committee; finance and investment committee; nominating and governance committee) • Stericycle, Inc. (Chair, audit committee) Prior Public Company Boards • A.M. Castle & Co. (2005-2016) (Chairman of the Board; Chair, audit committee) Prior Business and Other Experience • OfficeMax Incorporated (2004-2005), a distributor of business to business and retail office products, where Mr. Anderson served as Senior Vice President and Chief Financial Officer. • Baxter International Inc. (1991-2004), a global diversified medical products and services company, where he held various roles, including Senior Vice President and Chief Financial Officer (1998-2004); Vice President, Finance (1997-1998); Corporate Controller (1993-1997); and Vice President, Corporate Audit (1991-1993). • Deloitte LLP (formerly, Deloitte & Touche LLP) (1976-1991), a global professional services firm, where Mr. Anderson served as Audit Partner, for several years. Mr. Anderson served as the Chief Financial Officer of two large, multinational companies: OfficeMax Incorporated and Baxter International Inc. In the course of his career, he also held various finance positions, including Corporate Controller and Vice President of Audit at Baxter, and spent 15 years at an international public accounting firm, including as an Audit Partner. As a result, Mr. Anderson has in-depth knowledge of accounting and finance, including in the preparation and review of complex financial reporting statements, as well as experience in risk management and risk assessment and the application of the Committee of Sponsoring Organizations of the Treadway Commission internal controls framework. Mr. Anderson also has extensive experience sitting on and chairing the audit committees of public companies. He also brings to the Board meaningful experience based on his service as the Company's former Lead Director and former Chairman of the Board of A.M. Castle & Co., as well as his service as a Governing Board Member at the Center for Audit Quality. Mr. Anderson is an audit committee financial expert for purposes of the SEC's rules. See "Audit Committee" below for the Board's determination concerning Mr. Anderson's service on more than three public company audit committees.

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V. Ann Hailey ​ Former Executive Vice President and Chief Financial Officer of L Brands, Inc. (formerly, Limited Brands, Inc.) Independent Director Age: 69 Director Since: 2006 Grainger Board Committees: Chair, Audit BANC	​	Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Digital/eCommerce • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Business Ethics/Corporate Social Responsibility Other Current Public Company Boards • Realogy Holdings Corp. (Chair, audit committee; nominating and corporate governance committee) • TD Ameritrade Holdings, Inc. (audit committee; risk committee; outside independent director's committee) Prior Public Company Boards • Avon Products, Inc. (2008-2016) (audit committee; finance committee) • Federal Reserve Bank of Cleveland (2004-2009) (audit committee) • L Brands, Inc. (formerly, Limited Brands, Inc.) (2001-2006) Prior Business and Other Experience • L Brands, Inc., a retail apparel, personal care and beauty products company, where Ms. Hailey served as Executive Vice President and Chief Financial Officer (1997-2006); Executive Vice President, Corporate Development (2006-2007); and as a board member (2001-2006). • Famous Yard Sale, Inc. (2012-2014), an online marketplace, where Ms. Hailey served as President, Chief Executive Officer and Chief Financial Officer. • Gilt Groupe, Inc. (2009-2010), an online shopping and lifestyle company, where Ms. Hailey served as Chief Financial Officer. • PepsiCo, Inc. (1977-1990), a global food and beverage company, where Ms. Hailey served in various leadership roles, including Vice President, Headquarters Finance, Pepsi Cola Company; and Vice President, Finance and Chief Financial Officer of Pepsi Cola Fountain Beverage and USA Divisions, as well as holding positions in the marketing and human resources functions. • Pillsbury Company and RJR Nabisco Foods, Inc., where Ms. Hailey held various leadership roles. Ms. Hailey has spent her career as a senior finance executive in consumer businesses, such as L Brands (ten years), PepsiCo (13 years), Pillsbury Company, and RJR Nabisco Foods, and brings extensive financial and operations experience to the Company. In particular, Ms. Hailey possesses broad expertise in finance, strategic planning, branding and marketing, and retailing on a global scale. Ms. Hailey's positions as chief financial officer, her current and prior service on the audit committees of other public companies and as audit chair of the Cleveland Federal Reserve Bank and her accounting and financial knowledge, also impart significant expertise to the Board, including an understanding of financial statements, corporate finance, accounting and capital markets. Ms. Hailey also gained expertise in online businesses as well as new venture management and funding through her experiences at Famous Yard Sale and Gilt Groupe. Ms. Hailey is an audit committee financial expert for purposes of the SEC's rules.

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Stuart L. Levenick ​ Former Group President at Caterpillar Inc. Independent Director Lead Director Age: 67 Director Since: 2005 Grainger Board Committees: Chair, BANC CCOB	​	Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Supply Chain/Logistics • Digital/eCommerce • Marketing/Sales & Brand Management • Human Resources/Compensation • Public Company/Leadership • Corporate Governance/Public Company Experience • International • Risk Assessment & Risk Management • Government/Public Policy • Business Ethics/Corporate Social Responsibility Other Current Public Company Boards • Entergy Corporation (since 2005) (lead director (since May 2016); corporate governance committee; executive committee; nuclear committee) • Finning International Inc. (since 2016) (Chair, audit committee; corporate governance committee) Prior Business and Other Experience • Caterpillar Inc., a multinational manufacturer of construction and mining equipment, where Mr. Levenick held various leadership roles, including Group President, Customer & Dealer Support (2004-2015); Executive Office Member (2004-2015); Group President of Caterpillar Inc. (2004-2014); Vice President, Caterpillar Inc. and Chairman of Shin Caterpillar Mitsubishi Ltd. (2000-2004); and Vice President, Asia Pacific Division (2001-2004). Prior to 2000, he held various senior positions with Caterpillar in North America, Asia, and Europe. Mr. Levenick served as a Group President of Caterpillar Inc., leading several divisions for 10 years as part of a 37-year career at the company, in various leadership roles, including as the senior executive of Caterpillar's former joint venture with Mitsubishi in Japan. He has extensive international operations experience as a result of positions outside of the United States in Japan, Singapore, Russia and other countries for more than 20 years. During his career at Caterpillar, Mr. Levenick held leadership roles with operational responsibility for supply chain and logistics, engineering and design, manufacturing, global parts and product support, and global dealer and marketing functions. In addition, he led Caterpillar's global human resources and global purchasing functions. Mr. Levenick also has experience sitting on and chairing the audit and finance committees of other public companies and brings a broad range of experience to the Board based on his service as the lead director of Entergy Corporation. In addition, Mr. Levenick is a former chairman and director of the Association of Equipment Manufacturers and is a director of the University of Illinois Foundation. He also served as a director of the U.S./Japan Business Council, the U.S./China Business Council, the U.S./Russia Business Council, and as executive director of the U.S. Chamber of Commerce.

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D.G. Macpherson ​ Chairman of the Board and Chief Executive Officer of W.W. Grainger, Inc. Chairman of the Board Age: 52 Director Since: 2016	​	Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Supply Chain/Logistics • Digital/eCommerce • Marketing/Sales & Brand Management • Public Company/Leadership • Corporate Governance/Public Company Experience • International • Risk Assessment & Risk Management • Technology/Cybersecurity • Government/Public Policy • Business Ethics/Corporate Social Responsibility Business and Other Experience • Chairman of the Board of Directors of the Company, a position assumed in October 2017, and Chief Executive Officer of the Company, a position assumed in October 2016, at which time Mr. Macpherson was also appointed to the Board of Directors. • Previously, Mr. Macpherson held numerous senior management roles at the Company, including Chief Operating Officer (2015-2016); Senior Vice President and Group President, Global Supply Chain and International (2013-2015); Senior Vice President and President, Global Supply Chain and Corporate Strategy (2012-2013); and Senior Vice President, Global Supply Chain (2008-2012). • The Boston Consulting Group, Partner and Managing Director (2002-2008). Mr. Macpherson has served Grainger in many capacities over his more than 10 years with the Company, including developing Company strategy, overseeing the launch of Grainger's U.S. endless assortment business, Zoro Tools, Inc., building the Company's supply chain capabilities globally and realigning the U.S. business to create greater value for customers of all sizes. Mr. Macpherson also has extensive experience in strategic planning, development and execution. Mr. Macpherson joined Grainger in 2008 after working closely with Grainger for six years as a partner and managing director at The Boston Consulting Group, a global management consulting firm, where he was a member of the Industrial Goods Leadership Team.

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Neil S. Novich ​ Former Chairman of the Board, President and Chief Executive Officer of Ryerson Inc. Independent Director Age: 65 Director Since: 1999 Grainger Board Committees: Audit BANC	​	Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Supply Chain/Logistics • Marketing/Sales & Brand Management • Human Resources/Compensation • Public Company/Leadership • Corporate Governance/Public Company Experience • Risk Assessment & Risk Management • Technology/Cybersecurity • Business Ethics/Corporate Social Responsibility Other Current Public Company Boards • Beacon Roofing Supply, Inc. (Chair, compensation committee; former Chair, audit committee) • Hillenbrand, Inc. (Chair, audit committee; mergers and acquisitions committee; nominating and corporate governance committee; former Chair, compensation committee) Prior Public Company Boards • Analog Devices, Inc. (2008-2020) (audit committee; former Chair, compensation committee) • Ryerson Inc., Chairman of the Board (1999-2007) Prior Business and Other Experience • Ryerson, Inc. (1994-2007), a global metal distributor and fabricator, where Mr. Novich joined in 1994 as Chief Operating Officer, was named President and CEO in 1994, and was additionally appointed Chairman in 1999. He remained Chairman and CEO until 2007, when the company was sold. • Bain & Company (1981-1994), an international management consulting firm, where Mr. Novich spent several years as a partner and led the firm's Distribution and Logistics Practice. Mr. Novich served as the Chairman of the Board, President and Chief Executive Officer of a global public company where he was deeply engaged in its distribution operations on a domestic and international basis, and also on leadership development and human resources functions. He also spent 13 years with a major management consulting firm, where he was a partner and led the firm's Distribution and Logistics Practice. As a result, Mr. Novich has in-depth operational experience in supply chain, distribution and logistics and experience in developing strategy across a variety of industries. Mr. Novich also has extensive experience in corporate governance matters and serves as a director of other publicly traded companies with additional responsibilities, including one audit committee chairmanship, one compensation committee chairmanship, and service on various board committees. Mr. Novich is an audit committee financial expert for purposes of the SEC's rules. Mr. Novich is a trustee of the Field Museum of Natural History and a Member of the Dean's Council to the Physical Sciences Division of the University of Chicago.

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Beatriz R. Perez ​ Senior Vice President and Chief Communications, Public Affairs, Sustainability and Marketing Assets Officer of The Coca-Cola Company Independent Director Age: 50 Director Since: 2017 Grainger Board Committees: BANC CCOB	​	Qualifications, Attributes and Skills • Operational/Strategy • Digital/eCommerce • Marketing/Sales & Brand Management • Human Resources/Compensation • Public Company/Leadership • Corporate Governance/Public Company Experience • International • Government/Public Policy • Business Ethics/Corporate Social Responsibility Other Current Public Company Boards • Primerica,  Inc. (compensation committee) Prior Public Company Boards • HSBC North America Holdings, Inc. (2007-2014), the HSBC Finance Corporation (2008-2014), and the HSBC Bank Nevada, N.A. (2011-2013) (nominating and governance; risk & compliance committee; audit committee) Prior Business and Other Experience • The Coca-Cola Company (1996-present), a global beverage company, where prior to assuming her current position in March 2017, Ms. Perez held several leadership positions including as the company's first Chief Sustainability Officer (2011- 2017). Prior to that she held various roles of increasing responsibility at The Coca-Cola Company in the North America Operating Division, including Chief Marketing Officer, Senior Vice President Integrated Marketing, and multiple field operating roles. Ms. Perez is a Senior Vice President and named executive officer of The Coca-Cola Company, a public multinational beverage company, where she leads an integrated team across public affairs and communications, sustainability and marketing assets to support the company's growth model and strategic initiatives. In this role, Ms. Perez aligns a diverse portfolio of work against critical business objectives to support brands, communities, consumers and partners worldwide. During her tenure of more than two decades at that company, she has held several leadership roles while garnering significant experience in marketing and sustainability programs. Ms. Perez also has experience in corporate governance matters and serves as a director of another publicly traded company, with additional responsibilities including a compensation committee assignment. Ms. Perez is a strong advocate for community service, serving on various non-profit boards, including The Coca-Cola Foundation.

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Michael J. Roberts ​ Former Global President and Chief Operating Officer of McDonald's Corporation; Chief Executive Officer and founder of Westside Holdings LLC Independent Director Age: 69 Director Since: 2006 Grainger Board Committees: BANC Chair, CCOB	​	Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Supply Chain/Logistics • Marketing/Sales & Brand Management • Human Resources/Compensation • Public Company/Leadership • Corporate Governance/Public Company Experience • International • Government/Public Policy • Real Estate • Business Ethics/Corporate Social Responsibility Other Current Public Company Boards • CenturyLink, Inc. (human resources and compensation committee; nominating and corporate governance committee) Prior Public Company Boards • Qwest Communications International, Inc. (prior to its acquisition by CenturyLink) (2009-2011) (compensation and human resources committee) • SP Plus Corporation (formerly, Standard Parking Corporation) (2010-2013) (audit committee; compensation committee; executive committee) Prior Business and Other Experience • McDonald's Corporation (1997-2006), a global food service retailer, where Mr. Roberts held numerous leadership roles, including President and Chief Operating Officer (2004-2006); Chief Executive Officer, McDonald's USA (2004); President, McDonald's USA (2001-2004); and President, West Division, McDonald's USA (1997-2001). • Westside Holdings LLC (2006-present), a marketing and brand development company, where Mr. Roberts is Chief Executive Officer and founder. Mr. Roberts served as President and Chief Operating Officer of McDonald's Corporation, a public, multinational corporation. In his nearly 30 years with the company, he held key executive roles, including President and Chief Executive Officer of McDonald's USA. In these capacities, he acquired extensive management, and profit and loss responsibilities. He was also responsible for marketing and branding experience, and the international operations of the company. In addition, Mr. Roberts has significant experience in human resources and corporate governance matters and serves as a director of another publicly traded company with additional responsibilities, including service on the human resources and compensation committee.

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E. Scott Santi ​ Chairman and Chief Executive Officer of Illinois Tool Works Inc. Independent Director Age: 58 Director Since: 2010 Grainger Board Committees: Audit BANC	​	Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Marketing/Sales & Brand Management • Human Resources/Compensation • Public Company/Leadership • Corporate Governance/Public Company Experience • International • Risk Assessment & Risk Management • Technology/Cybersecurity • Government/Public Policy • Business Ethics/Corporate Social Responsibility Other Current Public Company Boards • Illinois Tool Works Inc. (Chairman of the Board, 2015-present); director (2012-present) Prior Business and Other Experience • Illinois Tool Works Inc. (2004-2012), a worldwide manufacturer of engineered components and systems, where Mr. Santi has served as Chief Executive Officer, since November 2012. Previously, Mr. Santi held various senior management roles with ITW, including Vice Chairman of ITW (2008-2012) and Executive Vice President (2004-2008). Mr. Santi is the Chairman and Chief Executive Officer of ITW, a global public company. In the course of his more than 30 years with ITW, he has served in various management roles for ITW including positions requiring significant operational and financial responsibility. During his tenure he has had extensive international responsibility including operating responsibility for a business with annual international revenues of several billion dollars. Mr. Santi has significant experience with mergers and acquisitions and integrating acquired companies. He has also had significant strategic marketing responsibilities and human resource experience including compensation policy, leadership development and succession planning. Mr. Santi is an audit committee financial expert for purposes of the SEC's rules. In addition, Mr. Santi is a member of the board of directors of the Federal Reserve Bank of Chicago. He also serves as a trustee or director in various civic, non-profit and other boards, including the board of trustees of Northwestern University, the Museum of Science and Industry, and Rush University Medical Center and the board of directors of United Way of Metropolitan Chicago, the Economic Club of Chicago, and the Chicago Council on Global Affairs.

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Susan Slavik Williams ​ President, Four Palms Ventures; Director, Mark IV Capital, Inc.; President, The Donald Slavik Family Foundation Director Nominee Age: 51 Director Since: New Nominee	​	Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Marketing/Sales & Brand Management • Human Resources/Compensation • Public Company/Leadership • Risk Assessment & Risk Management • Real Estate • Business Ethics/Corporate Social Responsibility Business and Other Experience • Four Palms Ventures, a venture capital firm founded by Ms. Slavik Williams focused on investing in early stage agtech and other technology companies, where Ms. Slavik Williams serves as President (2019-present). • Mark IV Capital, Inc., a private commercial real estate development and investment company, where Ms. Slavik Williams serves on its Board of Directors and presently chairs its compensation committee (1989-present). • The Donald Slavik Family Foundation, a nonprofit organization supporting programs that preserve wildlife and the environment, where Ms. Slavik Williams presently serves as President and a member of its Board of Directors (1995-present). • Ernst & Young Consulting (now Capgemini), a global consulting and technology services company, where Ms. Slavik Williams was a Manager (1994-1998). Ms. Slavik Williams is a private investor who has been a long-term significant shareholder of the Company as well as an entrepreneur and environmentalist. She has expansive knowledge in investments, financing, and real estate, including as a result of her 30 years of service on the board of directors of Mark IV Capital, Inc., where she presently chairs the compensation committee. She also has a deep understanding of environmental and social matters, working for 25 years as President and member of the board of directors of a foundation focused on wildlife preservation in the United States, Africa, South America, and Asia. Since 2017, Ms. Slavik Williams has served as a member of the board of directors of iSelect Fund, a venture capital investment firm. For 12 years, Ms. Slavik Williams was a director of the Saint Louis Zoo and currently serves on the conservation committee of its strategic planning group. As a longstanding significant shareholder of the Company, she possesses extensive knowledge of the Company's business, organization, and culture. Ms. Slavik Williams is the cousin of James D. Slavik, a current Director who is not standing for re-election at the Annual Meeting.

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Lucas E. Watson ​ Chief Marketing Officer and Rideshare General Manager at GM Cruise LLC Independent Director Age: 49 Director Since: 2017 Grainger Board Committees: Audit BANC	​	Qualifications, Attributes and Skills • Operational/Strategy • Finance/Capital Allocation • Supply Chain/Logistics • Digital/eCommerce • Marketing/Sales & Brand Management • Public Company/Leadership • Corporate Governance/Public Company Experience • International • Technology/Cybersecurity • Government/Public Policy • Business Ethics/Corporate Social Responsibility Prior Business and Other Experience • Intuit, Inc. (2016-2018), a global provider of business and financial management solutions, where Mr. Watson served as an Executive Vice President and Chief Marketing and Sales Officer. • Google, Inc. (2011-2016), a global technology company, where Mr. Watson served as Vice President, Global Brand Solutions. • Procter & Gamble Company (1994-2011), a global consumer products company, where Mr. Watson served in various sales, marketing and digital business roles. Mr. Watson is currently Chief Marketing Officer and Rideshare General Manager at GM Cruise LLC, an autonomous vehicle technology company owned by General Motors company. Previously, he served as Executive Vice President and Chief Marketing and Sales Officer at Intuit, where he led the company's global sales and go-to-market efforts bringing Intuit's financial management solutions to market across a variety of channels while focusing on global brand expansion, market share growth and strengthening brand equity. As Vice President, Global Brand Solutions at Google, he led the company's brand advertising business, working with some of the world's leading companies to build stronger and more trusted brands. At Procter & Gamble, a global consumer products company, he served as a Digital Marketing executive and held a variety of other roles across the globe. While at P&G, Mr. Watson drove P&G's digital initiatives for 75 brands across 200 countries. During his tenure of more than two decades at these multinational public companies, Mr. Watson has held several leadership roles while acquiring a deep understanding of sales, marketing, technology and digital business.

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2019 BOARD MEETINGS AND COMMITTEE MEMBERSHIP

The Operating Principles provide for the Board's Committees and the process for selecting Committee leadership. The BANC's recommendations are considered by the Board following each annual meeting of shareholders. The Committees are appointed by the Board based on recommendations of the BANC. As required by each Committee's charter, all members of each Committee must be "independent" Directors.

Five meetings of the Board were held in 2019. Each Board meeting included at least one executive session, during which only independent Directors were present. In total, 18 Committee meetings were held in 2019. During each Committee meeting, Committee members met in closed session, without management present. The Committees report regularly to the full Board on their activities and actions.

The Board has delegated certain responsibilities and authority to its standing Committees, as described below.

		Audit Committee		Board Affairs & Nominating Committee		Compensation Committee
​	​	​	​	​	​	​
Rodney C. Adkins
Brian P. Anderson						​
V. Ann Hailey
Stuart L. Levenick		​
Neil S. Novich
Beatriz R. Perez		​
Michael J. Roberts
E. Scott Santi						​
James D. Slavik †
Lucas E. Watson						​
​	​	​	​	​	​	​

 Chairperson      Member      Lead Director

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†

Mr. Slavik is retiring from the Board effective immediately following the Annual Meeting and is not standing for re-election.

Each Committee has a charter that it reviews annually and then makes recommendations to our Board for charter revisions that may be needed to reflect evolving best practices. Copies of each Committee charter are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

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AUDIT COMMITTEE		Number of Meetings Held in Fiscal 2019: 8

The Audit Committee of the Board (the Audit Committee) met eight times in 2019. The Board has determined that each of the members of the Audit Committee is "independent," as that term is defined in the independence requirements for audit committee members contained in the applicable rules of the U.S. Securities and Exchange Commission (the SEC) and in the listing standards of the NYSE. The Board has determined that each of the members of the Audit Committee is financially literate and that each of Ms. Hailey, Mr. Anderson, Mr. Novich, and Mr. Santi is an "audit committee financial expert," as that term is defined in the applicable rules of the SEC. Further, in accordance with applicable NYSE listing standards, the Board has considered Mr. Anderson's simultaneous service on the audit committees of more than three public companies, namely the audit committees of Grainger, PulteGroup Inc., James Hardie Industries plc, and Stericycle, Inc., and has determined that this service will not impair his ability to serve effectively on the Company's Audit Committee.

The Audit Committee assists the Board in its oversight responsibility with respect to the following:

•

Grainger's financial reporting process;



•

Grainger's systems of internal accounting, financial, and disclosure controls;



•

the integrity of Grainger's financial statements;



•

Grainger's compliance with legal and regulatory requirements;



•

Grainger's enterprise risk management systems and processes, including as to business continuity, cybersecurity, privacy, legal and other risks;



•

the qualifications and independence, as well as the appointment, compensation, retention, evaluation, and termination, of Grainger's independent auditor, the resolution of disagreements between management and the independent auditor regarding financial reporting, and the selection of the auditor's lead audit partner;



•

the performance of Grainger's internal audit function and the independent auditor;



•

the pre-approval of audit and permissible non-audit services and fees to be provided by the independent auditor;



•

activities and amendments relative to the Company's ERISA plans that involve the investment of funds, subject to coordination with the Compensation Committee where appropriate;



•

the establishment of procedures for the receipt, retention, and treatment of complaints regarding accounting, internal accounting controls, and auditing matters; and



•

compliance with Grainger's Business Conduct Guidelines, including review of potential violations communicated through the Company's confidential reporting channels.

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BOARD AFFAIRS AND NOMINATING COMMITTEE		Number of Meetings Held in Fiscal 2019: 5

The Board Affairs and Nominating Committee of the Board (the BANC) met five times in 2019. The Board has determined that each of the members of the BANC is "independent," as defined in the independence requirements for members of nominating committees contained in the applicable listing standards of the NYSE.

The BANC assists the Board in its oversight responsibility as follows:

Board Composition and Renewal

•

makes recommendations to the Board regarding the makeup and size of the Board and the types and functions of its Committees and their initial respective charters;



•

establishes specific written criteria by which Director nominees shall be qualified;



•

periodically evaluates whether the Board members collectively have the right mix of experience, qualifications, attributes, skills, backgrounds and diverse viewpoints necessary for the Board to be a good steward for the Company's shareholders;



•

determines the preferred qualifications and characteristics for potential Board nominees, which is shared with our third-party search firm;



•

identifies and screens potential nominees, consistent with the criteria approved by the Board;

Governance

•

makes recommendations concerning Director and nominee independence, attendance and performance;



•

reviews any transactions between Grainger and related persons (as further discussed below);



•

evaluates in its annual review the overall performance of the Board and its Committees;



•

oversees corporate governance, including:



o

making initial assessments regarding major issues or proposals concerning corporate governance,



o

recommending corporate governance guidelines, including annual review of the Committee charters, the Operating Principles for the Board, and the Criteria for Membership on the Board,



o

recommending the Lead Director,



o

recommending Board Committee responsibilities, Committee Chairs, and members,



o

determining policies regarding rotation of Directors among the Committees,



o

evaluating the Board in the area of corporate governance, including the adequacy of the information supplied to the Board,



o

evaluating the Board's performance of its oversight responsibilities relative to the management of Grainger, and



o

recommending retirement, compensation, and other policies applicable to Directors;

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Corporate Social Responsibility (CSR)

•

oversees on an annual basis the Company's corporate social responsibility activity to advance the interests of shareholders, including involvement in the communities Grainger serves and promotion of a sustainable environment;

Succession Planning and Management Development

•

works with the Compensation Committee to annually review senior management organization and succession; and



•

leads the annual review of management's performance, including the CEO to the extent necessary to supplement the Compensation Committee of the Board's review of CEO performance relative to CEO compensation goals and objectives.

COMPENSATION COMMITTEE		Number of Meetings Held in Fiscal 2019: 5

The Compensation Committee of the Board (the Compensation Committee) met five times in 2019. The Board has determined that each member of the Compensation Committee is "independent," as defined in the independence requirements for members of compensation committees in the applicable rules of the SEC, the listing standards of the NYSE, and under the Internal Revenue Code.

The Compensation Committee assists the Board in its oversight responsibility as follows:

•

oversees Grainger in the area of compensation and benefits to ensure that:



o

the Board appropriately discharges its responsibilities relating to senior management compensation,



o

the Company maintains a market competitive compensation structure designed to attract, motivate, develop, and retain key talent,



o

compensation and benefit policies and practices reflect the highest level of transparency and integrity,



o

compensation is aligned with shareholder value creation and strategic objectives,



o

compensation, especially senior management compensation, is linked to both personal and Company performance, and provides appropriate incentives to increase shareholder value,



o

the Company's compensation policies and practices for all employees are designed with appropriate incentives that do not encourage unnecessary or excessive risk taking, and are administered in a transparent manner,



o

the interests of shareholders are protected, and



o

all equity-based plans and incentive plans are appropriately designed and administered, including the review and approval of the performance measures applicable to the Company's short-term and long-term incentive plans;



•

provides independent oversight of the administration of the Company's shareholder approved equity plans;



•

annually reviews and approves CEO compensation, as follows:

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o

reviews and approves corporate goals and objectives relevant to CEO compensation,



o

evaluates CEO performance in light of those corporate financial goals and objectives, with assistance from the Lead Director and the other Board Committees, as appropriate, and



o

together with the other independent Directors, determines and approves, in its sole discretion, the CEO's total compensation based on the above evaluation, in executive session without members of management present;



•

reviews and recommends to the Board for approval the compensation paid to the CEO's direct reports, including the other Named Executive Officers (NEOs);



o

Members of management (including some of the NEOs) assist the Compensation Committee in providing recommendations for the design of Grainger's compensation program for its NEOs, other officers, and employees. Management also recommends salary and award levels for the Committee's review and recommendation, except those related to the CEO;



•

together with the other independent Directors as directed by the Board, determines, in their sole discretion, the appropriate compensation design and level of CEO compensation in executive session without members of management present;



•

approves annual grants of equity-based compensation awards (including, restricted stock units (RSUs) and performance stock units (PSUs)) to NEOs, other officers and employees under approved shareholder plans; and, may delegate to management limited authority to grant "off-cycle" equity-based compensation awards of stock options and RSUs to non-officer employees and to CEO direct reports that are new hires; and, awards under this authority are granted pursuant to terms and conditions approved by the Compensation Committee. Management informs the Compensation Committee of the awarded grants at the Compensation Committee's next meeting. The pool of shares available to management under this delegation is refreshed annually by the Compensation Committee. The Compensation Committee may terminate this delegation of authority at its discretion; and



•

retains, terminates, and approves the compensation for an independent compensation consultant that will report directly to the Compensation Committee, determines the independence of such independent compensation consultant, and routinely meets in an executive session with the independent compensation consultant, without management present.

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LEADERSHIP STRUCTURE

The Board has strong governance structures and processes in place to ensure the independence of the Board. These structures and processes, which are reflected in the Operating Principles and the Committees' charters, allow for the independent Directors to effectively exercise the Board's authority in overseeing critical matters of strategy, operations, enterprise risk management, and financial reporting.

The Board carefully considers its leadership structure and believes that a combined Chairman/CEO position, coupled with an independent Lead Director appointed by the Board, represents the best leadership structure for Grainger. In the Board's view, having a single individual serving as both the Chairman and CEO assists in the timely flow of relevant information, which supports effective Board decision-making and provides a useful connection between the Board and management so that Board actions are appropriately and efficiently executed.

In deciding that a combined Chairman and CEO position is the appropriate leadership structure for Grainger, the Board also recognized the need for independent leadership and oversight. The Lead Director is responsible for facilitating Board involvement in major issues and/or proposals, ensuring that the Board is addressing major strategic and operational initiatives, reviewing meeting agendas and information to be provided to the Board, consulting with Directors, the CEO and management, and presiding at executive sessions of the Board. With the Lead Director performing these important duties, the Board does not believe that separating the role of the Chairman and CEO would result in strengthening Grainger's corporate governance or in creating or enhancing long-term value for our shareholders.

The duties performed by the independent Directors, either collectively or through Committees comprised solely of independent Directors, include selecting the Chairman and CEO and evaluating his or her performance, and setting his or her compensation.

The Board believes that given Grainger's corporate governance structures and processes, a combined Chairman and CEO position in conjunction with an independent Lead Director provides effective oversight of management by the Board and results in a high level of management accountability to shareholders.

LEAD DIRECTOR

Under Grainger's By-Laws and the Operating Principles, the Lead Director is elected by and from the Board's independent Directors. The current Lead Director, Mr. Stuart L. Levenick, was appointed to serve in this capacity after the April 2014 annual meeting of shareholders. Among the duties assigned to the Lead Director is the responsibility for:

•

presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent Directors;



•

serving as the primary liaison between the Chairman and the independent Directors;



•

calling meetings of the independent Directors, if appropriate, to review and approve the types of information sent to the Board;



•

soliciting feedback from non-employee Directors on agenda items for Board meetings and collaborating with the Chairman in developing and approving Board meeting agendas;

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•

coordinating with the Board Affairs and Nominating Committee and the applicable Board Committee Chairs the annual self-evaluation of the performance and effectiveness of the Board, its Committees and individual Directors;



•

leading the Board in its annual review of the Board and management's performance, including the CEO, to the extent necessary to supplement the Compensation Committee's review of the CEO's performance relative to applicable compensation goals and objectives;



•

being available, as necessary, for consultation and communication with major shareholders;



•

coordinating with the BANC the Director recruitment and interview process; and



•

reviewing and approving meeting schedules to ensure that there is sufficient time for discussion of all agenda items.

BOARD, COMMITTEE AND DIRECTOR EVALUATIONS

The Board recognizes that a rigorous, ongoing evaluation process is an essential component of strong corporate governance practices and promoting continuing Board effectiveness. Each year, the Board conducts a three-part evaluation process coordinated by the Lead Director and the Committee Chairs: full Board evaluation, Committee evaluations, and Director self-assessments. To help make sure the evaluations are useful and that we are implementing best practices, we routinely review the evaluation process with an external governance expert.

Our historic approach has been to ask each Director to respond to written survey questions on how the Board performs. We have also sought written feedback on more open-ended topics, including Board and Committee processes and effectiveness.

In reviewing our approach to evaluation, including the actions that resulted from past surveys, in 2019 we decided to adopt a new approach designed to facilitate conversation focused on the Board's challenges and opportunities. We made the following changes:

1)

Rather than relying on written questionnaires, there were one-on-one discussions of open-ended questions on Board, Committee, and individual Director engagement and effectiveness.



2)

Questions related to (a) Board composition dynamics, operations, structure, performance and composition and (b) the Board's engagement in strategy, enterprise risk management, reputation/culture, and the Company's business.



3)

As before, the Lead Director conducted the Board evaluation and individual Director self-evaluations, while the Committee Chairs conducted evaluations for their respective Committees.



4)

Management's feedback on the Board's operation and engagement was provided to the Board.



5)

We also adopted an "after action" process that reviews routine matters such as information flow, meeting content, and management interaction following each meeting in executive session.

We believe that this open-ended question/interview approach helps elicit thoughtful and useful responses that encourage more valuable conversations and actionable insights. Supplementing the annual surveys is a continuous feedback loop that does not rely solely on a single, formal event at the end of the year.

As before, the results of the evaluations/interviews were compiled anonymously. The Lead Director discussed with the Board the results of the Board evaluations, individual Director self-assessments, and the management leadership team feedback, while the Committee Chairs discussed the results of the Committee evaluations with their respective Committees.

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Below is an overview of the key steps in the annual evaluation process:

Annual Board, Committee and Director Evaluation Process

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The information gained through this process helps shape the content of educational presentations to the Board and identify the skill sets desirable in Director searches conducted from time-to-time by the Board.

Among the actions that resulted from the Board's evaluation processes were an analysis of the desired skill sets for future directors and changes to meeting agenda to create more time for in-depth discussions.

BOARD OVERSIGHT

The Board oversees, counsels, and directs management in the long-term interests of the Company and its shareholders. The Board's oversight responsibilities include, among other things:

•

helping management assess short-term and long-term strategies for the Company and evaluating management's performance against its goals;



•

selecting, evaluating the performance of, and determining the compensation of the CEO and other executive officers;



•

ensuring effective succession planning to maximize long-term corporate performance;



•

overseeing enterprise risk management processes and policies of the Company;



•

monitoring the processes for maintaining our integrity with regard to our financial statements and other public disclosures, and compliance with law and ethics;



•

encouraging management communication with our shareholders;



•

assessing and monitoring the Company's culture; and



•

overseeing the Company's commitment to corporate social responsibility.

Board's Role in Shareholder Engagement

The Board believes it is important that the Company's strategy is effectively communicated to the Company's shareholders, and that shareholders' perspectives are understood and considered by the Board, including as to strategy, business performance, corporate governance, executive compensation practices, and other environmental, social, and governance concerns. During 2019, the Company proactively arranged for the Board's Lead Director to meet with a variety of institutional investors to explain the Company's corporate governance practices and policies as part of a corporate governance roadshow.

As part of its oversight role, the Board routinely receives reports and briefings from the Company's Investor Relations team. Grainger has a comprehensive shareholder engagement program to reach a significant cross-section of our shareholder base, including large institutional investors, pension funds, and other investors. Our CEO, CFO and VP, Investor Relations, and other members of our Investor Relations team, maintain regular contact throughout the year with a broad base of shareholders to understand their concerns on various topics, including financial performance, strategy, competitive environment, and environmental, social and governance matters. Contact with shareholders includes quarterly earnings calls, individual meetings and other channels of communication. In 2019, we engaged with shareholders representing over 40% of our outstanding shares. Throughout the shareholder engagement in 2019, the Board routinely received updates from the Company's CFO and VP, Investor Relations, regarding shareholder concerns, trends, and various questions.

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Succession Planning and Employee Development

The Board recognizes that it has an important duty to ensure senior leadership continuity by overseeing the development of executive talent and planning for the efficient succession of the CEO and other key leadership positions. The Board has delegated primary oversight responsibility for management development and leadership succession planning to the BANC. The BANC reports on its activities to the full Board, which routinely addresses planned succession scenarios and also has developed emergency succession plans reviewed annually.

Recruiting, developing, promoting and retaining top diverse talent is a key priority for the Company. The Board conducts in-depth reviews of senior leader development. This review addresses the Company's management development initiatives, assesses senior management resources, and identifies individuals who should be considered as potential future senior executives. To ensure that the succession planning and management development process supports and enhances Grainger's strategic objectives, the Board and the BANC also regularly consult with the Chairman of the Board and CEO on the Company's organizational needs, the leadership potential and related development plans for key managers and plans for future development and emergency situations.

To supplement these efforts, throughout the year, the senior management team, as well as a broader array of executives throughout our businesses, make presentations to the Board and its Committees and also interact with the Directors during Board dinners that coincide with our regularly scheduled Board meetings or visits to our operations. This engagement between Directors and our current and future leaders gives our Directors meaningful insight into our current pool of talent, what attracts and retains our executives, and the Company's culture.

Board's Role in Risk Oversight

The Board has overall responsibility for risk oversight, with the Audit Committee assisting the Board in performing this function. The Board's role is to oversee the Company's enterprise risk management (ERM) programs, including risk assessment and risk management processes and policies used by Grainger to identify, assess, monitor and address potential financial, compensation, operational, strategic and legal risks on an enterprise-wide basis.

As part of its ERM oversight, the Board oversees and reviews the Company's programs and processes for cybersecurity risk, including the Company's framework for preventing, detecting, and addressing cybersecurity incidents. To help inform its approach to devising an appropriate governance framework, cadence, metrics, and reporting to discharge its cybersecurity oversight responsibilities, the Board appointed an Ad Hoc Committee on Cybersecurity constituted of Grainger Directors with technology and cybersecurity experience. The Board's cybersecurity oversight framework—full Board ownership and oversight, with Audit Committee support, and quarterly informational updates and annual briefings—was implemented upon the recommendation of the Ad Hoc Committee, which remains available to provide strategic advice as needed.

Both the Board and the Audit Committee regularly review Grainger's risk assessment and management processes and policies, including receiving regular reports from the Company's Chief Information Security Officer, and the members of Grainger's management who are responsible for the effectiveness of Grainger's ERM program. As part of its oversight responsibility, the Compensation Committee assesses the relationship between potential risk created by Grainger's compensation programs and their impact on long-term shareholder value.

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Corporate Social Responsibility

Grainger is committed to being a responsible corporate citizen and strives to integrate environmental, social and governance (ESG) principles into the daily operation of its business. Grainger's Corporate Social Responsibility (CSR) platform includes our commitment to operating responsibly, valuing our people, serving our communities and sustaining our environment. These commitments shape our focus on corporate citizenship and fuel our determination to make a positive difference today and in the future.

We integrate citizenship initiatives into the Company's strategy and daily operations at each level of our business. This begins with oversight by the BANC. The BANC annually reviews the Company's promotion of environmental sustainability and community engagement. In addition, the BANC receives routine reports and updates on ESG matters. In 2017, the Board appointed a new Director with expertise in sustainability and the New Nominee has expertise on environmental matters. The Company's CSR Advisory Council, led by a senior executive and comprised of a select group of senior-level team members, provides guidance, strategic awareness and counsel to the Company's CSR program. Also, the Company has a cross-functional CSR Working Group that implements day-to-day programs and drives progress toward the success of our roadmap.

Grainger strives to ensure its team members reflect its increasingly global and diverse customer base. Diversity and inclusion are integral to Grainger's business success. The Company is committed to fostering an inclusive environment where all team members feel safe, valued and encouraged to voice their opinions regardless of age, gender, race, religion, ethnicity, sexual orientation, veteran status, disabilities or backgrounds. Grainger is also committed to leadership effectiveness as part of its people strategy.

The Company began reporting with reference to the Global Reporting Initiative's Sustainability Reporting Standards in 2016 and, since 2017, has been a member of the Dow Jones Sustainability Index. Grainger continues to evolve its ESG program in a manner that is beneficial to the Company and its investors. As part of this commitment, Grainger is working toward aligning its ESG reporting to the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD) frameworks by the end of 2020.

Grainger publishes an annual CSR report that is periodically updated and, while it is available under "Corporate Citizenship" in the Investor Relations section of our website at http://www.GraingerCSR.com, it is not being incorporated by reference into this proxy statement.

OTHER COMMUNICATIONS WITH DIRECTORS

Grainger has established a process by which shareholders and other interested parties may communicate with the Board, its Committees, and/or individual Directors on matters of interest. Such communications should be sent in writing to:

[Name(s) of Director(s)]
or
[Non-management Directors]
or
[Board of Directors]
W.W. Grainger, Inc.
P.O. Box 66
Lake Forest, Illinois 60045-0066

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If the matter is confidential in nature, please mark the correspondence accordingly. Additional information concerning this process is available in the are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

AVAILABLE INFORMATION

All the documents below are available to shareholders and under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/ or in print, free of charge, upon request to the Corporate Secretary at Grainger's headquarters, 100 Grainger Parkway, Lake Forest, Illinois 60045-5201.

Business Conduct Guidelines

Grainger has adopted Business Conduct Guidelines for Directors, officers, and employees, which incorporate the Code of Ethics required by the SEC to apply to a company's chief executive officer, chief financial officer, and chief accounting officer or controller. The Company provides annual Business Conduct Guidelines training and all Directors, officers, and employees are required to certify annually that they have read, understand and are in compliance with the Business Conduct Guidelines. Our Business Conduct Guidelines are posted in the Governance section on Grainger's website at http://invest.grainger.com/.

Operating Principles for the Board of Directors

Grainger also has adopted Operating Principles for the Board of Directors, which represents its corporate governance guidelines. The Operating Principles are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

Committee Charters

The charters, as adopted by the Board and amended from time to time, of the Audit Committee, the BANC, and the Compensation Committee are available under "Governance" in the Investor Relations section of our website at http://invest.grainger.com/.

Corporate Social Responsibility

Grainger publishes a CSR report that is periodically updated and, while it is available under "Corporate Citizenship" in the Investor Relations section of our website at http://www.GraingerCSR.com, it is not being incorporated by reference into our proxy statement.

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DIRECTOR COMPENSATION

Grainger's non-employee Directors each receive an annual cash retainer of $100,000 and an annual deferred stock grant of $145,000. The Lead Director and Directors serving as Committee Chairs receive an additional annual cash retainer.

Grainger's non-employee Directors are compensated at a level that approximates median market practice. In benchmarking Director pay, Grainger uses the same compensation comparator group that is used to benchmark compensation for Grainger's executives as described in the Compensation Discussion and Analysis / page 39. The Compensation Committee's independent compensation consultant periodically reviews and updates the comparator group as well as comparative compensation information and advises on Director compensation.

The Directors' compensation program, which was last adjusted in April 2018, consists of the following:

​		Compensation for		​		Value		​
​	​	​	​	​	​	​	​	​
		Annual Cash Retainer for each Director				$100,000
​	​	​	​	​	​	​	​	​
​		Deferred Stock Unit Grant for each Director		​		$145,000		​
​	​	​	​	​	​	​	​	​
		Annual Retainer for the Lead Director				$25,000
​	​	​	​	​	​	​	​	​
​		Chair Retainers:		​		​		​
​		Audit Committee		​		$20,000		​
​		Compensation Committee		​		$15,000		​
​		Board Affairs and Nominating Committee		​		$10,000		​
​	​	​	​	​	​	​	​	​

All non-employee Directors receive an annual deferred stock unit grant worth $145,000. In 2019, the number of shares covered by each grant was equal to $145,000 divided by the 20-day average stock price through January 31 (a methodology consistent with the calculation used for equity awards to grant-eligible employees), rounded up to the next whole share. Beginning with the 2020 equity grants, Grainger has adjusted this methodology to be the 20-day average stock price through March 31. The deferred stock units are settled in shares upon termination of service as a Director. Directors may defer their annual cash retainers, Lead Director retainer, and Committee Chair retainers (as applicable), into a deferred stock unit account.

Stock ownership guidelines applicable to non-employee Directors were established in 1998. These guidelines provide that within five years after election, a Director must own Grainger common stock and common stock equivalents having a value of at least five times the annual cash retainer fee for serving on the Board. The hedging or pledging of Company shares by Directors or executive officers is prohibited by Company policy (see Hedging and Pledging Prohibition / page 59). No Directors (or executive officers) have hedged or pledged any of the shares beneficially owned by them and all Directors are currently in compliance with the ownership guidelines.

Grainger matches Directors' charitable contributions on a three-to-one basis up to a maximum Company contribution of $7,500 per Director annually and provides discounts on product purchases, both on the same basis as provided to U.S. Grainger employees.

Mr. Macpherson, who is an employee of Grainger, does not receive any compensation for serving as a Director.

​

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​

2019 Director Compensation

Name

​

Fees Earned or Paid in Cash (1)

​

Stock Awards (2)

​

All Other Compensation (3)

​

Total

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Rodney C. Adkins

$100,000

$147,475

$7,500

$254,975

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Brian P. Anderson

​

$100,000

​

$147,475

​

$0

​

$247,475

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

V. Ann Hailey

$120,000

$147,475

$0

$267,475

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Stuart L. Levenick

​

$135,000

​

$147,475

​

$0

​

$282,475

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Neil S. Novich

$100,000

$147,475

$7,500

$254,975

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beatriz R. Perez

​

$100,000

​

$147,475

​

$7,500

​

$254,975

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Michael J. Roberts

$115,000

$147,475

$7,500

$269,975

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

E. Scott Santi

​

$100,000

​

$147,475

​

$0

​

$247,475

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

James D. Slavik

$100,000

$147,475

$7,500

$254,975

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Lucas E. Watson

​

$100,000

​

$147,475

​

$7,500

​

$254,975

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(1)

Represents cash fees received in 2019.

(2)

Represents the grant date fair value of an award of 503 deferred stock units made on April 24, 2019, with immediate vesting that will be paid upon termination from service, computed in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. The number of stock units was determined by dividing the grant dollar value by the 20-day average stock price as of January 31 in the year of the grant, a methodology consistent with the calculation used for equity awards to grant-eligible employees.

(3)

Represents amount paid by the Company to charitable organizations as part of the Company's matching gift program with respect to donations made and matched in 2019. The Directors receive no direct or indirect benefit from the matching contributions.

​

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OWNERSHIP OF GRAINGER STOCK

Security Ownership of Certain Beneficial Owners

The following table sets forth information concerning any person known to Grainger to beneficially own more than 5% of Grainger's common stock, as of December 31, 2019 except as otherwise noted below. The information in the table and the related notes are based on statements filed by the respective beneficial owners with the SEC pursuant to Sections 13(d) and 13(g) under the Securities Exchange Act of 1934, as amended.

Name and Address of Beneficial Owner		​		Amount and Nature of Beneficial Ownership (1)		​		Percent of Class
​	​	​	​	​	​	​	​	​
The Vanguard Group 100 Vanguard Boulevard Malvern, PA 19355				5,865,471(2)				10.88%
​	​	​	​	​	​	​	​	​
Susan Slavik Williams 4450 MacArthur Blvd., Second Floor Newport Beach, CA 92660		​		4,810,153(3)		​		8.96%
​	​	​	​	​	​	​	​	​
Longview Partners (Guernsey) Limited PO Box 559 Mill Court La Charroterie St Peter Port Guernsey GY1 6JG United Kingdom London EC4V 3RL				4,106,146(4)				7.65%
​	​	​	​	​	​	​	​	​
BlackRock, Inc. 55 East 52nd Street New York, NY 10055		​		3,182,616(5)		​		5.9%
​	​	​	​	​	​	​	​	​

(1)

Unless otherwise indicated, percentages calculated are based upon Grainger common stock outstanding as set forth in the statements on Schedule 13G or 13G/A filed by the respective beneficial owners with the SEC.

(2)

Based on information provided in a Schedule 13G/A filed on February 12, 2020, The Vanguard Group has sole voting power with respect to 68,040 shares, shared voting power with respect to 13,273 shares, sole dispositive power with respect to 5,787,915 shares, and shared dispositive power with respect to 77,556 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., beneficially owns 51,869 shares or 0.09% of the common stock outstanding of the Company as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., beneficially owns 41,180 shares or 0.07% of the common stock outstanding of the Company as a result of its serving as investment manager of Australian investment offerings. The Schedule 13G/A certifies that the securities were acquired in the ordinary course of business and not with the purpose or effect of changing or influencing the control of Grainger.

(3)

Based on information provided in a Schedule 13G/A filed on March 5, 2020, Ms. Slavik Williams has sole voting power with respect to 4,801,811 shares, shared voting power with respect to 8,342 shares, sole dispositive power with respect to 3,166,051 shares and shared dispositive power with respect to 1,644,102 shares. Ms. Slavik Williams aggregate beneficial ownership of 4,810,153 shares excludes 783,743 shares held in trusts over which Ms. Slavik Williams has no dispositive or voting power. The 8.96% calculation is based on the number of shares shown to be outstanding as of January 31, 2020 on Grainger's Annual Report on Form 10-K filed on February 20, 2020. Ms. Slavik Williams, a Director nominee for election at the Annual Meeting, is the cousin of James D. Slavik, a current Director who is not standing for re-election at the Annual Meeting. Neither Mr. Slavik nor Ms. Slavik Williams has any beneficial ownership of the other's shares.

(4)

Based on information provided in a Schedule 13G filed on February 11, 2020, Longview Partners (Guernsey) Limited, Longview Partners LLP, and Longview Partners (UK) Limited (collectively referred to hereafter as "Longview Partners")

​

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each has (i) shared voting power with respect to 2,457,292 shares and (ii) shared dispositive power with respect to 4,106,146 shares. Longview Partners (Guernsey) Limited is an investment advisor registered under section 203 of the Investment Advisors Act of 1940. Longview Partners (UK) Limited is 100% owned by Longview Partners (Guernsey) Limited. Longview Partners (UK) Limited is the managing member of Longview Partners LLP. The shares reported herein have been acquired on behalf of discretionary clients of Longview Partners. Persons other than Longview Partners are entitled to receive dividends from, and proceeds from the sale of, those shares. None of those persons to the knowledge of Longview Partners has an economic interest in more than 5% of the class. The Schedule 13G certifies that the securities were acquired and held in the ordinary course of business and not with the purpose or effect of changing or influencing the control of Grainger.

(5)

Based on information provided in a Schedule 13G/A filed on February 6, 2020, BlackRock, Inc. has sole dispositive power with respect to all of the shares, and sole voting power with respect to 2,659,715 shares. Various non-person entities have the right to receive or the power to direct the receipt of dividends or the proceeds from the sale of Grainger's common stock. No one person's interest in the Grainger common stock is more than five percent of the total outstanding common shares. The Schedule 13G/A certifies that the securities were acquired and held in the ordinary course of business and not with the purpose of changing or influencing the control of Grainger.

​

Proxy Statement         31

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Security Ownership of Management

The table below shows the ownership of Grainger common stock by each Director nominee, each of our NEOs, and all Director nominees and all executive officers as a group, as of March 2, 2020 except as otherwise noted below.

Beneficial ownership is broadly defined by the SEC. In general, a person beneficially owns securities if the person, alone or with another, has voting power or investment power (the power to sell) over the securities. Being able to acquire either voting or investment power within 60 days, such as by exercising stock options, also results in beneficial ownership of securities. Unless otherwise indicated in the footnotes following the table, each of the named persons had sole voting and investment power with respect to the indicated number of Grainger shares.

​

Name of Beneficial Owner

​

Shares

​

Stock Option Shares Exercisable within 60 Days (1)

​

Stock Units (2)

​

Percent of Class (3)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Rodney C. Adkins

400

0

3,767

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Brian P. Anderson

​

3,340

​

0

​

18,825

​

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

V. Ann Hailey

200

0

12,871

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

John L. Howard (4)

​

415,125

​

51,620

​

24,811

​

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Stuart L. Levenick

400

0

19,438

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

D.G. Macpherson

​

34,039

​

129,773

​

8,507

​

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deidra C. Merriwether

0

10,580

5,092

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Neil S. Novich

​

4,605

​

0

​

28,118

​

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Thomas B. Okray

1,690

3,118

5,823

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Beatriz R. Perez

​

0

​

0

​

2,367

​

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Paige K. Robbins

6,252

21,789

4,038

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Michael J. Roberts

​

1,000

​

0

​

22,810

​

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

E. Scott Santi

303

0

7,931

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

James D. Slavik (5)

​

2,033,325

​

0

​

22,341

​

3.79%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Susan Slavik Williams (6)

4,810,153

0

0

8.96%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Lucas E. Watson (7)

​

195

​

0

​

2,379

​

*

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Directors and Executive Officers as a group

7,311,895

219,090

193,230

13.97%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(1)

In computing the percentage of shares owned by each person and by the group, these shares were added to the total number of outstanding shares for the separate calculations.

(2)

Represents the number of stock units credited to the accounts of non-employee Directors, and the number of RSUs credited to the accounts of executive officers. Each stock unit is intended to be the economic equivalent of a share of Grainger common stock. These units are excluded from the computations of percentages of shares owned.

(3)

An asterisk (*) indicates less than 1%.

(4)

Includes 18,406 shares as to which Mr. Howard has sole voting and investment power, and 396,719 shares as to which Mr. Howard may be deemed to have shared voting and investment power, by virtue of his serving as a director of The Grainger Foundation, Inc. The Grainger Foundation was established in 1949 by William Wallace Grainger, the founder of Grainger, and is not affiliated with Grainger.

(5)

Based on information provided in a Schedule 13G/A filed on March 5, 2020, Mr. Slavik has sole voting power with respect to 1,159,833 shares, shared voting power with respect to 873,492 shares, sole dispositive power with respect to 1,159,833 shares, and shared dispositive power with respect to 873,492 shares. Mr. Slavik's aggregate beneficial ownership of 2,033,325 shares excludes 1,038,890 shares that are held in trusts for the benefit of Mr. Slavik's adult children who do not share his

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home and who serve as sole trustees of such trusts. The 3.79% calculation is based on 53,673,069 shares of common stock outstanding as of March 2, 2020, the record date for the Annual Meeting. Mr. Slavik, a current Director who is not standing for re-election at the Annual Meeting, is the cousin of Susan Slavik Williams, a Director nominee for election at the Annual Meeting. Neither Mr. Slavik nor Ms. Slavik Williams has any beneficial ownership of the other's shares

(6)

Based on information provided in a Schedule 13G/A filed on March 5, 2020, Ms. Slavik Williams has sole voting power with respect to 4,801,811 shares, shared voting power with respect to 8,342 shares, sole dispositive power with respect to 3,166,051 shares and shared dispositive power with respect to 1,644,102 shares. Ms. Slavik Williams' aggregate beneficial ownership of 4,810,153 shares excludes 783,743 shares held in trusts over which Ms. Slavik Williams has no dispositive or voting power. The 8.96% calculation is based on 53,673,069 shares of common stock outstanding as of March 2, 2020, the record date for the Annual Meeting. Ms. Slavik Williams, a Director nominee for election at the Annual Meeting, is the cousin of James D. Slavik, a current Director who is not standing for re-election at the Annual Meeting. Neither Mr. Slavik nor Ms. Slavik Williams has any beneficial ownership of the other's shares.

(7)

Includes 195 shares as to which Mr. Watson has shared voting and/or investment power.

​

Proxy Statement         33

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REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board of Directors assists the Board in fulfilling its oversight responsibilities. The Board has determined that each of the members of the Audit Committee is "independent," as that term is defined in the independence requirements for audit committee members contained in the applicable rules of the Securities and Exchange Commission (the SEC) and corporate governance standards of the New York Stock Exchange. The Audit Committee acts under a charter that is reviewed annually and was last amended by the Board on December 11, 2019. The charter is available on the Governance section of Grainger's website at http://invest.grainger.com/.

Management is responsible for the Company's internal controls and the financial reporting process and for compliance with applicable laws and regulations. Ernst & Young LLP (EY), the Company's independent auditor, was responsible for performing an independent audit of the Company's most recent consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States, as well as expressing an opinion on the effectiveness of the Company's internal control over financial reporting. The Audit Committee's responsibility is to monitor and oversee these processes.

In performing these responsibilities, the Audit Committee reviewed and discussed the Company's audited consolidated financial statements and the effectiveness of internal control over financial reporting with management and EY. The Audit Committee discussed with EY matters required to be discussed under Statement on Auditing Standards No. 1301 "Communications with Audit Committees" adopted by the Public Company Accounting Oversight Board (PCAOB). EY also provided to the Audit Committee the letter and written disclosures required by PCAOB standards concerning EY's independence and the Audit Committee discussed with EY the matter of the firm's independence.

Based on the review and discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC.

V. Ann Hailey, Chair
Brian P. Anderson
Neil S. Novich
E. Scott Santi
Lucas E. Watson

Members of the Audit Committee of
the Board of Directors

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AUDIT FEES AND AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

The following table sets forth the fees for professional services rendered by Ernst & Young LLP (EY) with respect to fiscal years 2019 and 2018, respectively:

Fee Category

​

​

2019

​

​

2018

​

​

​

​

​

​

​

​

​

​

​

​

Audit Fees (1)

​

​

$

5,519,000

​

​

$

5,736,000

​

​

​

​

​

​

​

​

​

​

​

​

Audit-Related Fees (2)

​

​

​

177,000

​

​

​

223,500

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax Fees (3)

​

​

372,000

​

​

700,000

​

​

​

​

​

​

​

​

​

​

​

​

All Other Fees (4)

​

​

​

7,000

​

​

​

7,000

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Fees

​

​

$

6,075,000

​

​

$

6,666,500

​

​

​

​

​

​

​

​

​

​

​

​

(1)

Audit Fees.    Consists of fees billed for professional services rendered for the audit of Grainger's annual financial statements and internal control over financial reporting, review of the interim financial statements included in Grainger's quarterly reports on Form 10-Q, and other services normally provided in connection with Grainger's statutory and regulatory filings or engagements.

(2)

Audit-Related Fees.    Consists of fees billed for professional services rendered for assurance and related services that are reasonably related to the performance of the audit or a review of Grainger's financial statements and are not reported under "Audit Fees." These services include the audits of Grainger's employee benefit plans and various attest services.

(3)

Tax Fees.    Consists of fees billed for professional services rendered for tax compliance, tax advice and tax planning. These services include assistance with the preparation of various tax returns.

(4)

All Other Fees.    Consists of fees billed for all other professional services rendered to Grainger, other than those reported as "Audit Fees," "Audit-Related Fees" and "Tax Fees." These fees relate to an annual subscription to an online research resource.

Pre-Approval Policy for Audit and Non-Audit Services

The Audit Committee has adopted a policy for the pre-approval of all audit and permitted non-audit services to be provided to Grainger by its independent auditor and is responsible for the review and approval of any fees associated with those services. Also, specific pre-approval by the Audit Committee is required for any proposed services exceeding pre-approved fee levels.

Pre-approvals for categories of services are granted at the start of each fiscal year and are applicable for 12 months from the date of pre-approval. In considering these pre-approvals, the Audit Committee reviews detailed supporting documentation from the independent auditor for each proposed service to be provided. Unused pre-approval amounts are not carried forward to the next year.

The Company's Controller monitors services provided by the independent auditor and overall compliance with the pre-approval policy. The Corporate Controller reports periodically to the Audit Committee about the status of outstanding engagements, including actual services provided and associated fees, and must promptly report any noncompliance with the pre-approval policy to the Chairman of the Audit Committee.

The Audit Committee may delegate pre-approval authority for audit and non-audit services to one or more of its members, and such authority has been delegated to the Chair of the Audit Committee. The decisions of any member to whom such authority is delegated must be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management its responsibilities to pre-approve services performed by the Company's independent auditor. The Audit Committee periodically reviews reports summarizing all services provided by the independent auditor.

​

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​	​ ​	​	​ Corporate Governance

​

		The Audit Committee is directly responsible for the appointment, compensation, retention, evaluation, termination and oversight of the independent external audit firm that performs audit services. In considering Ernst & Young LLP's (EY) appointment for the 2020 fiscal year, the Audit Committee reviewed the firm's qualifications and competencies, including the following factors: • EY's historical performance and its recent performance during its engagement for the 2019 fiscal year; • EY's capability and expertise in handling the breadth and complexity of the Company's operations; • the qualifications and experience of key members of the engagement team, including the lead audit partner, for the audit of the Company's financial statements; • the quality of EY's communications with the Audit Committee regarding the conduct of the audit, and with management with respect to issues identified in the audit; • external data on audit quality and performance, including recent PCAOB reports on EY; and • EY's reputation for integrity and competence in the fields of accounting and auditing.

EY has been retained as the Company's independent auditor continuously since 2005. To ensure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent auditor. The Audit Committee ensures that the mandated rotation of EY's personnel occurs routinely and the Audit Committee is directly involved in the review, selection and evaluation of EY's lead engagement partner.

The Audit Committee and the Board of Directors believe that the continued retention of EY to serve as the Company's independent auditor for the year ending December 31, 2020 is in the best interests of the Company and its shareholders, and the Board is asking shareholders to ratify this appointment. Representatives of EY are expected to be present at the meeting to respond to appropriate questions of shareholders and to make any desired statements.

Approval of the proposal requires the affirmative votes of a majority of the shares of Grainger common stock represented in person or by proxy at the meeting and entitled to vote. Abstentions will have the same effect as votes against the proposal. In the event the proposal is not approved, the Board will consider the negative vote as a mandate to appoint another independent auditor for the next year.

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36         www.grainger.com

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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis (CD&A) with management. Based on such review and discussion, the Compensation Committee has recommended to the Board of Directors that the CD&A be included in the Company's proxy statement for its 2020 annual meeting of shareholders and in its Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC. The Compensation Committee acts under a charter, last amended on December 12, 2018, that is reviewed annually. The Amended and Restated charter is available in the Governance section of Grainger's website at http://invest.grainger.com/.

Michael J. Roberts, Chairman
Rodney C. Adkins
Stuart L. Levenick
Beatriz R. Perez
James D. Slavik

Members of the Compensation Committee of
the Board of Directors

INDEPENDENT COMPENSATION CONSULTANT; FEES

In overseeing the Company's compensation programs, the Compensation Committee of the Board (the Compensation Committee) develops programs based on its own deliberations, programs and recommendations from management, and compensation and benefits consultants, including its independent compensation consultant.

After a review of the factors prescribed by the SEC and the NYSE rules and regulations, the Compensation Committee determined that Deloitte Consulting LLP (Deloitte Consulting) is independent and retained Deloitte Consulting as its independent compensation consultant.

At the Compensation Committee's direction, the independent compensation consultant:

•

attends Compensation Committee meetings;



•

assists the Compensation Committee in the review of goals and objectives for the CEO compensation;



•

provides the Compensation Committee with comparable compensation market data, including pay levels and pay practices of both our comparator companies and general industry;



•

helps the Compensation Committee evaluate recommendations proposed by management;



•

assists with incentive compensation program design, structure, and selection of the metrics;



•

annually reviews and recommends appropriate comparator companies used for compensation studies;



•

conducts or assists in risk reviews of the Company's performance and incentive-based compensation programs;



•

provides periodic updates on executive compensation trends and regulatory developments; and



•

undertakes special projects as assigned.

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Proxy Statement         37

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The following table sets forth the fees for services rendered by Deloitte Consulting and its affiliates with respect to fiscal year 2019:

Type of Fee		​	​	2019		​
​	​	​	​	​		​
Executive Compensation Consulting	​		​	$	182,724	​
​	​	​	​	​		​
All Other Consulting	​	​	​	$	1,214,821	​
​	​	​	​	​		​
Total Fees	​		​	$	1,397,545	​
​	​	​	​	​		​

Executive Compensation Consulting Fees:    Consists of fees billed for services provided to advise the Compensation Committee with respect to executive and Director compensation.

All Other Consulting Fees:    Consists of fees billed for all other services provided to Grainger. None of these fees are related to compensation matters.

Affiliates of Deloitte Consulting have provided other services to Grainger that are unrelated to executive compensation matters. The decision to engage an affiliate of Deloitte Consulting for these other services was made by management. The Board has been informed of this ongoing work and the use of an affiliate of Deloitte Consulting but neither the Board nor the Compensation Committee specifically approved these services. After a review of the factors prescribed by the SEC and the NYSE rules and regulations, the Compensation Committee determined that its compensation consultant, Deloitte Consulting, did not have any conflicts of interest.