Company: GWW
Filing Date: 2025-03-07
Form Type: DEF 14A
Source: 0001104659-25-021496
Chunk: 71

Company: W.W. GRAINGER, INC.
Filing Date: 2025-03-07
Form: DEF 14A
Chunk 71
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 account. No Directors or executive officers have hedged or pledged any of the shares beneficially owned by them. Deductibility of Executive Compensation Section 162(m) of the Internal Revenue Code generally disallows a federal income tax deduction to a public company for compensation over $1 million per taxable year paid to the Company’s NEOs. Prior to the Tax Cuts and Jobs Act of 2017 (“TCJA”), compensation that qualified as “performance-based” compensation was not subject to the deductibility limit. Effective for taxable years beginning after December 31, 2017, subject to certain transition relief, the TCJA eliminated this exception. Stock options granted to our NEOs prior to November 2, 2017 under the 2015 Incentive Plan qualify for the transition relief, and gains on exercises of such stock options are considered to be “performance-based” compensation not subject to the $1 million deductibility limit. Any other compensation paid to our NEOs, including awards other than the grandfathered stock options, is subject to the Section 162(m) deductibility limit and all or a portion of such compensation may be nondeductible. While the tax treatment applicable to the Company’s compensation programs was considered, the Company intends to authorize compensation that will not be deductible under Section 162(m) as it believes doing so is in the best interest of the Company and its shareholders. Accounting Considerations Upon vesting, settlement or maturity, equity awards under the 2022 Incentive Plan and predecessor plans are distributed in the form of shares of the Company’s common stock. Under the ASC 718, these types of awards are considered equity awards. As a result, the total amount of compensation expense to be recorded for the awards is based on the fair value of the awards on the grant date. This fair value is then recorded over the vesting period, usually three years, and is recorded to compensation expense, net of estimated forfeitures and as an increase in paid-in capital. The amount of compensation expense is not subsequently adjusted for changes in the Company’s share price, but it is adjusted for the estimated number of shares to be distributed. While the accounting treatment described above was considered in the development of the long-term incentive program, it was not a material consideration. Compensation Recoupment Policy (Clawback) The Company has established strong recoupment policies. For current or former executive officers only, the Company established a ‘no fault’ clawback policy that follows the incentive-based compensation recovery provisions of the Dodd-Frank Act