Sherwin-Williams Company (SHW)

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Rule 14a)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

(Amendment No.      )

(Name of Registrant as Specified in its Charter)

o  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

 

 

 

 

 

 

 

 

 

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The Sherwin-Williams Company

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held April 18, 2007

       The Annual Meeting of Shareholders of The Sherwin-Williams Company will be held in the Landmark Conference Center, 927 Midland Building, 101 Prospect Avenue, N.W., Cleveland, Ohio on Wednesday, April 18, 2007 at 9:00 A.M., local time, for the following purposes:

      Shareholders of record at the close of business on March 2, 2007 are the only shareholders entitled to notice of and to vote at the Annual Meeting.

      Your vote is important. Whether or not you plan to attend the Annual Meeting, please promptly vote by the Internet, by telephone or by completing and returning the enclosed proxy card. Voting early will help avoid additional solicitation costs and will not prevent you from voting in person at the Annual Meeting if you wish to do so.

      You may help us save money in the future by accessing your proxy materials on-line. If you would like to access proxy materials on the Internet beginning next year, please follow the instructions on the “Investor Relations” page of our website at www.sherwin.com.

101 Prospect Avenue, N.W.

Cleveland, Ohio 44115-1075

March 8, 2007

ADMISSION TO THE 2007 ANNUAL MEETING.

      You are entitled to attend the Annual Meeting only if you were a Sherwin-Williams shareholder as of the close of business on March 2, 2007, the record date. We may ask you to present valid photo identification to enter the Annual Meeting.

THE SHERWIN-WILLIAMS COMPANY

101 Prospect Avenue, N.W.

Cleveland, Ohio 44115-1075

PROXY STATEMENT

March 8, 2007

PRELIMINARY

      We are providing the enclosed proxy materials to you in connection with the solicitation by the Board of Directors of proxies to be voted at the Annual Meeting of Shareholders to be held on April 18, 2007. We began mailing these proxy materials to our shareholders on March 8, 2007.

ANNUAL REPORT

      We are enclosing our Annual Report to Shareholders for the year ended December 31, 2006 with these proxy materials. We may submit additional financial and other reports at the Annual Meeting, but we do not intend to take any action relating to those reports.

ABOUT THE MEETING

What is the purpose of the Annual Meeting?

      At the Annual Meeting, shareholders will act upon the proposals outlined in the Notice of Annual Meeting of Shareholders. These proposals include:

      • the election of directors;

      In addition, our management will report on Sherwin-Williams’ performance and respond to questions from shareholders. We are not aware of any other matters that will be brought before the Annual Meeting for action.

Who is entitled to vote?

      Only record holders of our common stock and our ESOP serial preferred stock at the close of business on March 2, 2007, the record date, are entitled to vote at the Annual Meeting. At the close of business on the record date, 131,854,618 shares of common stock and 408,137 shares of ESOP serial preferred stock were outstanding. Each share owned on the record date is entitled to one vote.

How do I vote?

      Voting by mail. If you are a shareholder of record, you may vote by signing, dating and returning your proxy card in the enclosed prepaid envelope. The proxy holders will vote your shares in accordance with your directions. If you sign and return your proxy card, but do not properly direct how your shares should be voted on a proposal, the proxy holders will vote your shares “FOR” Proposals 1, 2 and 3. If you sign and return your proxy card, the proxy holders will vote your shares according to their discretion on any other proposals and other matters that may be brought before the Annual Meeting.

      If you hold shares in an account through a broker or other nominee in “street name,” you should complete, sign and date the voting instruction card provided to you by your broker or nominee.

      Voting on the Internet or by Telephone. If you are a shareholder of record, detailed instructions for Internet and telephone voting are attached to your proxy card. Your Internet or telephone vote authorizes the proxy holders to vote your shares in the same manner as if you signed and returned your proxy card by mail. If you are a shareholder of record and

you vote by the Internet or telephone, your vote must be received by 5:00 p.m. E.D.T. on April 17, 2007; you should not return your proxy card.

      If you hold shares through a broker or other nominee in “street name,” you may be able to vote by the Internet or telephone as permitted by your broker or nominee.

      Voting in Person. All shareholders may vote in person at the Annual Meeting. Shareholders of record may also be represented by another person present at the Annual Meeting by signing a proxy designating such person to act on your behalf. If you hold shares through a broker or nominee, you may vote in person at the Annual Meeting only if you have obtained a signed proxy from your broker or nominee giving you the right to vote your shares.

Who tabulates the vote?

      Representatives of The Bank of New York will tabulate the votes and act as inspectors of election at the Annual Meeting.

How do I vote if I am a participant in the Stock Ownership and Automatic Dividend Reinvestment Plan or the Employee Stock Purchase and Savings Plan?

      If you are a participant in one of these plans, your proxy card also serves as voting instructions for the number of shares which you are entitled to direct the vote under each plan. You may vote your shares in the same manner outlined above. If you are a participant in the Employee Stock Purchase and Savings Plan, your voting instructions must be received by the close of business on April 13, 2007 in order to allow the trustee sufficient time for voting.

      If you are a participant in the Employee Stock Purchase and Savings Plan and you do not timely provide your voting instructions, the trustee will vote your shares in the same proportion as the trustee votes those shares for which it receives proper instructions. The trustee will vote any unallocated shares held in the Employee Stock Purchase and Savings Plan in the same proportion as the trustee votes those shares for which it receives proper instructions.

What are the voting recommendations of the Board of Directors?

      The Board of Directors recommends that you vote:

What constitutes a quorum for the Annual Meeting?

      A “quorum” of shareholders is necessary for us to hold a valid Annual Meeting. For a quorum, there must be present, in person or by proxy, or by use of communications equipment, shareholders of record entitled to exercise not less than fifty percent of the voting power of Sherwin-Williams.

      Proxy cards marked as withholding authority, as well as proxy cards containing abstentions and “broker non-votes,” will be treated as present for purposes of determining a quorum. A “broker non-vote” occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular “non-routine” proposal because the broker or nominee does not have discretionary voting power for that proposal and has not received voting instructions from the beneficial owner. If you are a beneficial owner and a broker holds your shares, it is expected that your broker will be permitted to vote your shares on Proposals 1, 2 and 3 even if your broker does not receive voting instructions from you.

What vote is required to approve each proposal?

      Election of Directors (Proposal 1). Proposal 1 to fix the number of directors at 11 requires the affirmative vote of the holders of a majority of the shares present, in person or by proxy, and entitled to vote on this proposal. To be elected as a director, a nominee must

receive the affirmative vote of a plurality of the votes cast. A proxy card marked as withholding authority with respect to the election of one or more directors will be counted for quorum purposes.

      Under our Majority Voting Policy, in an uncontested election, any nominee for director who receives a greater number of “withheld” votes than “for” votes is required to tender his or her resignation for consideration by the Nominating and Corporate Governance Committee of the Board of Directors. We have provided more information about our Majority Voting Policy under the heading “Corporate Governance — Majority Voting Policy.”

      Approval of the 2007 Executive Performance Bonus Plan (Proposal 2). Proposal 2 to approve the 2007 Executive Performance Bonus Plan requires the affirmative vote of a majority of the votes cast. A proxy card marked as abstaining with respect to this proposal and any broker non-votes with respect to this proposal will be counted for quorum purposes, but will not be counted as a vote cast, and therefore will have no effect on the vote.

      Ratification of Independent Registered Public Accounting Firm (Proposal 3). Proposal 3 to ratify the appointment of Ernst & Young LLP as Sherwin-Williams’ independent registered public accounting firm requires the affirmative vote of a majority of the votes cast. A proxy card marked as abstaining with respect to this proposal will be counted for quorum purposes, but will not be counted as a vote cast, and therefore will have no effect on the vote.

      Other Items. All other proposals and other business as may properly come before the Annual Meeting require the affirmative vote of a majority of the votes cast, except as otherwise required by statute or our Amended Articles of Incorporation or Regulations.

Can I revoke or change my vote after I submit my proxy?

      Yes. You can revoke or change your vote before the proxy holders vote your shares by timely:

How can I attend the Annual Meeting?

      You are entitled to attend the Annual Meeting only if you were a shareholder as of the close of business on March 2, 2007, the record date. We may ask you to present valid photo identification to enter the Annual Meeting.

CORPORATE GOVERNANCE

      We have a long history of good corporate governance practices that has greatly aided our long-term success. The Board of Directors and management have recognized for many years the need for sound corporate governance practices in fulfilling their respective duties and responsibilities to shareholders.

      Corporate Governance Guidelines. The Board of Directors has adopted Corporate Governance Guidelines, which provide the framework for the governance of our company. The Board of Directors reviews our Corporate Governance Guidelines at least annually. From time to time, the Board of Directors may revise

our Corporate Governance Guidelines to reflect new regulatory requirements and evolving corporate governance practices.

      Business Ethics Policy. We have operated under a Business Ethics Policy for many years and are committed to conducting business in an ethical and legal manner throughout the world. Our Business Ethics Policy applies to all of our directors, officers and employees and outlines the broad principles of ethical and legal conduct embraced by Sherwin-Williams to guide our business related conduct. Under our Business Ethics Policy, any director or employee who reasonably believes or suspects that Sherwin-Williams or any director or employee has or is engaging in improper or illegal activities, fraud or activities that appear to be inconsistent with or in violation of the Business Ethics Policy is responsible for reporting such activities. We do not permit retaliation of any kind against any person who, in good faith, reports any known or suspected improper activities pursuant to the Business Ethics Policy.

      Our Business Ethics Policy includes additional ethical obligations for our senior financial management (which includes our chief executive officer, our chief financial officer, and the controller, treasurer and principal financial and accounting personnel in our operating groups and corporate departments). Our senior financial management is responsible for creating and maintaining a culture of high ethical standards throughout our company to ensure the fair and timely reporting of our financial results and financial condition.

      Communications with Directors. The Board of Directors has adopted a process by which shareholders and other interested parties may communicate with the non-management directors or the chairperson of any of the committees of the Board of Directors by e-mail or regular mail. You may send communications by e-mail to the auditchair@sherwin.com, compchair@sherwin.com, or corpgovchair@sherwin.com, or to the non-management directors as a group to the non-managementdirectors@sherwin.com. You may also send communications by regular mail to the attention of the Chairperson, Audit Committee; Chairperson, Compensation and Management Development Committee; or Chairperson, Nominating and Corporate Governance Committee; or to the non-management directors as a group to the Non-Management Directors, each c/o Corporate Secretary, The Sherwin-Williams Company, 101 Prospect Avenue, N.W., 12th Floor, Midland Building, Cleveland, Ohio 44115.

      Sherwin-Williams’ management will review all communications received to determine whether the communication requires immediate action. Management will pass on all communications received, or a summary of such communications, to the appropriate director or directors.

      Complaint Procedures for Accounting, Auditing and Financial Related Matters. The Audit Committee has established procedures for receiving, retaining and treating complaints from any source regarding accounting, internal accounting controls and auditing matters. The Audit Committee has also established procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. Interested parties may communicate such complaints by following the procedures described under the heading “Communications with Directors,” above. Employees may report such complaints by following the procedures outlined in the Business Ethics Policy. We do not permit any retaliation of any kind against any person who, in good faith, submits a complaint or concern under these procedures.

      Independence of Directors. Under our Director Independence Standards (a copy of which is attached as Appendix A), 10 of our current 11 directors are independent and 10 of our 11 director nominees are independent. In addition, all members of the Audit Committee, the Compensation and Management Development Committee, and the Nominating and Corporate Governance Committee are independent.

      Majority Voting Policy. The Board of Directors has adopted a Majority Voting Policy. Any nominee for director in an uncontested election who receives a greater number of “withheld” votes than “for” votes shall promptly tender his or her resignation. The Nominating and Corporate Governance Committee will promptly consider the tendered

resignation and will recommend to the Board of Directors whether to accept the tendered resignation or to take some other action, such as rejecting the tendered resignation and addressing the apparent underlying causes of the “withheld” votes.

      In making this recommendation, the Committee will consider all factors deemed relevant by its members. These factors may include the underlying reasons why shareholders “withheld” votes for election from such director (if ascertainable), the length of service and qualifications of the director whose resignation has been tendered, the director’s contributions to Sherwin-Williams, whether by accepting such resignation Sherwin-Williams will no longer be in compliance with any applicable law, rule, regulation or governing document, and whether or not accepting the resignation is in the best interests of Sherwin-Williams and our shareholders.

      In considering the Committee’s recommendation, the Board of Directors will consider the factors considered by the Committee and such additional information and factors that the Board of Directors believes to be relevant. We will promptly publicly disclose the Board of Directors’ decision and process in a periodic or current report filed with the SEC.

      Executive Sessions. The non-management members of the Board of Directors meet at least twice each year in regularly scheduled executive sessions. Additional executive sessions may be scheduled by the non-management directors. The chairpersons of the Audit Committee, the Compensation and Management Development Committee, and the Nominating and Corporate Governance Committee rotate presiding over these sessions.

      Annual Board Self-Assessments. The Board of Directors has instituted annual self-assessments of the Board of Directors, as well as the Audit Committee, the Compensation and Management Development Committee, and the Nominating and Corporate Governance Committee, to assist in determining whether the Board of Directors and its committees are functioning effectively. In early 2007, the Board and each of its committees completed self-evaluations and reviewed and discussed the results. The Nominating and Corporate Governance Committee oversees this evaluation process.

      Board Committee Charters. The Board of Directors has adopted written charters for the Audit Committee, the Compensation and Management Development Committee, and the Nominating and Corporate Governance Committee. Each committee reviews and evaluates the adequacy of its charter at least annually and recommends any proposed changes to the Board of Directors for approval.

      Stock Ownership Guidelines. The Board of Directors has established a minimum share ownership requirement for its directors, executive officers and operating presidents. Each director who has served on the Board for at least five years is expected to own a minimum of 5,000 shares of common stock. Each executive officer and operating president who has served in such capacity for at least five years is expected to own shares of common stock equal in value to a multiple of their base salary ranging from a low of three times to a high of five times for the Chairman and Chief Executive Officer. For purposes of meeting this minimum share ownership requirement, each equivalent share of common stock and each share of restricted stock held under our benefit plans is considered as a share of common stock. Stock options are not considered towards meeting this requirement.

      All directors, executive officers and operating presidents have either met our stock ownership guidelines or are pursuing plans to meet our guidelines within the time frames prescribed.

      Availability of Corporate Governance Materials. You may access all committee charters, our Corporate Governance Guidelines, our Director Independence Standards, our Business Ethics Policy, our Majority Voting Policy and other corporate governance materials in the “Corporate Governance” section on the “Investor Relations” page of our website at www.sherwin.com. You also may receive copies without charge by writing to us at: The Sherwin-Williams Company, 101 Prospect Avenue, N.W., Cleveland, Ohio 44115, Attention: Investor Relations.

ELECTION OF DIRECTORS (PROPOSAL 1)

      At the Annual Meeting, the number of directors is to be fixed at 11, and 11 directors are to be elected to hold office until the next Annual Meeting of Shareholders and until their successors are elected.

      Our Board of Directors currently has 11 members. All of these directors are standing for re-election as nominees. All of the nominees were elected by the shareholders at the 2006 Annual Meeting. All of the nominees are independent except for Mr. Connor. Mr. Connor is not considered to be independent because of his position as Chairman and Chief Executive Officer of Sherwin-Williams. There are no family relationships among any of the directors and executive officers.

      Each of the nominees has agreed to serve if elected. If any nominee declines or is unable to accept such nomination or is unable to serve, an event which we do not expect, the Board of Directors reserves the right in its discretion to substitute another person as a nominee or to reduce the number of nominees. In this event, the proxy holders may vote in their discretion for any substitute nominee proposed by the Board of Directors unless you indicate otherwise.

      The following is information regarding each nominee:

Arthur F. Anton

President and
Chief Executive Officer,

Swagelok Company

Director of Sherwin-Williams since 2006

Arthur F. Anton, 49, has served as President and Chief Executive Officer of Swagelok Company (manufacturer and provider of fluid system products and services) since January 2004. Mr. Anton served as President and Chief Operating Officer of Swagelok from January 2001 to January 2004, Executive Vice President of Swagelok from July 2000 to January 2001, and Chief Financial Officer of Swagelok from August 1998 to July 2000. Mr. Anton is also a Director of University Hospitals Health System and is Vice Chairman of the Manufacturing Advocacy & Growth Network.

James C. Boland

Vice Chairman,
Cavaliers Operating Company, LLC

Director of Sherwin-Williams since 1998

James C. Boland, 67, has served as Vice Chairman of Cavaliers Operating Company, LLC (formerly known as Cavaliers/Gund Arena Company) (operator of the Cleveland Cavaliers professional basketball team and Quicken Loans Arena) since January 2003. Mr. Boland served as President and Chief Executive Officer of CAVS/Gund Arena Company from January 1998 to January 2003. Prior to his retirement from Ernst & Young LLP in September 1998, Mr. Boland served for 22 years as a partner of Ernst & Young LLP in various roles including Vice Chairman and Regional Managing Partner as well as a member of the firm’s Management Committee from 1988 to 1996 and as Vice Chairman of National Accounts from 1997 to his retirement. Mr. Boland is also a Director of The Goodyear Tire & Rubber Company and Invacare Corporation and is a Trustee of Bluecoats, Inc. and The Harvard Business School Club of Cleveland.

Christopher M. Connor
Chairman and

Chief Executive Officer,

Sherwin-Williams

Director of Sherwin-Williams since 1999

Christopher M. Connor, 50, has served as Chairman of Sherwin-Williams since April 2000 and Chief Executive Officer of Sherwin-Williams since October 1999. Mr. Connor served as President of Sherwin-Williams from July 2005 to October 2006, Vice Chairman of Sherwin-Williams from October 1999 to April 2000, and President, Paint Stores Group of Sherwin-Williams from August 1997 to October 1999. Mr. Connor has been with Sherwin-Williams since 1983 in roles of increasing responsibility. Mr. Connor is also a Director of Eaton Corporation and National City Corporation. In addition, Mr. Connor is Chairman of University Hospitals Health System, serves on the boards of Keep America Beautiful, Rock and Roll Hall of Fame, Playhouse Square Foundation, United Way Services of Greater Cleveland, Greater Cleveland Partnership, National Association of Manufacturers, National Paint & Coatings Association and The Catholic Diocese of Cleveland

Foundation and is a member of the Dean’s Advisory Council of the Fisher College of Business, The Ohio State University.

Daniel E. Evans

Retired, Former Chairman, Chief

Executive Officer and Secretary,

Bob Evans Farms, Inc.

Director of Sherwin-Williams since 1990

Daniel E. Evans, 70, prior to his retirement in April 2001, served as Chairman of Bob Evans Farms, Inc. (food products and restaurants) since 1971. Mr. Evans served as Chief Executive Officer and Secretary of Bob Evans Farms from 1971 to April 2000. Mr. Evans is also a Director of Evans Enterprises, Inc. and Motorists Mutual Insurance Company.

David F. Hodnik

Retired, Former President and

Chief Executive Officer,

Ace Hardware Corporation

Director of Sherwin-Williams since 2005

David F. Hodnik, 59, prior to his retirement in April 2005, served as Chief Executive Officer of Ace Hardware Corporation (cooperative of independent hardware retail stores) since January 1997. Mr. Hodnik also served as President of Ace from January 1996 through December 2004. Mr. Hodnik joined Ace in October 1972 and held various financial, accounting and operating positions at Ace.

Susan J. Kropf

Retired, Former President and

Chief Operating Officer,

Avon Products, Inc.

Director of Sherwin-Williams since 2003

Susan J. Kropf, 58, prior to her retirement in January 2007, served as President and Chief Operating Officer of Avon Products, Inc. (global manufacturer and marketer of beauty and related products) since January 2001. Mrs. Kropf served as Executive Vice President and Chief Operating Officer, North America and Global Business Operations, of Avon from December 1999 to January 2001 and Executive Vice President and President, North America, of Avon from March 1997 to December 1999. Mrs. Kropf joined Avon in 1970 and held various positions in manufacturing, marketing and product development. Mrs. Kropf is also a Director of Coach, Inc., MeadWestvaco Corporation and the Wallace Foundation.

Robert W. Mahoney

Retired, Former Chairman, Chief

Executive Officer and President,

Diebold, Incorporated

Director of Sherwin-Williams since 1995

Robert W. Mahoney, 70, prior to his retirement in April 2000, served as Chairman of Diebold, Incorporated (manufacturer of financial self-service transaction systems and security products) since April 1988. Mr. Mahoney served as Chief Executive Officer of Diebold from April 1988 to November 1999 and President of Diebold from July 1993 to November 1996. Mr. Mahoney is also a Director of Cincinnati Bell Inc. and The Timken Company, is Chairman of the Federal Reserve Bank of Cleveland, Chairman of Ignite Sales, Inc. and Chairman of Mercy Medical Center (Canton, Ohio), is a Trustee of the Professional Football Hall of Fame, and is a Member of the Stark (County, Ohio) Development Board, Inc.

Gary E. McCullough

Senior Vice President,

Abbott Laboratories

President, Ross Products Division

Director of Sherwin-Williams since 2002

Gary E. McCullough, 48, has served as Senior Vice President of Abbott Laboratories and President of its Ross Products Division (manufacturer of a variety of pediatric and adult nutritional products) since December 2003. Immediately prior to joining Abbott, Mr. McCullough served as Senior Vice President – Americas of Wm. Wrigley Jr. Company from March 2000 to December 2003. Mr. McCullough also spent 13 years at the Procter & Gamble Company where he served in a variety of marketing and management positions including General Manager, North America Home Care Category from December 1998 to March 2000, Marketing Director, Juice Products Category from September 1996 to December 1998, and Marketing Director, Laundry & Cleaning Products, Venezuela from December 1995 to September 1996. Mr. McCullough is a Director of the Columbus Chamber of Commerce and a Member of the Board of Trustees of COSI Columbus

(Center of Science and Industry) and United Way of Central Ohio.

A. Malachi Mixon, III

Chairman and Chief Executive Officer,
Invacare Corporation

Director of Sherwin-Williams since 1993

A. Malachi Mixon, III, 66, has served as Chief Executive Officer of Invacare Corporation (manufacturer and distributor of home health care products) since January 1980 and Chairman of Invacare since September 1983. Mr. Mixon served as President of Invacare from January 1980 to November 1996. Mr. Mixon is also a Director of The Lamson and Sessions Co. and is Chairman of The Cleveland Clinic Foundation and the Cleveland Institute of Music.

Curtis E. Moll

Chairman and Chief Executive Officer,
MTD Holdings Inc

Director of Sherwin-Williams since 1997

Curtis E. Moll, 67, has served as Chairman and Chief Executive Officer of MTD Holdings Inc (manufacturer of outdoor power equipment and tools, dies and stampings for the automotive industry) since October 1980. Mr. Moll is also a Director of AGCO Corporation and is Chairman of the Board of Directors of Shiloh Industries, Inc.

Richard K. Smucker

President and Co-Chief Executive Officer,
The J.M. Smucker Company

Director of Sherwin-Williams since 1991

Richard K. Smucker, 58, has served as Co-Chief Executive Officer of The J.M. Smucker Company (makers of food products) since February 2001 and President of J.M. Smucker since January 1987. Mr. Smucker served as Chief Financial Officer of J.M. Smucker from June 2003 to January 2005. Mr. Smucker is also a Director of J.M. Smucker and Wm. Wrigley Jr. Company and is a Trustee of Miami University of Ohio and the Musical Arts Association (The Cleveland Orchestra).

      The Board of Directors unanimously recommends that you vote “FOR” Proposal 1 relating to the election of directors.

INDEPENDENCE OF DIRECTORS

      The Board of Directors has adopted categorical Director Independence Standards to assist the Board of Directors in determining the independence of each director. To be considered independent, the Board of Directors must affirmatively determine that the director has no material relationship with Sherwin-Williams. In each case, the Board of Directors broadly considers all relevant facts and circumstances, including the director’s commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, and such other criteria as the Board of Directors may determine from time to time. A copy of our Director Independence Standards is attached as Appendix A.

      During the Board of Directors’ annual review of director independence, the Board of Directors considers transactions, relationships and arrangements between each director or an immediate family member of the director and Sherwin-Williams. The Board of Directors also considers transactions, relationships and arrangements between each director or an immediate family member of the director and Sherwin-Williams’ senior management.

      Early this year, the Board of Directors performed its annual director independence review for 2007. As part of this review, the Board of Directors considered club memberships common among our directors, including Messrs. Anton, Boland, Connor, Mixon and Smucker. The Board of Directors also considered common public, private and charitable board memberships among our executive officers and directors, including Messrs. Anton, Boland, Connor, Mixon and Moll. The Board of Directors does not believe that any of these common club and board memberships impair the independence of the directors.

      As a result of this review, the Board of Directors determined that 10 of our 11 current directors and director nominees are independent, and all members of the Audit Committee, the Compensation and Management Development Committee, and the Nominating and Corporate Governance Committee are independent. The Board of Directors determined that Mrs. Kropf and Messrs. Anton, Boland, Evans, Hodnik, Mahoney, McCullough, Mixon, Moll and

Smucker meet these standards and are independent and, in addition, satisfy the independence requirements of the New York Stock Exchange. In addition, the Board of Directors determined in early 2006 that Mr. Collins (who retired at the 2006 Annual Meeting of Shareholders in accordance with the Board’s retirement policy) was independent under those standards and requirements. Mr. Connor is not considered to be independent because of his position as Chairman and Chief Executive Officer of Sherwin-Williams.

2006 DIRECTOR COMPENSATION TABLE

      The following table sets forth information regarding the compensation of our nonemployee directors for 2006. Mr. Connor, who is our Chairman and Chief Executive Officer, does not receive any additional compensation for services as a director.

DIRECTOR COMPENSATION PROGRAM

      The Compensation and Management Development Committee is responsible for annually reviewing and approving the compensation for the nonemployee directors. All of the nonemployee directors are paid under the same compensation program. Officers of Sherwin-Williams who also serve as directors do not receive any additional compensation for services as a director.

      We use a combination of cash and equity-based compensation to attract and retain our nonemployee directors. Compensation for the nonemployee directors consists of an annual cash retainer; an additional annual cash retainer for chairs of the Audit Committee, the Compensation and Management Development Committee, and the Nominating and Corporate Governance Committee; meeting fees; an annual grant of restricted stock; and other benefits.

      Stock options are not currently a part of the nonemployee director compensation program. In addition, we do not provide retirement benefits to our nonemployee directors.

      Director Fees. For 2007, the cash and equity compensation payable to the nonemployee directors is as follows:

Shares of restricted stock vest in annual increments of one-third of the shares granted over a period of three years. The shares will immediately vest in the event of the death or disability of the director or in the event of a change in control of Sherwin-Williams. In the event of the retirement of the director, the shares will continue to vest in accordance with the original three-year vesting schedule.

      Other Benefits. We reimburse all directors for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors and its committees. This includes travel expenses of spouses if they are invited for a specific business purpose.

      We also pay the premiums for liability insurance and business travel accident insurance for all directors, including $225,000 accidental death and dismemberment coverage and $225,000 permanent total disability coverage, while the directors are traveling on Sherwin-Williams’ business.

      Directors may also receive the same discounts as our employees on the purchase of products at Sherwin-Williams’ stores and are eligible to participate in our matching gifts programs on the same basis as employees. These programs provide for annual matches of up to $5,000 under the matching gifts to education program and $1,000 under the matching gifts for volunteer leaders program, as well as annual grants of up to $200 under the grants for volunteers program.

      Deferral of Director Fees. In accordance with the Director Deferred Fee Plan, directors may elect to defer all or a part of their retainer and meeting fees. Deferred fees may be credited to a common stock account, a shadow stock account or an interest bearing cash account. The value of the shadow stock account reflects changes in the market price of our common stock and the payment of dividend equivalents at the same rate as paid on our common stock. Amounts deferred may be distributed either in annual installments over a period up to ten years or in a lump sum on the date chosen by the director.

BOARD MEETINGS AND COMMITTEE MEMBERSHIP

      The Board of Directors held four meetings during 2006. Each director attended at least 75% of the meetings of the Board of Directors and committees on which he or she served. Each director is expected to attend, absent unusual circumstances, all annual and special meetings of shareholders. All directors attended the 2006 Annual Meeting of Shareholders.

      The Board of Directors has established an Audit Committee, a Compensation and Management Development Committee, and a Nominating and Corporate Governance Committee. The Board of Directors has adopted a written charter for each of these committees. You can find a complete copy of each committee charter in the “Corporate Governance” section on the “Investor Relations” page of our website at www.sherwin.com. The following table sets forth the current membership of these committees.

* Committee Chair

      Audit Committee. The purpose of the Audit Committee is to assist the Board of Directors in fulfilling the Board of Directors’ oversight responsibilities on matters relating to:

      The Audit Committee met five times during 2006. Each member of the Committee is independent as defined in the corporate governance listing standards of the New York Stock Exchange, SEC regulations and our Director Independence Standards. The Board of Directors has determined that Messrs. Boland and Smucker are “audit committee financial experts,” as that term is defined by SEC regulations. No member of the Audit Committee serves on the audit committees of three other public companies.

      Compensation and Management Development Committee. The purpose of the Compensation and Management Development Committee is to assist the Board of Directors in fulfilling the Board of Directors’ oversight responsibilities on matters relating to:

      The Compensation and Management Development Committee met four times during 2006. Each member of the Committee is independent as defined in the corporate governance listing standards of the New York Stock Exchange and our Director Independence Standards.

      Process for Determining Director and Executive Compensation. The Committee reports to the Board of Directors on all compensation matters regarding our directors, executive officers and other key salaried employees. The Committee annually reviews and approves the compensation for our directors, executive officers and other key salaried employees. The Committee does not generally delegate any of its authority to other persons, although it has the power to delegate authority to subcommittees. The Committee relies upon our executive officers and other employees and outside compensation consultants in order to assist the Committee in performing its duties.

      As explained in more detail under the heading “Compensation Discussion and Analysis,” we generally want to pay our executive officers compensation that is competitive in the marketplace. Likewise, we also want to pay our directors competitive compensation. In order to assist in determining whether compensation is competitive, the Committee and Sherwin-Williams engage a compensation consultant to annually compile information regarding the compensation that similar companies are paying to their directors and executive officers. Our Senior Vice President — Human Resources and his staff usually work directly with the compensation consultant to compile the market compensation information. We use that information as a starting point to set compensation levels for our directors and executive officers.

      During 2006, the Committee and Sherwin-Williams retained Towers Perrin as the compensation consultant. We requested the compensation consultant to provide us with information regarding all elements of compensation that companies comparable to Sherwin-Williams pay to their directors. In addition, as described under the heading “Compensation Discussion and Analysis,” the compensation consultant was asked to provide similar market information with regard to compensation paid to executive officers. During 2006, the Committee and Sherwin-Williams also engaged Towers Perrin to review our severance pay agreements to assist us in identifying market practices.

      The Committee relies upon our Senior Vice President — Human Resources and his staff for input in setting director and executive officer compensation levels. The compensation consultant typically provides the requested market compensation information to our Senior Vice President — Human Resources. With regard to director compensation, the compensation consultant also typically provides the Committee with recommendations of any changes to director compensation. Our Senior Vice President — Human Resources may also make recommendations to the Committee for director compensation. With regard to executive officer compensation, management generally makes recommendations to the Committee and plays a more active role in the compensation setting process, including the evaluation of executive officer performance and making recommendations with regard to salary levels, annual cash incentive compensation, long-term annual compensation awards (restricted stock and stock options) and other employee benefits.

      Prior to providing recommendations to the Committee at its formal meetings, our Senior Vice President — Human Resources generally will meet with our Chief Executive Officer to review the recommendations, except for recommendations concerning our Chief Executive Officer’s compensation. Our Chief Executive Officer and our Senior Vice President — Human Resources also will meet with the Chair of the Committee prior to Committee meetings to review the agenda for the meeting and the compensation recommendations. Our Chief Executive Officer and our Senior Vice President — Human Resources generally attend all Committee meetings. Our Senior Vice President — Human Resources serves as secretary for the Committee at its meetings. Our Chief Executive Officer is excused from that part of

the meeting during which the Committee discusses his annual performance evaluation and compensation.

      Nominating and Corporate Governance Committee. The purpose of the Nominating and Corporate Governance Committee is to assist the Board of Directors in fulfilling the Board of Directors’ oversight responsibilities on matters relating to:

      The Nominating and Corporate Governance Committee met three times in 2006. Each member of the Committee is independent as defined in the corporate governance listing standards of the New York Stock Exchange and our Director Independence Standards.

      Director Qualifications. The Committee seeks a diverse group of candidates who possess the appropriate characteristics, skills, experience and time to make a significant contribution to the Board of Directors, Sherwin-Williams and our shareholders. Each candidate will be evaluated in the context of the Board of Directors as a whole, with the objective that the Board of Directors can best perpetuate Sherwin-Williams’ success and represent shareholders’ interests through the exercise of sound business judgment using the directors’ diversity of experiences. Each candidate shall have the highest personal and professional character and integrity, and shall have demonstrated exceptional ability and judgment in their respective endeavors. Candidates must possess sufficient time to effectively carry out their duties and responsibilities.

      In considering the composition of the Board of Directors as a whole, the Board of Directors considers the following skills and experiences of each individual candidate:

      In addition, the Board of Directors considers such other skills and experiences as it deems appropriate given the then-current needs of the Board of Directors and Sherwin-Williams.

      The Committee may employ professional search firms (for which it would pay a fee) to assist it in identifying potential members of the Board of Directors with the desired skills and disciplines.

      Consideration of Candidates Recommended by Shareholders. The Committee’s policy with respect to the consideration of director candidates recommended by shareholders is that the Committee will consider such candidates on the same basis and in the same manner as it considers all director candidates. Recommendations are required to include information about the background and qualifications of the candidate. You may find a description of these requirements in the “Corporate Governance” section on the “Investor Relations” page of our website at www.sherwin.com. Shareholders may submit recommendations, along with proof of shareholder status, in writing to Chairperson, Nominating and Corporate Governance Committee, c/o Corporate Secretary, The Sherwin-Williams Company, 101 Prospect Avenue, N.W., 12th Floor, Midland Building, Cleveland, Ohio 44115.

AUDIT COMMITTEE REPORT

      Management has the primary responsibility for the integrity of Sherwin-Williams’ financial information and the financial reporting process, including the system of internal control over financial reporting. Ernst & Young LLP, Sherwin-Williams’ independent registered public accounting firm, is responsible for conducting independent audits of Sherwin-Williams’ financial statements and management’s assessment of the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) and expressing an opinion on the financial statements and management’s assessment based upon those audits. The Audit Committee is responsible for overseeing the conduct of these activities by management and Ernst & Young LLP.

      As part of its oversight responsibility, the Committee has reviewed and discussed the audited financial statements, the adequacy of financial controls and the effectiveness of Sherwin-Williams’ internal control over financial reporting with management and Ernst & Young LLP. The Committee also has discussed with Ernst & Young LLP the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees). The Committee has received the written disclosures and the letter from Ernst & Young LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and has discussed with Ernst & Young LLP that firm’s independence.

      Based upon these reviews and discussions, the Committee recommended to the Board of Directors that the audited financial statements be included in Sherwin-Williams’ Annual Report on Form 10-K for the year ended December 31, 2006 for filing with the Securities and Exchange Commission.

AUDIT COMMITTEE

R. K. Smucker, Chairman

J. C. Boland

D. F. Hodnik

G. E. McCullough

C. E. Moll

COMPENSATION COMMITTEE REPORT

      The Compensation and Management Development Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based upon this review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Sherwin-Williams’ Annual Report on Form 10-K for the year ended December 31, 2006 and this proxy statement.

COMPENSATION AND MANAGEMENT

DEVELOPMENT COMMITTEE

R. W. Mahoney, Chairman

A. F. Anton

D. E. Evans

S. J. Kropf

A. M. Mixon, III

COMPENSATION DISCUSSION AND ANALYSIS

      Objectives. We design our compensation programs to maintain a performance and achievement-oriented environment throughout our company. We also design our compensation programs to attract, hire, retain and motivate talented and skilled individuals at all levels of our company. We have designed our executive compensation program with these same goals in mind.

      Generally, we want to pay our executives compensation that is competitive in the marketplace. We review the median compensation paid to executives at other comparable chemical, building product manufacturing and retail companies. We use this information as a starting point to set compensation levels for our executives. When setting compensation levels, we also take into account other factors such as the level of responsibility of the executive, the performance of the executive, the experience and tenure of the executive, the compensation of the executive compared to the compensation of other key salaried employees, and the performance of our company and our business units.

      The Compensation Committee. The Compensation and Management Development Committee assists our Board of Directors in fulfilling our Board’s oversight responsibilities to administer our executive compensation program. Each member of the Committee is independent as defined in the corporate governance listing standards of the New York Stock Exchange and our director independence standards.

      The Committee reports to the Board of Directors on all compensation matters regarding our executives and other key salaried employees. The Committee annually reviews and approves the compensation (including annual base salary, annual cash incentive compensation, long-term incentive compensation and other employee benefits) for our executives and other key salaried employees. You may learn more about the Committee’s responsibilities by reading the Committee’s Charter, which is available in the “Corporate Governance” section on the “Investor Relations” page of our website at www.sherwin.com. We have also included additional information about the Committee, including the role of compensation consultants and our executives in the compensation setting process, under the heading “Board Meetings and Committee Membership — Compensation and Management Development Committee.”

      Components of Compensation. The major components of our executive compensation program are the following:

      The 2006 Summary Compensation Table sets forth amounts for these components that we paid to our Chairman and Chief Executive Officer, our Senior Vice President-Finance and Chief Financial Officer and our three other highest paid executives for 2006. We refer to these five executives as our named executives.

      We compensate our executives principally by using a combination of short-term compensation (salary and annual cash incentive compensation) and long-term compensation (stock options and restricted stock). We determine the mix of short-term and long-term compensation by using market compensation information. Accordingly, we do not have a specific policy for the allocation of compensation between short-term and long-term compensation or cash and equity compensation. We tie our annual cash incentive compensation and long-term incentive compensation to the achievement of performance goals or to the value of our common stock. We believe it is important that a portion of our executives’ incentive compensation is dependent upon the price of our common stock in order to align the interests of our executives with the interests of our shareholders. However, since the price of our common stock is subject to some factors outside of the control of our company and our executives,

we believe it is also important that a portion of an executive’s incentive compensation be tied to performance goals relating to the operations of our company. We select performance goals that we believe help to drive our business and create value for our shareholders.

      Our Starting Point. We offer our executives annual base salaries, annual cash incentive compensation, long-term incentive compensation and other employee benefits that are intended to be competitive with those offered at similar chemical, building product manufacturing and retail companies with comparable sales. We review compensation paid at these companies because their size and business make them most comparable to us. We also believe these companies likely compete with us for executive talent. We engage a compensation consultant to identify annually the median compensation paid to executives holding equivalent positions or having similar responsibilities at these companies. These companies change from time to time. We may also use general compensation surveys sponsored by nationally recognized compensation consulting firms to assist us in making compensation decisions.

      The Committee and Sherwin-Williams engaged Towers Perrin, a compensation consultant, to provide us with median compensation information for 24 of these peer companies. We generally benchmark the compensation that we pay to our executives against the median compensation that those 24 companies pay to their executives. We benchmark against median compensation because it allows us to attract and retain employees, provides an incentive for employees to strive for better than average performance to earn better than average compensation, and helps us to manage the overall cost of our compensation program. The compensation information provided by the consultant includes median base salary, annual cash incentive compensation, long-term incentive compensation and total direct compensation. Total direct compensation is the sum of base salary, annual cash incentive compensation and long-term incentive compensation. These peer companies included:

     In October 2006, we promoted Mr. Morikis to President and Chief Operating Officer. Prior to setting Mr. Morikis’ compensation for his new position, we asked the compensation consultant to compile additional market compensation information for presidents and chief operating officers. We reviewed this additional market information (in addition to that of the peer companies) because the position of Chief Operating Officer had been vacant at our company for approximately one and one-half years and many of the peer companies did not employ a president and chief operating officer. The consultant provided us with the median amount of salary, annual cash incentive compensation, long-term incentive compensation and total direct compensation paid to chief operating officers at: (a) the peer companies, (b) 35 Fortune 500 companies with revenues between $6 billion and $10 billion, and (c) an average of five commercially available surveys from five nationally recognized compensation consultants. Using this information, the consultant compiled a composite amount for each of these components of compensation at the 50th percentile. When we set Mr. Morikis’ compensation for his new position, we used this composite amount in the same way we use

the median amounts for the peer companies for our other executives.

      We review total direct compensation (which is the sum of base salary, annual cash incentive compensation and long-term incentive compensation) in order to determine whether the compensation components that we pay to our executives are competitive in the aggregate.

      Use of Tally Sheets. When approving changes in compensation for our named executives, we also prepare a tally sheet for each executive. Tally sheets set forth the dollar amounts of all components of each named executive’s current compensation, including salary, annual cash incentive compensation, long-term incentive compensation, retirement and savings programs, health and welfare programs and other executive benefits, including perquisites. These tally sheets allow the Committee and management to review how a change in the amount of each compensation component affects each named executive’s total compensation and to review each named executive’s total compensation in the aggregate. Based upon the review of tally sheets, the Committee determined the total compensation, in the aggregate, for our named executives to be reasonable and not excessive.

      The Committee and management also reviewed potential compensation payments to our named executives under retirement and termination in the event of a change in control of our company. This review included potential severance payment obligations, potential values of accelerated shares of restricted stock and stock options and projected payment obligations in connection with our retirement and savings programs, health and welfare plans, and other executive benefits.

      Base Salary. We pay salaries to our employees to provide them with a base compensation for the day-to-day performance of their job responsibilities. We assign pay grades to salaried positions at our company. Each pay grade has a salary range. When assigning a pay grade for an executive position, we review the salary range against median base salaries at the peer companies based upon the position and level of responsibility. The midpoint of the range generally approximates the median salary paid for an equivalent position at the peer companies. The Committee reviews salary grades for our executives annually and makes adjustments to these grades as deemed necessary or appropriate to maintain competitiveness. Once we determine a range, we set salary levels within the range based upon other factors, including the executive’s performance, experience and tenure in his particular position.

      Annual salary increases are based on the overall annual salary budget guidelines for our company and an evaluation of the executive’s performance. As part of our annual budget process, we review our overall salary structure to ensure that it remains competitive. Each executive undergoes a performance review. The executive’s performance for the prior year is reviewed by his direct supervisor or, with respect to the performance of the Chairman and Chief Executive Officer, by the Committee. The Committee reviews and approves the base salary of each executive annually and at other times in connection with any promotion or other change in responsibility.

      For 2006, we adopted an overall 3.5% merit budget for salary increases with possible merit increases ranging from 0% to 8%. For 2007, we adopted an overall 3.75% merit budget for salary increases with possible merit increases ranging from 0% to 8.25%. In February 2006 and 2007, we increased the base salaries of each of our executives. We also increased Mr. Morikis’ base salary by 40.5% in October 2006 in connection with his promotion to President and Chief Operating Officer. The following table sets forth the 2006 and 2007 base salaries for our named executives and the percentage increase. Base salary increases are effective in March.

      Annual Cash Incentive Compensation. We pay annual cash incentive compensation to our executives under our Management Incentive Plan. The amount of cash incentive compensation earned by our named executives in 2006 is set forth in the “Non-Equity Incentive

Plan Compensation” column of the 2006 Summary Compensation Table. We paid these amounts in February 2007. All of our executives participate in our Management Incentive Plan. In determining the amount of any annual cash incentive paid to our executives, we place great emphasis on establishing incentive opportunities that are directly linked with our company performance and the maximization of shareholder value. We pay annual cash incentive amounts for the purpose of rewarding performance during the year based on the achievement of annual performance goals. We have designed our Management Incentive Plan so that our executives may earn higher than average annual cash incentive compensation for above average performance and lower than average annual cash incentive compensation for below average performance.

      The Committee annually reviews target and maximum annual cash incentive compensation levels for our executives as a percent of their salary. Target bonus awards are determined by using the median annual cash incentive compensation available at the peer companies, which is generally equivalent to the amount an executive could receive under our Management Incentive Plan if he achieves a 100% average of his goals. The annual cash incentive amount earned by an executive in any year based upon the achievement of his performance goals may exceed or fall below the median annual cash incentive compensation available at the peer companies.

      The table below sets forth the minimum, target and maximum cash incentive amount levels, as a percent of salary, for our named executives based upon the executive achieving an average of 75%, 100% and 125%, respectively, of his performance goals. These levels are effective for annual cash incentive amounts earned in 2007 and payable in February 2008. In October 2006, we increased the maximum annual cash incentive level that may be earned in 2007 for Messrs. Connor, Morikis and Hennessy (from 165%, 135% and 135%, respectively). We increased these levels for Messrs. Connor, Morikis and Hennessy to align their annual cash incentive compensation with the annual cash incentive compensation available at the peer companies.

      Under our Management Incentive Plan, we annually establish a threshold goal of increased company earnings. 75% of this earnings increase must be met before we pay annual incentive compensation, subject to the Committee’s discretion to pay amounts for individual performance and to make adjustments for non-recurring or unusual items. For 2006, we set the threshold earnings goal at an increase in 2006 earnings before taxes of $38.1 million over 2005 earnings. In 2006, our earnings before taxes increased $178.1 million compared to 2005. Accordingly, we attained this threshold earnings goal.

      We assign performance goals for each executive at the beginning of each year. The Committee approves the goals of all of our named executives. The Chairman and Chief Executive Officer also approves the goals of our other named executives. These performance goals vary by executive, are weighted and usually relate to the particular business unit or function for which such person has responsibility. Executives are encouraged to have quantitative goals that stretch performance and have a significant impact on the improvement of a business unit or our company. Financial performance goals are generally weighted more heavily. The Committee reviews and approves annually each named executive’s achievement of his performance goals.

      For 2006, the target performance goals for the named executives were as follows:

      At its February 2007 meeting, the Committee reviewed each named executive’s achievement of these goals during 2006 and approved cash incentive compensation under our Management Incentive Plan. For each of our named executives, we have set forth in the table below the average percentage of performance goals achieved, the amount of annual cash incentive compensation earned and the corresponding percentage of their 2006 salary that the amount represented.

      From time to time, we review the accounting and tax laws, rules and regulations that may affect our compensation programs. However, tax and accounting considerations have not significantly impacted the compensation programs that we offer to our executives.

      Section 162(m) of the Internal Revenue Code generally provides that certain compensation in excess of $1 million per year paid to a company’s chief executive officer and any of its four other highest paid executive officers is not deductible by a company unless the compensation qualifies for an exception. Section 162(m) provides an exception to the deductibility limit for performance-based compensation if certain procedural requirements, including shareholder approval of the material terms of the performance goal, are satisfied. Compensation paid under our Management Incentive Plan currently does not qualify for the exception for performance-based compensation.

      As part of this proxy statement, we are submitting the 2007 Executive Performance Bonus Plan for shareholder approval so that we will have the ability to pay non-discretionary annual cash incentive compensation to our named executives that will qualify for deductibility. Independent of the 2007 Executive Performance Bonus Plan, the Committee retains the discretion to reward strong individual performance by paying executive compensation that may not be deductible under Section 162(m). The Committee believes that its ability to exercise such discretion is in the best interests of Sherwin-Williams and our shareholders. We provide additional information about the 2007 Executive Performance Bonus Plan under the heading “Approval of The Sherwin-Williams Company 2007 Executive Performance Bonus Plan (Proposal 2).”

      Long-term Incentive Compensation. We grant long-term incentive compensation in the form of stock options and restricted stock annually to our executives under our 2006 Equity and Performance Incentive Plan. We begin by determining the median market value of long-term incentive compensation that the peer companies grant to their executives, and then we allocate that compensation between stock options and restricted stock. When making awards of stock options and restricted stock to executives, we allocate comparable values to stock options and to restricted stock. We allocate the mix of stock options and restricted stock in this way because we want to equally reward the growth in the value of our common stock and the achievement of financial performance goals. Grants of stock options and

restricted stock vest over time, which help us to retain our executives and encourage our executives to improve the long-term performance of our company, rather than to focus exclusively on short-term goals, thereby more closely aligning the interests of our executives with the interests of our shareholders.

      We have used a consistent approach in granting stock options and restricted stock over the years. We grant stock options and restricted stock on an annual basis at regularly scheduled Board of Directors meetings. We schedule the dates of these meetings approximately one year in advance. We typically grant restricted stock in February and stock options in October. We grant restricted stock and stock options in February and October so that our annual grants are made at different times of the year. Information relating to the stock options and shares of restricted stock granted to our named executives is set forth in the 2006 Summary Compensation Table and the 2006 Grants of Plan-Based Awards Table.

      At each October Board of Directors meeting, we grant stock options to all of our eligible employees. These grants are made typically on the same day that the Audit Committee approves our earnings release for the third quarter and a day or so before we release the third quarter earnings announcement. At each February Board of Directors meeting, we grant restricted stock. This meeting typically occurs in the third week of February, approximately three or four weeks after we release our annual earnings results. We may also grant restricted stock and stock options at other regularly scheduled Board meetings in connection with an employee’s promotion and other events. The dates of these grants may occur shortly before the release of quarterly earnings announcements. We do not take into account our earnings announcement when determining the number of stock options or shares of restricted stock to be granted.

      Stock Options. The number of stock options granted to an executive is based upon the executive’s position and level of responsibility using comparable positions at the peer companies. We determine the specific number of stock options to be granted by calculating the Black-Scholes-Merton value of the stock options over a prior 90-day period. Black-Scholes-Merton is a generally accepted model used in estimating the value of stock options. In accordance with the terms of our stock plans, the option exercise price for all stock options is equal to the average of the high and low market price of our common stock on the date options are granted. Accordingly, the exercise price may be higher or lower than the closing price of our common stock on that day. We do not reprice stock options, and our stock plans do not contain reload features. Stock options typically vest at the rate of one-third per year for three years (beginning one year from the date of grant) and expire ten years from the date of grant. In October 2006, we granted stock options to all of our executives.

      Restricted Stock. We determine the granting of restricted stock in the same manner that we determine the granting of stock options. If granted, shares of restricted stock are subject to a “substantial risk of forfeiture” and vest in accordance with performance and time restrictions. The number of shares of restricted stock that will vest at the end of the restriction period is based upon the achievement of one or more performance goals. Up to 100% of the number of shares of restricted stock may be forfeited if the performance goals are not achieved.

      In February 2006, we granted shares of performance-based restricted stock to all of our executives. In October 2006, we granted additional shares of performance-based restricted stock to Messrs. Morikis and Seitz. We granted the additional shares of restricted stock to Mr. Morikis in connection with his promotion. We granted the additional shares of restricted stock to Mr. Seitz in recognition of additional responsibilities as President, Consumer Group. The shares of restricted stock granted vest in February 2010. During the vesting period, the executives beneficially own the shares of restricted stock and possess all voting and dividend rights.

      The number of shares of restricted stock that will actually vest will range from 0% to 100% based upon our company’s achievement of specified financial performance goals. These goals measure average return on average equity and cumulative earnings before interest, taxes,

depreciation and amortization over four years. We refer to this second measure as EBITDA. We explain how we calculate EBITDA on page 35 of our 2006 Annual Report to Shareholders. We selected these two performance measures because they reward our executives in achieving two important business objectives — earnings growth and working capital management — which we believe help us improve our long-term financial results. The Committee approves these goals. 100% of the shares of restricted stock will vest in the event we achieve at least a 17% average return on average equity and at least an 8% cumulative growth in EBITDA. No shares will vest in the event we achieve below 13% average return on average equity or below 3% cumulative growth in EBITDA. Between 0% and 100% of the restricted stock will vest in the event we achieve between 13% and 17% return on average equity and between 3% and 8% cumulate growth in EBITDA. At the end of the vesting period, the Committee will review performance against the goals and determine the number of shares of restricted stock that will vest.

      Long-term incentive opportunities are intended to be competitive with market long-term incentive opportunities. Therefore, we do not generally consider the amount of outstanding stock options and shares of restricted stock currently held by an executive when making awards of stock options and restricted stock.

      Other Benefits. We provide our named executives with various retirement and savings programs, health and welfare programs, and employee benefit plans, programs and arrangements generally available to all employees. We also provide our named executives with other executive benefit programs and perquisites as part of providing a competitive executive compensation program and for employee retention. We annually review all of these items in connection with our preparation and review of the overall compensation packages of our named executives and in connection with our review of tally sheets.

      Perquisites may include a company automobile, parking, use of the corporate aircraft, personal liability insurance, an annual physical, club memberships, reimbursement for basic financial planning and a home security system. We have set forth the incremental cost of providing these perquisites to our named executives in separate table that is included in a footnote to the “All Other Compensation” column of the 2006 Summary Compensation Table.

      The other executive benefit programs include an executive life insurance program, an executive long-term disability program and a grantor trust program. We have also set forth the amounts for these programs in a separate table that is included in a footnote to the “All Other Compensation” column of the 2006 Summary Compensation Table.

      The life insurance and long term disability programs are designed to provide our named executives with life and disability benefits greater than the life and disability benefits available under the broad-based life insurance and long term disability programs that we offer to other employees due to benefit limitations within the broad-based programs.

      We initiated our grantor trust program in 2003 to replace our non-qualified deferred compensation plan for some of our executives to provide financial security to those executives who have accumulated a significant retirement benefit in our non-qualified deferred compensation plan. All salaried employees are eligible to participate in funded retirement plans. The Internal Revenue Code contains limits on the amount of benefits that can be contributed to and/or paid from a qualified retirement plan. Employees whose retirement benefits are limited are eligible to participate in the non-qualified deferred compensation plan to provide such employees with the retirement benefits they would have received under our qualified retirement plans but for those limitations. Executives who are eligible to participate in our grantor trust program are not eligible to participate in our deferred compensation plan.

      All of our named executives participate in our grantor trust program. Under this program, supplemental compensation amounts are paid to our named executives to fund individual grantor trusts established by the executives. It is intended that these amounts provide our named executives with the same after-tax amount at retirement age as would have been provided under our non-qualified deferred compensation plan.

      Severance Agreements. To ensure continuity and the continued dedication of our executives during any period of uncertainty caused by the possible threat of a takeover, we have entered into severance pay agreements with our executives, including each of our named executives. In 2006, the Committee engaged Towers Perrin to evaluate our existing severance pay agreements in order to determine how these agreements compare to market practices. Towers Perrin’s evaluation included a review of the change in control trigger threshold, severance pay single versus double triggers, severance pay multiples, continuation of retirement, health and welfare benefits, excise tax gross-ups, and the impact of Section 409A of the Internal Revenue Code.

      Based upon this evaluation, the Committee approved a new form of severance agreement in February 2007, and we entered into new severance agreements with each of our executives. Information regarding these new severance agreements, including the estimated amounts payable to each named executive, is set forth under the heading “Potential Payments upon Termination or Change in Control.”

      Stock Ownership Guidelines. We have established a minimum share ownership requirement for our directors, executive officers and operating presidents. We require each director who has served on the Board of Directors for at least five years to own a minimum of 5,000 shares of common stock. We require each executive and operating president who has served in such capacity for at least five years to own shares of common stock equal in value to a multiple of their base salary ranging from a low of three times to a high of five times for the Chief Executive Officer. The requirements for the executives and operating presidents are as follows.

      For purposes of meeting this requirement, each equivalent share of common stock and each share of restricted stock held under our benefit plans is considered as a share of common stock. Stock options are not considered towards meeting the requirement. All directors, executive officers and operating presidents have either met the guidelines or are pursuing plans to meet the guidelines within the time frames prescribed.

2006 SUMMARY COMPENSATION TABLE

      The following table sets forth information regarding the compensation of our Chairman and Chief Executive Officer, our Senior Vice President — Finance and Chief Financial Officer and our other three highest paid executive officers for 2006.

      Amounts do not include the incremental cost of our Business Travel Accident Insurance Plan, which provides coverage for all of our directors, executive officers and full-time salaried employees. The total aggregate premium in 2006 for this plan for all directors, executive officers and employees was less than $20,000.

      Perquisites and Other Personal Benefits. We provide our executive officers with perquisites and other personal benefits as part of providing a competitive executive compensation program and for employee retention. Perquisites may include a company automobile, parking, personal use of the corporate aircraft, personal liability insurance, an annual physical, club memberships, reimbursement for basic financial planning and a home security system. The types and costs of all perquisites and other personal benefits provided to our named executives during 2006 are listed in the following table.

      These benefits are valued based upon the incremental cost of providing the benefit to the executive. The incremental cost of the executive automobile program is determined by adding all of the costs of the program, including lease costs and costs of maintenance, fuel, license and taxes. The incremental cost of personal use of corporate aircraft is determined based upon the variable operating costs of the aircraft, which includes fuel costs, maintenance and repair costs, landing fees, catering costs, and travel costs for the pilots. An average hourly rate is calculated by dividing the total variable operating costs for the year by the number of hours the aircraft is flown. The average hourly rate is then multiplied by the number of hours of the executive’s personal use to derive the total incremental cost. The incremental cost of personal use of club memberships is comprised of all dues and costs for the membership multiplied by the percentage of times that the club was utilized for personal use.

2006 GRANTS OF PLAN-BASED AWARDS

      The following table sets forth information regarding the grants of annual cash incentive compensation, stock options and restricted stock during 2006 to our executive officers named in the 2006 Summary Compensation Table.

      Salary. Salaries paid to our named executives are set forth in the 2006 Summary Compensation Table. For 2006, salaries paid to our named executives accounted for the following percentages of their total compensation: Mr. Connor (15.1%), Mr. Morikis (20.2%), Mr. Hennessy (21.0%), Mr. Seitz (18.9%) and Mr. Stellato (25.1%).

      Non-equity Incentive Plan Compensation. The non-equity incentive plan compensation set forth in the tables above reflects annual cash incentive compensation under our Management Incentive Plan. Annual cash incentive compensation is earned based upon the achievement of a threshold company earnings goal and the accomplishment by the executive of performance goals. Performance goals vary by executive and usually relate to the particular business unit or function for which such person has responsibility. Annual cash incentive compensation is payable as a percentage of salary. These percentages vary by named executive. The performance goals and the percentages of salary are set forth under the heading “Compensation Discussion and Analysis.”

      The threshold, target and maximum amounts set forth in the 2006 Grants of Plan-Based Awards Table correspond to the named executive achieving an average of 75%, 100% and 125% of his performance goals, respectively.

      Restricted Stock. We grant restricted stock pursuant to our 2006 Equity and Performance Incentive Plan. The shares of restricted stock granted generally vest over a four-year period based upon the achievement of specified financial performance goals. The number of shares of restricted stock that will actually vest at the end of the vesting period will range from 0% to 100% based upon achievement of the specified financial performance goals. These goals relate to our average return on average equity and cumulative earnings before interest, taxes, depreciation and amortization over the vesting period. We have included more information about these performance goals under the heading “Compensation Discussion and Analysis.”

      At the end of the vesting period, the Compensation Committee reviews our performance against these goals and determines the number of shares of restricted stock that will vest. Up to 100% of the shares of restricted stock may be forfeited if the performance goals are not achieved. Shares of restricted stock will vest immediately upon the death or disability of the employee or upon a change in control of Sherwin-Williams.

      During the vesting period, the executives are the beneficial owners of the shares of restricted stock and possess all voting and dividend rights. Dividends are payable at the same rate as is paid on Sherwin-Williams common stock generally. During 2006, the quarterly dividend rate was $0.25 per share. In February 2007, the Board of Directors announced an increase in the quarterly dividend rate to $0.315 per share payable on March 16, 2007.

      Stock Options. We grant stock options pursuant to our 2006 Equity and Performance Incentive Plan. The option exercise price is equal to the market value of our common stock on the date options are granted. In accordance with the terms of the plan, the market value is equal to the average of the highest and lowest reported sale prices of our common stock on the date of grant during normal trading hours on the New York Stock Exchange. Stock options will vest at the rate of one-third per year and have a term of ten years. Stock options will become immediately exercisable in the event of the death or disability of the executive or in the event of a change in control of Sherwin-Williams. Stock options are not transferable other than by will or the laws of descent and distribution.

      Employment Agreements. None of the named executives have written employment agreements with Sherwin-Williams.

      Additional Information. We have provided additional information regarding the compensation we pay to our named executives under the heading “Compensation Discussion and Analysis.”

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2006

      The following table sets forth information regarding the number of shares of unexercised stock options and the number of shares and value of unvested restricted stock outstanding on December 31, 2006 for our executive officers named in the 2006 Summary Compensation Table.

2006 OPTION EXERCISES AND STOCK VESTED

      The following table sets forth information regarding the number and value of stock options exercised and stock vested during 2006 for our executive officers named in the 2006 Summary Compensation Table.

2006 PENSION BENEFITS

      The following table sets forth information relating to The Sherwin-Williams Company Salaried Employees’ Pension Investment Plan. Mr. Seitz is the only executive officer named in the 2006 Summary Compensation Table that participates in our Salaried Employees’ Pension Investment Plan.

      Our Salaried Employees’ Pension Investment Plan is a qualified noncontributory defined benefit pension plan. The benefit formula with respect to active participants hired prior to January 1, 2002, including Mr. Seitz, consists of the sum of two components: (a) a traditional pension-type retirement benefit that is determined based upon the greater of two formulas;

and (b) a contribution credit equal to 1% of the participant’s earnings for periods after January 1, 2002.

      The pension-type retirement benefit is determined based upon the greater of the following two formulas:

      Pension benefits may be collected upon attainment of normal retirement age (age 65) or upon satisfying the criteria for early retirement (age 55-59 with at least 20 years of vesting service or age 60 or older if the participant’s combination of age and years of vesting service equal at least 75). If otherwise eligible for early retirement, a participant can elect to retire from Sherwin-Williams at age 62 with unreduced benefits. All other early retirement benefit payments are actuarially reduced to reflect the longer expected payout period. Pension benefits commence on the first day of the calendar month following the month in which the Pension Administration Committee approves the retirement election.

      The normal form of benefit for a married participant is a 60% joint and survivor annuity, which provides reduced monthly payments during the participant’s lifetime and lifetime payments to the spouse following the participant’s death in the amount of 60% of the reduced payments. With the spouse’s consent, a married participant may alternatively elect to receive benefits in the form of a single life annuity, a 100% joint and survivor annuity, a five-year certain annuity, a 10-year certain annuity or in a lump sum. Our Salaried Employees’ Pension Investment Plan provides guarantees that at least the first 12 monthly payments will be paid to either the participant or his beneficiary if the participant dies during the 12-month period following retirement. We do not normally grant additional years of service credit.

      The 1% contribution credit is converted into units to account for the participant’s benefit attributable to this portion of the retirement benefit. The participant’s benefit is determined based upon hypothetical returns achieved on the allocation of units among investments in various mutual fund alternatives as directed by the participant.

      For purposes of determining the present value of Mr. Seitz’s accumulated benefit, the following assumptions were used:

Both the RP2000 and the GAM-94 Basic Table are commonly accepted actuarial tables published by the IRS for purposes of determining mortality in connection with the determination of retirement benefits, among other things.

2006 NONQUALIFIED DEFERRED COMPENSATION

      The following table sets forth information relating to The Sherwin-Williams Company Revised Key Management Deferred Compensation Plan. Mr. Morikis is the only executive officer named in the 2006 Summary Compensation Table that participates in our Key Management Plan.

      Our Key Management Plan is a nonqualified deferred compensation plan pursuant which employees who participate in our Management Incentive Plan or other identified employee groups may elect to defer on a pre-tax basis up to 100% of their base salary and bonus. Our Key Management Plan is “unfunded” for tax purposes; account balances are merely bookkeeping entries that measure our obligation to the participant.

      Amounts deferred are credited with any associated earnings in accordance with hypothetical investment options elected by the participant from a variety of investment funds. All benefits are 100% vested at all times. Amounts deferred may be distributed in-service only pursuant to the election of scheduled in-service withdrawals, which may commence no sooner than four years following the time of initial deferral. All such scheduled payments are made in January.

      Upon retirement (or sooner if elected), participants may receive a distribution in the form of a single lump sum payment or in annual installments made once each year over a fixed period not to exceed 15 years. Upon termination of employment prior to retirement, any deferred amounts are automatically payable as a single lump sum, generally within 90 days from date of separation from service. As a result of the American Jobs Creation Act of 2004, our Key Management Plan was frozen to all further participation and contributions effective December 31, 2004.

EQUITY COMPENSATION PLAN INFORMATION

      The following table provides information about our common stock that may be issued under our equity compensation plans at December 31, 2006.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

      The following information and table set forth the amount of payments to each of our named executives in the event of a termination of employment as a result of normal and early retirement, involuntary termination, death, disability, voluntary termination (not for cause), termination for cause, and termination following a change in control. The table also sets forth the amount of payments to each of our named executives in the event of a change in control without a termination of employment.

      We do not have employment agreements with any of our named executives and do not have a formal severance policy or arrangement that provides for payments to a named executive in the event of a termination of employment (other than with respect to a termination of employment following a change in control as described below). The Compensation and Management Development Committee has sole discretion to determine the amount, if any, of severance payments and benefits that will be offered to a named executive in the event of a termination. The Committee believes that it is in the best interests of Sherwin-Williams and our shareholders that executives are treated fairly and equitably on a termination of employment.

      Assumptions and General Principles. The following assumptions and general principles apply with respect to the following table and any termination of employment of a named executive.

Because we have assumed a December 31, 2006 termination date, each of the named executives is entitled to receive the annual cash incentive compensation payment earned under the plan for 2006. Therefore, the amount set forth in the table for prorated annual cash incentive compensation is the actual annual incentive compensation earned by each named executive during 2006. This amount is also the amount set forth in the “Non-Equity Incentive Plan Compensation” column of the 2006 Summary Compensation Table.

      Normal and Early Retirement. A named executive is eligible to elect normal retirement at age 65 and early retirement upon satisfying the criteria for early retirement (age 55-59 with at least 20 years of vesting service or age 60 or older if the executive’s combination of age and years of vesting service equal at least 75). All of our full-time salaried employees hired prior to January 1, 1993 are eligible for health care and life insurance benefits upon normal retirement subject to the terms of the plans. In addition, upon normal retirement, all outstanding stock options will continue to vest in accordance with their terms, and all outstanding restricted stock awards will continue to vest as if the named executive had continued employment throughout the restriction period. The number of unrestricted shares that the named executive will be entitled to receive will be determined in accordance with the plan as if the named executive had remained employed throughout the restriction period.

      In the event of early retirement, all outstanding stock options will continue to vest in accordance with their terms. The Committee has the discretion to cancel all of the named executive’s rights to outstanding restricted stock, continue all rights in full, or prorate the number of shares of restricted stock for the portions of the restricted periods completed as of the date of retirement. The number of unrestricted shares that the named executive will be entitled to receive if the named executive’s rights continue in full or prorata will be determined in accordance with the plan as if the named executive had remained employed throughout the restriction period.

      As of December 31, 2006, none of the named executives were eligible for normal retirement, and only Messrs. Seitz and Stellato were eligible for early retirement.

      Involuntary Termination. In the event of an involuntary termination not for cause the Committee has the sole discretion to determine the amount, if any, of severance payments and benefits that will be offered to a named executive. In making this determination, the Committee may consider a number of factors including the reasons for the termination, the named executive’s tenure and performance, the named executive’s personal circumstances and the amount of severance payments, if any, generally offered to executives at other companies in similar positions. Because we do not have sufficient experience with involuntary terminations of executives at the positions of the named executives, we cannot reasonably estimate the amount or range of amounts of severance payments and benefits that would be offered to the named executives. Therefore, although it is reasonably likely that we will offer a severance payment and benefits to a named executive in the event of an involuntary termination not for cause, these amounts are not included in the table.

      Death and Disability. In the event of the death or disability of a named executive, all outstanding stock options will immediately vest and become exercisable and all shares of restricted stock will immediately vest and become unrestricted. The amounts set forth in the table for stock options reflect the difference between the closing price of our common stock on December 29, 2006 and the exercise prices for each option for which vesting accelerated. The amounts set forth in the table for restricted stock reflect the number of shares of restricted stock for which the vesting accelerated multiplied by the closing price of our common stock on December 29, 2006.

      In addition, each named executive participates in our executive life insurance program. Under our executive life insurance program, the beneficiary of a named executive is entitled to

receive a death benefit based upon the following formulas: (a) if the event occurs prior to age 62, then the death benefit will equal 4.0 times (for Messrs. Connor, Morikis and Hennessy) or 3.5 times (for Messrs. Seitz and Stellato) the named executive’s base salary; (b) if the event occurs on or after age 62 and before age 65, then the death benefit will equal 4.0 times (for Messrs. Connor, Morikis and Hennessy) or 3.5 times (for Messrs. Seitz and Stellato) the named executive’s base salary at age 62; and (c) if the event occurs at age 65 or older, then the death benefit will equal 2.5 times (for Messrs. Connor, Morikis and Hennessy) or 2.0 times (for Messrs. Seitz and Stellato) the named executive’s base salary at age 62. All of the named executives were less than 62 years of age on December 31, 2006.

      Each named executive also participates in our executive long-term disability program. Upon the occurrence of a disability under the program, a named executive will receive an annual benefit equal to 60% of base salary until the earlier of: (a) age 65; (b) recovery from the disability; (c) the date the named executive begins receiving retirement plan benefits; or (d) death. The amounts set forth in the table reflect the amount of the first annual payment (60% multiplied by the named executive’s current base salary) under the program.

      Voluntary Termination and Termination for Cause. A named executive is not entitled to receive any additional forms of severance payments or benefits upon his voluntary decision to terminate employment with Sherwin-Williams prior to being eligible for retirement or upon termination for cause.

      Change in Control. Upon the occurrence of a change in control, as generally defined below, all outstanding stock options will immediately vest and become exercisable and all shares of restricted stock will immediately vest and become unrestricted. The amounts set forth in the table for stock options reflect the difference between the closing price of our common stock on December 29, 2006 and the exercise prices for each option for which vesting accelerated. The amounts set forth in the table for restricted stock reflect the number of shares of restricted stock for which vesting accelerated multiplied by the closing price of our common stock on December 29, 2006.

      We have also entered into change in control severance agreements with each of the named executives. Forms of these agreements have been filed as Exhibit 10(b) to our Current Report on Form 8-K dated February 21, 2007. Generally, pursuant to these agreements, a change in control occurs:

      (a) if any person becomes the beneficial owner of 20% or more of Sherwin-Williams’ then-outstanding voting securities (other than acquisitions of voting securities (i) directly from Sherwin-Williams and approved by the Board of Directors, (ii) by Sherwin-Williams or any subsidiary, (iii) by the trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by Sherwin-Williams or any subsidiary, and (iv) in connection with a business transaction as proscribed in the agreement);

      (b) if a majority of Sherwin-Williams’ incumbent Board of Directors during any two year period are replaced other than in specific circumstances;

      (c) upon the consummation of any reorganization, merger or consolidation of Sherwin-Williams, or the sale or other disposition of all or substantially all of the assets of Sherwin-Williams, other than any transaction in which, immediately following the transaction, (i) the voting securities of Sherwin-Williams immediately prior to the transaction represent more than 50% of the combined voting power of the then-outstanding voting securities of the entity resulting from the transaction, (ii) no person beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then-outstanding voting securities of the entity resulting from the transaction, and (iii) at least a majority of the members of the board of directors of the entity resulting from the transaction were members of Sherwin-Williams’ incumbent Board of Directors at the time of initiating the transaction; or

      (d) upon the liquidation or dissolution of Sherwin-Williams (other than pursuant to a transaction that complies with clauses (c)(i), (c)(ii) and (c)(iii) above).

      The severance agreements provide that upon a termination of employment following a

change in control (other than termination for cause or by reason of death or disability) or if the named executive terminates his employment in certain circumstances defined in the agreement which constitutes “good reason,” in addition to the accelerated vesting of stock options and restricted stock described above, each will receive:

ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL