This excerpt taken from the GWW DEF 14A filed Mar 13, 2009.
Annual incentives are intended to provide an appropriate level of variable compensation to encourage executives to achieve annual results that create shareholder value.
NEOs, along with approximately 1,500 other managers, receive annual cash incentives based on the achievement of specified annual Company-wide financial performance measures set forth in the Management Incentive Program (MIP). The Company structures the MIP to motivate performance that balances short-term and long-term results and aligns the interests of management with shareholders. The Company believes the design of the annual incentive program encourages performance that creates shareholder value by focusing on profitable sales growth and return on invested capital (ROIC). For 2008, MIP was based on ROIC and sales growth. ROIC reflects how effectively management uses Company assets and is generally defined by the Company as pre-tax
operating earnings divided by net working assets and sales growth is determined by year-over-year results. The total MIP payout is calculated as follows: