W.W. Grainger (GWW)

Base Salaries

Base salaries are intended to provide an appropriate level of fixed compensation to attract and retain executives. Base salaries are determined based on the individual's performance, experience, and evaluated in relation to the market as reflected in the compensation comparator group studies. Base salaries are adjusted after a detailed evaluation of individual performance, competitive market levels, and executive experience.

        The 2008 Compensation Study showed that, on average, the Company's base salaries for NEOs were slightly below the market median. During 2008, the Committee and the Board approved several changes as part of planned leadership succession. The Company believes it has structured compensation that will help ensure leadership continuity through this management transition. Specific actions in 2008 included:

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In June 2008, Mr. Ryan was promoted to Chief Executive Officer. To reflect Mr. Ryan's additional responsibilities, his salary was increased to $850,000 (+21%).



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Mr. Keyser retained the position of Chairman of the Board and his salary was reduced to $900,000 (-23%) and it was further decreased to $450,000 (-62% from the original level) effective January 2009.



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In March 2008, Mr. Jadin was promoted to Senior Vice President and Chief Financial Officer. To reflect Mr. Jadin's additional responsibilities, his salary was increased to $440,000 (+47%).



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Mr. Loux was named Vice Chairman and his salary was increased to $557,000 (+5%) and was subsequently decreased to $360,000 (-35%) effective January 2009.

        In addition, in April 2008, as part of the routine salary review process, the Committee approved base salary increases of 8% for Mr. Chen, 11% for Mr. Howard (this included a promotional increase to reflect additional responsibilities), and 3% for Mr. Loizzo.

        Routine base salary adjustments are made to reflect individual performance, contribution, experience, changes in responsibilities, and to adjust salaries for certain executives to be closer to the market median reflecting their responsibilities. Base salary increases also have the effect of increasing the size of annual incentive and profit sharing opportunities, as both are tied to formulas that are functions of base salary. Base salary increases generally do not impact the long-term equity incentive award opportunities as the individual's long-term award targets are generally tied to organizational positions rather than an individual's base salary.

Base Salaries

       Base salaries are intended to provide an appropriate level of fixed compensation to aid in attraction and retention. Base salaries are determined based on performance, experience, and market. Adjustments to base salaries require a detailed evaluation of individual performance, competitive market levels and rates of increase, executive experience, and internal equity, as well as the Company's overall salary budget. The 2006 Compensation Study showed that, on average, the Company's base salaries for officers were approximately at the market median, although Mr. Keyser, who has been Chief Executive Officer for over 12 years, was 5.9% above the market median. In 2007, Mr. Keyser's base salary was established as $1,170,000, representing a 6.4% increase over 2006. In addition, the Committee approved base salary increases of 6.0% for Mr. Loux, 16.7% for Mr. Ryan (this included a promotional increase), 12.5% for Mr. Chen (this included a promotional increase) and 5.9% for Mr. Howard. These base salary adjustments were made to reflect individual performance, contribution, experience, and to adjust salaries for certain executives to be closer to the market median reflecting their responsibilities. Base salary increases also have the effect of increasing the size of annual incentive and profit sharing opportunities, as both are tied to formulas that are functions of base salary. Base salary increases generally do not impact the long-term equity incentive award opportunities as the Company's long-term award targets are generally tied to organizational positions rather than an individual's base salary.

Base Salaries

        Base salaries are intended to provide an appropriate level of fixed compensation to aid in attraction and retention. They also serve as the basis for creating bonus targets and profit sharing opportunities. Base salaries are determined based on merit and market. Adjustments to base salaries require a detailed evaluation of individual performance, competitive market levels and rates of increase, executive experience and internal equity, as well as the Company's overall salary budget. The 2006 Compensation Study showed that, on average, the Company's base salaries were approximately at the market median. In 2006, Mr. Keyser's base salary was established as $1,100,000,

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representing a 10% increase over 2005. This base salary reflected market competitive pay halfway between the 50^thand 75^th percentile of the comparator group and was intended to reward Mr. Keyser's individual contributions, his overall leadership and experience and the Company's positive results. In addition, the Committee approved base salary increases of 7.8% for Mr. Loux, 20.0% for Mr. Ryan (this included a promotional increase), 13.0% for Mr. Chen (this included a promotional increase) and 13.3% for Mr. Howard. These base salary adjustments were made to move certain executives closer to the market median and reflect individual performance and contribution. Since annual incentives (as discussed below) are based on a percentage of base salary, base salary increases also have the effect of increasing the size of annual incentive and profit sharing opportunities. Base salary increases generally do not impact the long-term equity incentive award opportunities as the Company's long-term award targets are generally tied to organizational positions rather than an individual's base salary.

Base Salaries

        The Committee reviews base salaries annually. Adjustments to base salaries are determined based on a detailed evaluation of the position, individual performance, the competitive market,

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executive experience and internal equity. After evaluating the competitive market, merit increases consistent with market rates and the Company's compensation policy were approved by the Committee for 2005.

Base Salaries

        The Committee reviews base salaries annually. Adjustments to base salaries are determined based on a detailed evaluation of individual performance, the competitive market, executive experience and internal equity. After evaluating the competitive market, merit increases consistent with market rates were approved by the Committee for 2004.

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