W.W. Grainger (GWW)

Role of Management

       A committee of management, including the CEO, the President, the CFO, the General Counsel, and the Senior Vice President, Human Resources, routinely recommends compensation and performance-incentive programs that it believes will provide the appropriate level of incentives to achieve the Company's compensation goals: attract the best people and encourage them to achieve results that create shareholder value. The recommendations also include the structure of short- and long-term incentive programs for all employees and changes to programs required for regulatory compliance. These recommendations are reviewed and approved by the CEO before they are presented to the Compensation Committee of the Board.

       Consistent with this process and the factors discussed above, management works with advisors from Hewitt Associates LLC (Hewitt) to develop market information and recommends base salaries and adjustments, annual incentive targets, and long-term incentive awards to the Committee for officers including the NEOs other than Messrs. Keyser and Ryan. The compensation awarded to Messrs. Keyser and Ryan is considered by the Committee and, following the Committee's recommendation, is then determined by the independent members of the Board in executive session without members of management present. Management also develops the annual and long-term incentive targets for the year for approval by the Committee. The Committee reviews these recommendations in conjunction with its independent compensation consultant.

Role of Management

        The Committee is responsible for the overall design and implementation of the Company's compensation program. Members of management (including certain of its NEOs), as well as a variety of consultants, assist the Committee by providing alternatives and recommendations for the Committee's consideration concerning the Company's compensation program for NEOs and other executive officers. Management also provides (based on factors discussed above) recommended award levels, except those aspects related to Messrs. Keyser and Ryan, which are determined solely by the Board in executive session without members of management present.