DEF 14A

Our Governance
& Ethics

Our People

Our Communities

Our Environment

DEF 14A 1 d236440ddef14a.htm DEF 14A DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐

Check the appropriate box:


☐		Preliminary Proxy Statement

☐		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☒		Definitive Proxy Statement

☐		Definitive Additional Materials

☐		Soliciting Material Pursuant to §240.14a-12

ILLINOIS TOOL WORKS INC.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

☒		No fee required.

☐		Fee paid previously with preliminary materials.

☐		Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

LOGO

Notice of 2022 Annual Meeting And Proxy Statement

LOGO

Illinois Tool Works Inc.

Notice of Annual Meeting of Stockholders

TIME AND DATE

Friday, May 6, 2022

8:30 a.m. Central Time

VIRTUAL MEETING

The Annual Meeting will be held in virtual format only at: www.virtualshareholdermeeting.com/ITW2022

ITEMS OF BUSINESS

1.	To elect the ten director nominees named in this proxy statement;

2.	To ratify the appointment of Deloitte & Touche LLP as ITW’s independent registered public accounting firm for 2022;

3.	To hold an advisory vote on executive compensation;

4.	To consider a non-binding stockholder proposal to change the ownership threshold to call special stockholder meetings, if properly presented; and

5.	To conduct any other business as may be properly brought before the meeting.

RECORD DATE

Only stockholders of record at the close of business on March 7, 2022 are entitled to vote.

VIRTUAL MEETING

The Annual Meeting will be held in virtual format to protect the health of our stockholders, directors and guests during the continuing COVID-19 pandemic and to make the Annual Meeting accessible to all of our stockholders. The virtual Annual Meeting will afford our stockholders the same rights and opportunities as an in-person meeting, allowing for active participation by all of our stockholders at no cost, regardless of their geographic location. To attend the Annual Meeting, vote and submit questions during the Annual Meeting, go to www.virtualshareholdermeeting.com/ITW2022 on the date of the meeting.

FORM 10-K

Our Form 10-K for fiscal year 2021 is enclosed if you received proxy materials by mail. The Form 10-K is accessible on the Internet at www.proxyvote.com if you received the Notice of Internet Availability of Proxy Materials or previously consented to electronic delivery of proxy materials.

By Order of the Board of Directors,

Jennifer K. Schott

Secretary

March 25, 2022

Your Vote is Important

You may vote your shares in one of the following four ways:


1. By telephone:		Toll-free by calling 1-800-690-6903;
2. By Internet:		See the instructions at www.proxyvote.com;
3. By mail:		If you received these proxy materials by mail, by signing, dating and mailing the enclosed proxy card; or
4. At the meeting:		Virtually attend our Annual Meeting, where you can submit a vote.

If you vote by telephone or Internet, you should have your proxy card, Notice of Internet Availability of Proxy Materials or voter instruction card in hand when you call or go to www.proxyvote.com. If you hold your shares through a bank or broker that does not offer telephone or Internet voting, please complete and return your proxy card by mail. If you receive more than one proxy card, Notice of Internet Availability or voter instruction card that has a 16-digit control number, you must vote each separately to ensure that all shares you own are voted.

If you plan to attend the meeting, you may vote at the Annual Meeting. To do so, you must be a holder of Illinois Tool Works Inc. shares as of the record date of March 7, 2022, and visit www.virtualshareholdermeeting.com/ITW2022 on the date of the meeting. You will log into the Annual Meeting by entering your unique 16-digit control number found on your proxy card, Notice of Internet Availability or voter instruction card, as applicable. You may log into the Annual Meeting beginning at 8:15 a.m., Central Time, on May 6, 2022 and the Annual Meeting will begin promptly at 8:30 a.m., Central Time. As part of the Annual Meeting, we will hold a live question and answer session, during which we intend to answer questions that are submitted in writing during the meeting by our stockholders who log in with their unique 16-digit control number and are pertinent to the Company and the business of the meeting, as time permits. For more information about how to attend the Annual Meeting online, as a stockholder or as a guest, please see “Other Information—Voting and Virtual Annual Meeting Information” in this proxy statement.

Whether or not you plan to virtually attend the meeting, please vote as soon as possible. Under New York Stock Exchange rules, your broker will NOT be able to vote your shares on Proposals 1, 3 or 4 unless it receives specific instructions from you. If you hold your shares through a bank or brokerage account, we strongly encourage you to return the voting instruction card to your bank, broker or other holder of record so that your vote is counted.

Avoid escheatment. We have been advised that some states are strictly enforcing unclaimed property laws and requiring shares held in “inactive” accounts to be escheated to the state in which the stockholder was last known to reside. One way you can show that your account is active is to vote your shares.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 6, 2022: The Form 10-K and this 2022 Proxy Statement are available on the Company’s website at www.itw.com under the “Investor Relations” link. Paper copies are available without charge upon written request to the Company at Illinois Tool Works Inc., 155 Harlem Avenue, Glenview, Illinois 60025, Attention: Secretary.

Table of Contents


Corporate Governance Highlights		1
Composition of Director Nominees		1
Governance Profile		2
Sustainability and COVID-19 Response		2
Director Nominees		4

Proposal 1 – Election of Directors		5
Board of Directors and its Committees		11
Corporate Governance Policies and Code of Conduct		15
Shareholder Engagement		18
Director Compensation		18
Ownership of ITW Stock		20
Availability of Form 10-K		23

Compensation Discussion and Analysis		24
Executive Overview		24
Executive Compensation Highlights		28
How We Make Compensation Decisions		31
Components of the 2021 Executive Compensation Program		33
Compensation Governance Practices and Policies		37

NEO Compensation		39
Summary Compensation Table		39
Grants of Plan-Based Awards		41
Outstanding Equity Awards at Fiscal Year-End 2021		42
Option Exercises and Stock Vested		43
Pension Benefits		43
ITW Retirement Plans		44
Potential Payments upon Termination		47
Summary of Termination and Change-in-Control Provisions		49
Termination and Change-in-Control Payments and Benefits		50
Compensation Committee Report		52
Equity Compensation Plan Information		53
Pay Ratio		53

Certain Relationships and Related Party Transactions		55

Audit Committee Report		56

Proposal 2 – Ratification of the Appointment of Independent Registered Public Accounting Firm		58

Proposal 3 – Advisory Vote on Executive Compensation		60

Proposal 4 – Non-Binding Stockholder Proposal to Change the Ownership Threshold to Call Special Stockholder Meetings		61

Other Information		64
Voting and Virtual Annual Meeting Information		64
Submitting Proxy Proposals and Director Nominations for the 2023 Annual Meeting		69
Forward-Looking Statements		70

Appendix A – Categorical Standards for Director Independence		A-1

Appendix B – GAAP to Non-GAAP Reconciliations		B-1

Corporate Governance Highlights

Composition of Director Nominees

Our ten current Board members are the director nominees. See “Proposal No. 1—Election of Directors” for biographical and other information about our director nominees.

LOGO


		*		Skills and attributes have been gained from direct, hands-on experience, direct managerial experience or serving on a relevant Board committee at the Company or another public company. These skills and attributes do not represent all the knowledge, skills and experience or attributes of our director nominees.

Governance Profile



Board and Other Governance Information

Annual Election of All Directors	Yes	Shareholder Engagement Program	Yes

Majority Voting for Directors with Director Resignation Policy	Yes	Stock Ownership Requirements for Executives and Directors	Yes

Number of Independent Directors Standing for Election	9	Anti-Hedging, Anti-Short-Sale and Anti-Pledging Policies	Yes

Total Number of Director Nominees	10	Compensation/Clawback Policy (based on material financial restatement regardless of misconduct)	Yes

Average Age of Director Nominees	63	Code of Conduct for Members of the Board of Directors	Yes

Independent Lead Director	Yes	Poison Pill	No

Regular Executive Sessions of Independent Directors	Yes	Annual Advisory Approval of Executive Compensation	Yes

Annual Board and Committee Self-Evaluations	Yes	Stockholder Ability to Call Special Meetings	Yes

Annual Independent Director Evaluation of Chairman and CEO	Yes	Proxy Access	Yes

Mandatory Retirement Age	Yes	Simple Majority Vote to Amend Charter and By-Laws	Yes

Risk Oversight by Full Board and Committees	Yes	Exclusive Venue Requirement	No

Strong Board Oversight of Sustainability	Yes	Strong Board Oversight of Cybersecurity	Yes

Sustainability and COVID-19 Response

Strategy. Our sustainability strategy is built around a framework that is consistent with our core values and decentralized, entrepreneurial culture. It is operationalized at the division level and consists of four key elements:

Board Oversight. Our Board plays an active role in the Company’s sustainability strategy, including environmental, social and governance (“ESG”) matters. It reviews annually with management the Company’s ESG strategy and performance. Throughout the year, the Board also receives periodic updates from management regarding progress on ESG strategy and performance, which may include, for example, discussions relating to ESG initiatives, risks and reporting. Throughout 2021, the Board continued to provide strong oversight to the Company’s response to the COVID-19 pandemic, including with respect to the health and safety of our workforce as well as commercial and financial challenges presented. For more information about the Board’s oversight function, see “Board of Directors and its Committees — Board’s Role in Risk Oversight.”

Management Commitment. The Company’s management team, subject to oversight by our Board, structures, monitors and adjusts the Company’s sustainability efforts in a manner that is consistent with our core values and best serves the interests of the Company and its stakeholders. Each year, senior management reviews the long-range plans of our segments and divisions. These plans consider, as appropriate, long-term sustainability implications and the ability to meet customer needs related to sustainability and clean technology. During 2021, the Company’s management continued to respond promptly and decisively to the unprecedented health, safety, commercial and financial challenges brought on by the COVID-19 pandemic. For more information, see “Compensation Discussion and Analysis — Executive Overview — 2021: Disciplined Execution and Strong Financial Performance in a Challenging Environment.”

Recent Developments

Our People; Safety. Since the outbreak of the pandemic in early 2020, the Company’s management determined that its number one priority would be to protect the health and support the well-being of ITW’s colleagues. With our employees’ health and well-being a top priority, we chose to use our strong financial foundation to reinforce our commitment to our people and did not initiate any enterprise-wide employment reduction mandates or programs in 2020 or 2021. Additionally, we redesigned production processes to ensure proper social distancing practices, adjusted shift schedules and assignments to help colleagues who have child and elder care needs and implemented aggressive new workplace sanitation practices and a coordinated response to ensure access to personal protective equipment to minimize infection risk. For more information, see “Compensation Discussion and Analysis — Executive Overview — 2021: Disciplined Execution and Strong Financial Performance in a Challenging Environment.”

Our People; Diversity and Inclusion. We remain committed to achieving our Diversity and Inclusion (D&I) goals and enhancing the diversity of our global leadership teams. We have seen significant improvement since beginning our current D&I strategy in 2013. As of December 31, 2021, approximately 28 percent of our top 1,000 global senior leaders are women and approximately 18 percent of our U.S.-based senior leaders are racially or ethnically diverse. In addition, the diversity of our executive leadership team continues to increase, currently including five females, one of whom is Asian-American, and one African-American male.

Our Communities. In 2021, we continued to invest in the communities where our colleagues live and work and where we do business. We supported our communities during the COVID-19 pandemic through in-kind and financial donations. We also continued to empower our colleagues globally to make positive contributions to the organizations that mean the most to them, including through our $3 for $1 corporate match program in the U.S. and Canada.

Our Environment. We continue operating our business in a way that demonstrates our dedication to global environmental sustainability, including continuous improvement in reducing our impact on the environment. In 2019, we announced a greenhouse gas emissions intensity reduction target and met that target by the end of 2020. In early 2021, we set a new target to reduce by 2030 the combined Scope 1 and Scope 2 greenhouse gas emissions per U.S. dollar of operating revenue by 40 percent below 2017 levels. We will report our progress towards achieving the revised target annually in our Sustainability Report.

Our Sustainability Report, published annually and available on our website (www.itw.com/sustainability), contains detailed information about our initiatives and progress in each of the four key elements that comprise our sustainability strategy, including our updated greenhouse gas emissions intensity target and response to COVID-19. Information in the Sustainability Report or on the Company’s website is not incorporated herein by reference.

Director Nominees


Director Nominee	Age	Director Since	Other Public Boards	Primary Occupation	Committee Memberships

Daniel J. Brutto Independent	65	2012	1	Retired President of UPS International and Senior Vice President of United Parcel Service, Inc.	Audit, Finance
Susan Crown Independent	63	1994	1	Chairman and CEO of Owl Creek Partners, LLC	Compensation, Gov/Nom, Executive (Chair)
Darrell L. Ford Independent	57	2021	N/A	Executive Vice President, Chief Human Resources Officer of UPS International	Audit, Compensation
James W. Griffith Independent	68	2012	N/A	Retired President and CEO of The Timken Company	Compensation, Gov/Nom, Executive
Jay L. Henderson Independent	66	2016	2	Retired Vice Chairman, Client Service of PricewaterhouseCoopers LLP	Audit, Finance
Richard H. Lenny Independent Lead Director	70	2014	2	Non-Executive Chairman of Conagra Brands, Inc.	Compensation, Gov/Nom (Chair), Executive
E. Scott Santi Chairman of the Board and CEO Illinois Tool Works Inc.	60	2012	1	Chairman and CEO of Illinois Tool Works Inc.	Executive
David B. Smith, Jr. Independent	55	2009	1	Executive Vice President for Policy and Legal Affairs and General Counsel of Mutual Fund Directors Forum	Audit, Finance (Chair)
Pamela B. Strobel Independent	69	2008	N/A	Retired Executive Vice President and Chief Administrative Officer of Exelon Corporation and President of Exelon Business Services Company	Audit (Chair), Gov/Nom, Executive
Anré D. Williams Independent	56	2010	1	Chief Executive Officer, American Express National Bank and Group President, Enterprise Services of American Express Company	Compensation (Chair), Finance

Proposal 1 - Election of Directors

Stockholders are being asked to elect the ten director nominees named in this proxy statement at our Annual Meeting. The individuals listed below have been nominated by the Board of Directors as recommended by the Corporate Governance and Nominating Committee. See “Corporate Governance Policies and Practices” for more information regarding our candidate selection process. If elected, each director nominee will serve until the 2023 Annual Meeting, until a qualified successor director has been elected, or until he or she resigns or is removed.

We will vote your shares as you specify on the proxy card, by telephone, by Internet or by mail. If you do not specify how you want your shares voted, we will vote them “FOR” the election of all the nominees listed below. If unforeseen circumstances (such as death or disability) make it necessary for the Board of Directors to substitute another person for any of the nominees, we will vote your shares “FOR” that other person. The Board of Directors does not anticipate that any nominee will be unable to serve.

Each nominee for director brings a strong and unique background and set of skills to the Board, giving the Board as a whole competence and experience in a variety of areas. Set forth below is biographical information provided by the nominees, as well as a description of the experiences, qualifications, skills and attributes that led the Corporate Governance and Nominating Committee and the Board to conclude that each nominee should serve as a director of the Company.

LOGO

Daniel J. Brutto

Retired President of

UPS International

and Senior Vice

President of United

Parcel Service, Inc.

Director since 2012

Age: 65

Mr. Brutto retired as President of UPS International and Senior Vice President of United Parcel Service, Inc., a global package delivery, supply chain management and freight forwarding company, having served in these capacities from 2008 to 2013. From 2016 to 2017, he served as Executive Chairman of Radial, Inc., a global fulfillment, customer care and omnichannel technology company; from 2015 to 2016 he served as Vice Chairman of eBay Enterprise/Innotrac, the predecessor business to Radial, and prior to 2015 he served as a director of Innotrac. Mr. Brutto had over 38 years of experience at UPS, serving in various areas with increasing levels of responsibility, including global operations, finance, accounting, information systems, mergers and acquisitions, marketing and business development. His service at UPS included President, Global Freight Forwarding and corporate controller. He has served as a director of ITW since 2012 and currently serves as a director of Sysco Corporation, where he serves as Chairman of the Corporate Social Responsibility Committee and a member of the Corporate Governance and Nominating and Executive Committees. He has not served as a director of any other publicly traded company in the last five years. In the past, he has served on the board of the US China Business Council, the Guangdong Economic Council and the Turkey Economic Advisory Council. He was also a delegate to the World Economic Forum, Davos Switzerland, from 2009 to 2013.

Skills and Qualifications:

Mr. Brutto’s significant strategic, operational, and financial leadership experience with a major global company, including the establishment of operations in 35 countries, along with his significant international business experience and board leadership role in the area of Corporate Social Responsibility, bring valuable perspectives to our Board.


Susan Crown Executive Committee Chair Chairman and CEO of Owl Creek Partners, LLC Director since 1994 Age: 63		Ms. Crown has served as Chairman and CEO of Owl Creek Partners, LLC, a private equity firm, since 2010. She is also the founder of Susan Crown Exchange Inc., a social investment organization. She served two terms as a Fellow of the Yale Corporation, and is currently Chairperson of Rush University Medical Center, the Rush System for Health, and a director of The Brookings Institution as well as several other civic and not-for-profit organizations. From 1984 to 2015, Ms. Crown served as Vice President of Henry Crown and Company, a business with diversified investments. She has served as a director of ITW since 1994 and currently serves as a director of Northern Trust Corporation, where she serves as a member of the Business Risk and Compensation and Benefits Committees. She has not served as a director of any other publicly traded company in the last five years. Ms. Crown’s experience includes executive experience in diversified manufacturing, management, corporate governance and strategy. Skills and Qualifications: Ms. Crown’s long-standing board service at a global banking and financial institution and her extensive board service and leadership roles with many civic and not-for-profit organizations bring valuable perspectives to our Board.

Darrell L. Ford Executive Vice President and Chief Human Resources Officer, UPS International Director since 2021 Age: 57		Mr. Ford has been Executive Vice President, Chief Human Resources Officer of UPS International, a global package delivery, supply chain management and freight forwarding company, since January 2021. In this role, Mr. Ford is responsible for human resources strategy and operations. Prior to joining UPS International, he served as Chief Human Resources Officer and Senior Vice President, Communications, Occupational Health and Aviation, DuPont de Nemours, Inc. from 2018 to 2020, and as Chief Human Resources Officer for Xerox Corporation from 2015 to 2018. Prior to Xerox Corporation, Mr. Ford served in various human capital management leadership roles at Advanced Micro Devices (AMD), Shell Oil and Honeywell International. Throughout his professional career, Mr. Ford has focused on building successful company cultures. Mr. Ford has served as a director of ITW since 2021 and has not served as a director of any other publicly traded company in the last five years. Mr. Ford also serves as a director of a number of professional, civic and not-for-profit organizations. Skills and Qualifications: Mr. Ford’s extensive experience and senior leadership roles with large public global companies in the areas of talent management, compensation and human capital strategy will bring valuable perspectives to our Board.


James W. Griffith Retired President and Chief Executive Officer of The Timken Company Director since 2012 Age: 68		Mr. Griffith retired as President and Chief Executive Officer of The Timken Company, a manufacturer of bearings, alloy and specialty steels and components, having served in that capacity from 2002 to 2014. From 1999 to 2002, he served as Timken’s President and Chief Operating Officer. Mr. Griffith joined Timken in 1984 and held positions in various functional areas of Timken with increasing levels of responsibility, including purchasing and logistics, manufacturing and international operations. From 1996 to 1999, he led Timken’s automotive business in North America and Timken’s bearing business activities in Asia and Latin America. Mr. Griffith has served as a director of ITW since 2012, and previously served as a director of AB Volvo, The Timken Company and Goodrich Corporation. He has not served as a director of any other publicly traded company in the last five years. He also previously served as a director of the US China Business Council and a number of other industry and not-for-profit organization boards. Skills and Qualifications: Mr. Griffith’s extensive experience as Chief Executive Officer of a global industrial manufacturer, along with his international business and engineering experience, bring valuable perspectives to our Board.

Jay L. Henderson Retired Vice Chairman, Client Service PricewaterhouseCoopers LLP Director since 2016 Age: 66		Mr. Henderson retired as Vice Chairman, Client Service of PricewaterhouseCoopers LLP (PwC), a global professional services firm, in June 2016, having served in that capacity since 2007. He also served as PwC’s Greater Chicago Market Managing Partner from 2003 to 2013 and, prior thereto, Managing Partner of the Cleveland Office. During his career at PwC, Mr. Henderson gained significant broad-based experience working with boards and audit committees of Fortune 500 global organizations across multiple markets and industry sectors. Mr. Henderson has been a Certified Public Accountant since 1977. He has served as a director of ITW since 2016 and currently serves as a director of The J.M. Smucker Company, where he serves as Chairman of the Audit Committee, and Northern Trust Corporation, where he serves as Lead Director, Chairman of the Audit Committee, and a member of the Capital Governance, Compensation and Benefits, Corporate Governance and Executive Committees. He has not served as a director of any other publicly traded company in the last five years. Mr. Henderson also has significant expertise as a participating board member of a number of professional, civic and not-for-profit organizations. Skills and Qualifications: Mr. Henderson’s extensive experience in managing and overseeing businesses and working with the boards and audit committees of complex global companies, his other board leadership roles and leadership roles at a major professional services firm, as well as his experience with risk oversight, bring valuable perspectives to our Board.


Richard H. Lenny Independent Lead Director Corporate Governance and Nominating Committee Chair Non-Executive Chairman of Conagra Brands, Inc. Director since 2014 Age: 70		Mr. Lenny has served as non-executive Chairman of Conagra Brands, Inc. since May 2018. Previously, he served as Chairman of Information Resources, Inc., a privately held producer of market and shopper information, from 2013 to 2018, and senior advisor of Friedman Fleischer & Lowe LLC, a private equity firm, from 2014 to 2016, after serving as an operating partner of that firm. From 2001 through 2007, he served as Chairman, President and Chief Executive Officer of The Hershey Company, a manufacturer, distributor and marketer of candy, snacks and candy-related grocery products. Prior thereto, he served as President, Nabisco Biscuit Company, and President of Pillsbury, North America. He has served as a director of ITW since 2014 and currently serves as a director of Conagra Brands, Inc., where, in addition to being the non-executive Chairman, he is a member of the Human Resources and Nominating and Corporate Governance Committees and Chairman of the Executive Committee, and McDonald’s Corporation, where he is the Chairman of the Compensation Committee and a member of the Sustainability and Corporate Responsibility Committee. He previously served as a director of Discover Financial Services. He has not served as a director of any other publicly traded company in the last five years. Skills and Qualifications: Mr. Lenny’s experience as Chief Executive Officer of a global Fortune 500 company and diverse board experience, including board leadership roles and board experience in human resources, sustainability and Corporate Social Responsibility, bring valuable perspectives to our Board.

E. Scott Santi Chairman and CEO of Illinois Tool Works Inc. Director since 2012 Age: 60		Mr. Santi has served as Chairman of ITW since May 2015 and as Chief Executive Officer since November 2012. He served as President and Chief Executive Officer of ITW from November 2012 to May 2015 and as President and Chief Operating Officer from October to November 2012. Prior thereto, he served as Vice Chairman from December 2008 to October 2012 and Executive Vice President from October 2004 to December 2008. Mr. Santi also serves on the boards of numerous civic and not-for-profit organizations. He has served as a director of ITW since November 2012 and currently serves as a director of W.W. Grainger, Inc., where he is a member of the Audit and Board Affairs and Nominating Committees. He has not served as a director of any other publicly traded company in the last five years. Skills and Qualifications: Mr. Santi’s deep understanding of the Company’s business operations, operating philosophy and culture, his expertise in the application of ITW’s business model, as well as his demonstrated success and proven quality of leadership, bring indispensable perspectives to our Board and strong leadership as Chairman.


David B. Smith, Jr. Finance Committee Chair Executive Vice President for Policy and Legal Affairs and General Counsel of Mutual Fund Directors Forum Director since 2009 Age: 55		Mr. Smith has served as Executive Vice President for Policy and Legal Affairs and General Counsel of Mutual Fund Directors Forum, a not-for-profit membership organization for independent investment company directors and an advocate on important policy matters, since 2005. From 1996 to 2005, Mr. Smith held several positions with increasing levels of responsibility at the Securities and Exchange Commission, serving as Associate Director, Division of Investment Management, from 2001 to 2005. He has served as a director of ITW since 2009 and currently serves as a director of Northern Trust Corporation, where he serves as a member of the Audit and Executive Committees and the Chairman of the Capital Governance Committee. He has not served as a director of any other publicly traded company in the last five years. Mr. Smith is a nephew of Mr. Harold B. Smith, an emeritus director of ITW. Skills and Qualifications: Mr. Smith’s extensive leadership experience in the finance industry and executive experience with a mutual fund industry organization, along with his legal and regulatory experience, bring valuable perspectives to our Board.

Pamela B. Strobel Audit Committee Chair Retired Executive Vice President and Chief Administrative Officer of Exelon Corporation and President of Exelon Business Services Company Director since 2008 Age: 69		Ms. Strobel retired as Executive Vice President and Chief Administrative Officer of Exelon Corporation and President of Exelon Business Services Company, an electric and gas utility company, in October 2005, a position she had held since 2003, previously serving as Chairman and Chief Executive Officer of Exelon Energy Delivery from 2000 to 2003. Prior thereto, she served as Executive Vice President of Unicom and its chief subsidiary, ComEd, having joined ComEd as General Counsel in 1993, where her experience included supervision and oversight of legal matters and risk management. Ms. Strobel has served as a director of ITW since 2008 and currently serves as a director of State Farm Mutual Automobile Insurance Company, where she serves as a member of the Compensation, Executive and Corporate Governance Committees. Ms. Strobel previously served as a director of Domtar Corporation and has not served as a director of any other publicly traded company in the last five years. Skills and Qualifications: Ms. Strobel’s executive and legal experience with a leading energy provider, experience with risk oversight and human capital management, and board leadership roles bring valuable perspectives to our Board.

Anré D. Williams

Compensation

Committee Chair

Chief Executive Officer,

American Express

National Bank and
Group President,
Enterprise Services

of American Express

Company

Director since 2010

Age: 56

Mr. Williams has been Chief Executive Officer, American Express National Bank and Group President, Enterprise Services of American Express Company, a global services company, since April 2021. He is a member of American Express’ Executive Committee, which is responsible for developing the company’s strategic direction and determining key policies. He was Group President, Global Merchant & Network Services, of American Express Company, from 2018 to 2021; President, Global Merchant Services & Loyalty Group, from 2015 to 2018; and he was President, Global Merchant Services from 2011 to 2015. Mr. Williams has over 30 years of experience at American Express, serving in various capacities with increasing levels of responsibility, including President, Global Commercial Card; Executive Vice President, U.S. Commercial Card; Senior Vice President, U.S. Middle Market; Vice President and General Manager, Western Region, Corporate Services, and Vice President, Acquisition and Advertising. Mr. Williams has served as a director of ITW since 2010 and currently serves as a director of Infinite Acquisition Corp., where he is a member of the Audit Committee. Mr. Williams previously served as a director of Ryerson Inc. and has not served as a director of any other publicly traded company in the last five years. Mr. Williams also serves as a board member on a number of professional, civic and not-for-profit organizations.

Skills and Qualifications:

Mr. Williams’ significant strategic and operational leadership experience with a major global financial services company, along with his global business experience, bring valuable perspectives to our Board.

The Board of Directors recommends a vote “FOR” the election of each of the nominees.

Board of Directors and its Committees

The Company’s Board of Directors met six times during 2021, including at five regularly scheduled meetings and one special meeting. Non-employee directors, all of whom are independent, met five times in regularly scheduled executive sessions in conjunction with the regular Board meetings. The Company strongly encourages its directors to attend all Board and committee meetings and the Annual Meeting of Stockholders. In 2021, our directors attended 98% of the total number of meetings of our Board and the respective Committees on which they served, and each director attended 75% or more of such meetings. In addition, in 2021, all of the directors attended the Annual Meeting of Stockholders.

The Board of Directors has standing Audit, Compensation, Corporate Governance and Nominating, Finance, and Executive committees. Under the terms of the respective charters, each member of the Audit, Compensation, and Corporate Governance and Nominating Committees must meet applicable New York Stock Exchange (NYSE) and Securities and Exchange Commission (SEC) independence requirements.

Role of Chairman and Chief Executive Officer

Pursuant to the Company’s Corporate Governance Guidelines, the Board examines whether the role of Chairman and CEO should be combined each time the Board elects a new CEO, and may determine to separate or combine the offices of Chairman and CEO at such other times as it deems appropriate. E. Scott Santi was elected President and CEO in November 2012, and the Board decided to separate the roles of Chairman and CEO at that time. Given Mr. Santi’s successful transition into the CEO role and his deep knowledge and understanding of the Company’s business model, operations and culture, the Board determined that he was best positioned to lead the Board in its ongoing oversight of the Company’s operations and strategy. In May 2015, the Board elected Mr. Santi Chairman of the Board and CEO. The Board continues to believe that Mr. Santi is best positioned to lead the Board given his demonstrated success and quality of leadership.

Strong Independent Lead Director

Since the roles of Chairman and CEO were combined in 2015, the Board has elected a strong independent director as Lead Director. The Board believes that this structure, which calls for a strong, independent and highly experienced lead director with well-defined responsibilities, along with the Company’s experienced and engaged independent directors, provides effective oversight of the Company’s management. Mr. Richard H. Lenny was appointed Lead Director by the Board effective May 8, 2020. Mr. Lenny is a highly experienced director who has held several board and management leadership roles and currently serves as non-executive Chairman of the Board of Conagra Brands, Inc. and as a member of the Board of McDonald’s Corporation. In conjunction with the Board’s role in overall strategy and succession planning as described below, Mr. Lenny actively engages with our Chairman and CEO on such matters. Additionally, Mr. Lenny works closely with our Chairman and CEO on meeting agendas that guide the Board in performing its oversight function, including with respect to the Company’s strategy and response to the COVID-19 pandemic, Board succession and Board evaluations.

In addition to the duties and responsibilities noted above, the Corporate Governance Guidelines state that the Lead Director will:

•

preside at all meetings of the Board at which the chairman is not present, including executive sessions of the independent directors;

•

act as a key liaison between the chairman and the independent directors;

•

have the authority to call meetings of the independent directors, when necessary;

•

approve meeting agendas, schedules and information sent to the Board;

•

communicate Board member feedback to the chairman after each Board meeting;

•

if requested by major stockholders, ensure that he or she is available for consultation and direct communication; and

•

perform such other duties as requested by the Board.

Board’s Role in Company Strategy and Executive Succession Planning

The Board has an active role in the Company’s overall strategies. Each year, the Board conducts a comprehensive, in-depth review of the Company’s long-term strategy and annual operating plan and actively monitors and reviews management’s progress in executing both throughout the year. The Board also conducts an annual review of the Company’s corporate governance practices. In addition, throughout the year the Board conducts individual segment strategy reviews with segment leadership. The Board also reviews annually the Company’s sustainability strategy and receives periodic updates regarding the Company’s sustainability initiatives and progress.

The Board recognizes that one of its most important duties is to ensure continuity in the Company’s senior leadership by overseeing the development of executive talent and planning for the effective succession of the Company’s CEO and the executive leadership team. In order to ensure that the succession planning and leadership development process supports and enhances ITW’s strategic objectives, including the Company’s diversity goals, the Board regularly consults with the CEO on the Company’s organizational needs, its leadership pipeline and the succession plans for critical leadership positions. On an annual basis, the Board conducts a detailed review of executive succession plans, in addition to addressing the Company’s talent management initiatives and discussing individuals who are considered potential future senior executives of the Company. Similarly, leadership development, including succession planning, is a top priority of the CEO and the senior executive team.

Board’s Role in Risk Oversight

The Board of Directors is responsible for the overall risk oversight of the Company with a focus on the most significant risks facing the Company.

The Board’s oversight process builds upon management’s annual enterprise risk assessment. The Company has identified key enterprise risks, including, but not limited to, legal/compliance/reputation, controllership/tax, key leader continuity/succession, supply chain integrity/continuity, cybersecurity, plastics in consumer packaging and significant external event risks. The Board has a formal process to review these risks annually or more frequently, if appropriate. Company management presents on these risks, at least annually, at meetings of the Company’s Board and Board committees, providing them with an opportunity to discuss the risks and the Company’s risk mitigation processes.

The Board has delegated to the Audit Committee the responsibility to review and evaluate the Company’s overall financial and compliance risk policies and practices, including certain legal affairs and environmental, safety and health matters and related policies; has delegated to the Corporate Governance and Nominating Committee the responsibility to advise the Board on matters of corporate governance and associated risks; has delegated to the Finance Committee the responsibility to review and evaluate the risks relating to financings, capital structure, pension obligations, and other treasury functions; and has delegated to the Compensation Committee the responsibility to review and evaluate the risks arising from the Company’s compensation policies and practices. The Compensation Committee also advises management on whether the Company’s compensation policies and practices may have a material adverse effect on the Company.

Throughout 2021, the Board continued to oversee the Company’s strategy and response to the COVID-19 pandemic, including with respect to the health, safety and financial challenges presented, receiving regular updates from management. Regular access to information provided the Board with opportunities to effectively exercise its oversight function and provide leadership and support to management during these unprecedented times.

In instances where a particular committee reviews certain risks, that committee reports on those risks to the full Board on a regular basis. The Company believes that because each of these committees is comprised solely of independent directors, the Chairman and CEO of the Company is subject to the risk oversight of independent directors.

The committee descriptions below provide more detail regarding the risk oversight delegated to each committee by the Board.

Audit Committee

The Audit Committee is responsible for the integrity of the Company’s financial statements, compliance with legal and regulatory requirements, the independence and performance of ITW’s independent registered public accounting firm, and the performance of the Company’s internal audit function. In addition, the Committee is responsible for the oversight and engagement of our independent registered public accounting firm and assists the Board with respect to matters involving and overseeing accounting, financial reporting, and internal audit functions. In addition, as required by the Company’s Corporate Governance Guidelines and Audit Committee charter, the Audit Committee annually reviews legal affairs and environmental, safety and health matters that may have a material impact on the Company’s financial statements or the Company’s compliance policies. The Audit Committee reviews and evaluates certain of our policies and practices with respect to risk assessment and risk management and steps taken by management to monitor and control such exposures, including with respect to cybersecurity. The Audit Committee also receives quarterly cybersecurity reports from management. Additional information on the Audit Committee and its activities is set forth under “Audit Committee Report.”

Compensation Committee

The Compensation Committee establishes and oversees the Company’s executive compensation philosophy, programs and policies, including ensuring that executive compensation is aligned with Company and individual performance. The Compensation Committee recommends to the other independent directors compensation for the chief executive officer, reviews and approves the chief executive officer’s recommendations regarding the compensation of our other executive officers, and makes recommendations regarding new incentive compensation and equity-based plans or amendments to any existing plans. The Compensation Committee also is responsible for reviewing and evaluating risks arising from our compensation policies and practices and providing input to management on whether such policies and practices may have a material adverse effect on the Company.

Under its charter, the Compensation Committee may retain an independent compensation consultant or other advisors. The Compensation Committee engaged independent consultants Frederic W. Cook & Co., Inc. (Cook) until May 2021 and Meridian Compensation Partners LLC (Meridian) beginning in June 2021, as its independent advisor to review the Company’s overall executive compensation program, review the peer group of companies used by the Compensation Committee for comparison purposes and assess our compensation governance process. Based on representations from Cook, Meridian and executive officers and directors of the Company, the Compensation Committee has determined that Cook, Meridian and their respective individual compensation advisors to the committee are independent. See “Compensation Discussion and Analysis — How We Make Compensation Decisions — Role of the Compensation Consultant.”

Additional information on the Compensation Committee, its activities, its relationship with its compensation consultant and the role of management in setting compensation is provided under “Compensation Discussion and Analysis.”

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee identifies, evaluates and recommends director candidates; develops, administers and recommends corporate governance guidelines; reviews and makes recommendations on matters of corporate governance and associated risks; oversees the evaluations of the performance and procedures of the Board and individual directors; makes recommendations as to Board committees and Board size; and makes a recommendation to the Board regarding the determination of director independence for the Board, the Audit Committee and the Compensation Committee. It is also responsible for reviewing with the Board qualification criteria for Board members. This committee also oversees and makes recommendations to the independent directors regarding non-employee director compensation. See “Corporate Governance Policies and Practices — Director Candidate Selection Process” for a description of the director selection process.

Finance Committee

The Finance Committee reviews, evaluates and recommends management’s proposals to the Board relating to the Company’s financings and dividend policy, and reviews and evaluates an annual summary of the funding and investment status of significant benefit plans sponsored by the Company globally. The Finance Committee also periodically reviews and evaluates the Company’s capital structure and capital allocation strategy as well as risks arising from the Company’s treasury function.

Executive Committee

The Executive Committee may act on behalf of the Board if a matter requires Board action between meetings of the full Board. The Executive Committee’s authority in certain matters is limited by law and our by-laws.

Committee Memberships

The following table shows the committee memberships effective on May 7, 2021 and the number of meetings held by each committee during 2021.


Director	Audit Committee	Compensation Committee	Corporate Governance and Nominating Committee	Finance Committee	Executive Committee
Daniel J. Brutto	X			X
Susan Crown		X	X		Chair
Darrell L. Ford	X	X
James W. Griffith		X	X		X
Jay L. Henderson	X			X
Richard H. Lenny		X	Chair		X
E. Scott Santi					X
David B. Smith, Jr.	X			Chair
Pamela B. Strobel	Chair		X		X
Anré D. Williams		Chair		X

2021 meetings	4	4	3	2	—

Corporate Governance Policies and Code of Conduct

General

One of our core values is integrity, and we have long believed that strong corporate governance is important to assure that the Company is managed for the long-term benefit of its stockholders. Accordingly, we continuously review our corporate governance policies and practices not only for compliance with applicable laws, the rules and regulations of the SEC, and the listing standards of the NYSE, but also for strong corporate governance and social and environmental responsibility principles and standards of behavior.

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Our Corporate Governance Guidelines provide a framework for the effective governance of the Company and address such matters as Board structure, Board governance and the responsibilities of the independent Lead Director.

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Our Code of Conduct sets forth standards of conduct applicable to all employees and directors, and all relevant aspects of our Code of Conduct are also applied to our suppliers through our Supplier Code of Conduct.

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Our Global Anti-Corruption Policy emphasizes the importance of complying with anti-corruption laws of all countries in which ITW and our divisions, subsidiaries, agents, consultants and affiliates operate.

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Our Code of Ethics sets forth standards of ethical dealing, full and fair disclosure and compliance applicable to our CEO, Vice Chairman, CFO, and all key financial personnel.

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Our Sustainability Report describes our sustainability strategy and our commitment to robust governance and ethics, our people, our communities and our environment and provides information about our goals and progress in these areas.

The Audit, Compensation and Corporate Governance and Nominating Committees each review their Committee charters annually and recommend that the Board of Directors approve any changes. Our website (https://investor.itw.com) includes the charters of these committees, the Company’s Corporate Governance Guidelines, the Code of Conduct, the Global Anti-Corruption Policy, the Code of Ethics for the Chief Executive Officer and key financial and accounting personnel, and the Sustainability Report, none of which is incorporated herein by reference. Any amendments to or waivers of the Code of Ethics will be promptly posted on our website. Copies of these documents will be provided, without charge, upon request.

Board Independence

Our Corporate Governance and Nominating Committee conducts an annual review and makes a recommendation to the full Board as to whether each of our directors meets the applicable independence standards of the NYSE. In accordance with the NYSE listing standards, our Board of Directors has adopted categorical standards for director independence, including heightened standards applicable to members of our Audit and Compensation Committees. A copy of the Company’s Categorical Standards for Director Independence is attached as Appendix A. A director will not be considered independent unless the Board of Directors determines that the director has no material relationship with the Company (directly, or as a partner, stockholder or officer of an organization that has a material relationship with the Company).

The Board has determined that, other than E. Scott Santi, each of our current directors has no material relationship with the Company other than as a director and is independent within the meaning of the

Company’s Categorical Standards for Director Independence and the listing standards of the NYSE. In making its independence determinations, the Board of Directors has broadly considered all relevant facts and circumstances including that: (1) Ms. Crown and Messrs. Henderson and Smith serve as directors of Northern Trust Corporation and its subsidiary, The Northern Trust Company, with which the Company has a commercial banking relationship; (2) Messrs. Brutto, Griffith, Henderson and Lenny and Ms. Strobel serve or served as directors of companies that have an existing customer or supplier relationship with the Company; (3) Mr. David B. Smith, Jr. is the nephew of Harold B. Smith, emeritus director of the Company; and (4) each of Messrs. Ford and Williams are officers of companies with which we conduct business. The Board has concluded that these relationships are not material and, therefore, do not impair the independence of these directors or the director nominee.

Board Evaluations

The Board of Directors and the Audit, Compensation, and Corporate Governance and Nominating Committees conduct annual evaluations that assess the effectiveness, processes, skills, functions and other matters relevant to the Board as a whole or to the particular committee. Results of the evaluations are summarized and discussed at Board and committee meetings. In addition, the Board conducts a peer review evaluation led by our independent Lead Director, whereby each Board member evaluates the contributions of the other Board members, and each director receives feedback from this peer review from our independent Lead Director. The evaluation process provides the Board with actionable feedback to enhance its performance and effectiveness.

Director Qualifications and Succession Planning

The Corporate Governance and Nominating Committee periodically reviews with the Board the skills and characteristics required of Board members in the context of the current make-up of the Board and screens and recommends nominees for director to the full Board. Pursuant to our Corporate Governance Guidelines, the criteria for Board membership includes skills, such as an understanding of manufacturing, marketing, finance, regulation and public policy, international background and experience, age, diversity (including racial, ethnic and gender diversity), and ability to provide strategic insight and direction on the Company’s key strategic initiatives. In addition to skills and experience, Board candidates are considered based upon various criteria, such as their personal integrity and judgment, global business and social perspective, and concern for the long-term interests of our stockholders. Although there is no specific policy regarding Board diversity quotas, racial, ethnic and gender diversity are important factors considered in the director selection process. Of the ten director nominees, two are female and two are African-American men. In addition, directors must have time available to devote to Board activities and to enhance their knowledge of the global manufacturing environment. Accordingly, we seek to attract and retain a diverse board composed of highly qualified directors who have sufficient time to attend to their duties and responsibilities to the Company. For a chart summarizing the skills and attributes of our director nominees, see “Corporate Governance Highlights — Composition of Director Nominees.”

Pursuant to ITW’s Corporate Governance Guidelines, a director may not stand for re-election after his or her 75th birthday, except in rare circumstances approved by the Board. The Committee believes it is important to replace skills that may be lost as directors approach retirement age and to identify skills to supplement existing board experience. The Committee discusses with the full Board its analysis of the characteristics and key attributes for future Board candidates. After receiving recommendations for nominations from the Corporate Governance and Nominating Committee, the Board nominates or elects candidates for director.

Director Candidate Selection Process

The Corporate Governance and Nominating Committee, or other members of the Board of Directors, may identify a need to add new members to the Board of Directors with specific skills or to fill a vacancy on the Board. At that time, the Corporate Governance and Nominating Committee would initiate a search, seeking input from Board members and senior management and, to the extent it deems appropriate, engaging a search firm. An initial qualified candidate or a slate of qualified candidates would be identified and presented to the Committee for its evaluation and approval. The Committee would then seek full Board approval of the selected candidate(s).

Our by-laws permit any stockholder or group of up to 20 stockholders meeting certain ownership requirements to nominate a director candidate or candidates for inclusion in our proxy statement and form of proxy. For a description of the process for submitting a director candidate through the use of proxy access, see “Other Information — Submitting Proxy Proposals and Director Nominations for the 2023 Annual Meeting — How do I use proxy access to nominate a director candidate to be included in ITW’s 2023 Proxy Statement?” Our by-laws also permit stockholders to nominate directors for consideration at an annual meeting of stockholders without requiring that their nominees be included in our proxy statement and form of proxy. The Corporate Governance and Nominating Committee will consider a candidate who has been properly nominated pursuant to Article II, Section 10 of the Company’s by-laws by following substantially the same process, and applying substantially the same criteria, as for candidates submitted by other sources, but the Committee has no obligation to recommend that candidate for nomination. For a description of the process for submitting a director candidate without proxy access, see “Other Information — Submitting Proxy Proposals and Director Nominations for the 2023 Annual Meeting — How do I nominate a director candidate who would not be included in ITW’s Proxy Statement?”

Director Election

Our by-laws provide for the election of directors in uncontested elections by majority vote. Under this majority vote standard, each director must be elected by a majority of the votes cast with respect to that director. For this purpose, a majority of the votes cast means that the number of shares voted “for” a director exceeds the number of shares voted “against” that director. In a contested election, directors will be elected by a plurality of the votes represented in person or by proxy at the meeting. An election is contested if the number of nominees exceeds the number of directors to be elected. Whether an election is contested or not is determined ten days in advance of when we file our definitive proxy statement with the SEC. This year’s election is uncontested, and the majority vote standard will apply.

If a nominee who is serving as a director is not elected at an annual meeting, Delaware law provides that the director would continue to serve on the Board as a “holdover director” until his or her successor is elected. Our Corporate Governance Guidelines, however, require any nominee for director who fails to receive a majority of the votes cast for his or her election to tender his or her resignation. The Corporate Governance and Nominating Committee of the Board will consider the resignation and recommend to the Board whether to accept or reject it. In considering the resignation, the Committee will take into account such factors as any stated reasons stockholders voted against the election of the director, the length of service and qualifications of the director, the director’s contributions to the Company, and our Corporate Governance Guidelines. The Board will consider the Committee’s recommendation, but no director who failed to receive a majority of the votes cast will participate. We will disclose the results of the Committee’s review within 90 days of such annual meeting. At our 2021 Annual Meeting, each director received over 95% of the votes cast for his or her election.

Shareholder Engagement

Shareholder Outreach Activities

We believe regular, proactive communications with our shareholders to be in the long-term best interests of the Company. Our investor communications and outreach typically include annual investor day meetings, quarterly conference calls, investor conferences, and analyst meetings and calls throughout the year at the request of investors. These meetings provide a forum to engage with our shareholders on topics including strategy, financial performance, risk management, talent development, compensation, corporate governance, and social and environmental matters. Management representatives led numerous meetings throughout 2021 on these topics and sought valuable feedback from our shareholders.

Additionally, we regularly engage with shareholders holding more than a majority of our shares regarding environmental, social and governance topics, shareholder proposals and any other topics of interest to our investors, and we share feedback we receive from our investors with our Board. We have received valuable inputs from our investors related to our progress in executing our sustainability strategy. We have also received supportive feedback regarding Board composition, diversity and inclusion strategies, goals and progress, our response to COVID-19, our greenhouse gas emissions intensity reduction target, and our continuous journey to utilize the SASB Materiality Map^® and the Task Force on Climate-related Financial Disclosures (TCFD) framework to guide our sustainability-related disclosures.

As part of our annual investor outreach, early this year we offered the opportunity to holders of approximately 55% of our shares, represented by 22 investors, to engage with us regarding governance-related matters, the special meeting shareholder proposal, our progress on sustainability and any other topics they wished to discuss. Eight investors, holding in the aggregate approximately 32% of our shares, engaged with us by telephone. Others indicated that they had no questions and did not feel a call was needed. Overall, the discussions were positive, with investors expressing support for the Company’s Board, current governance practices and progress in executing our sustainability strategy.

How to Communicate with our Directors

Shareholders and other interested parties may communicate with any of our directors, including our independent Lead Director, or with the independent directors as a group by sending an e-mail to independentdirectors@itw.com or by writing to the independent directors as a group or to any of our directors c/o Illinois Tool Works Inc., 155 Harlem Avenue, Glenview, IL 60025, Attention: Secretary, with a designation on the outside of the envelope as a “Board Communication.” Relevant communications will be forwarded by the Secretary to the appropriate directors depending on the facts and circumstances outlined in the communication.

Director Co

SEC Form DEF 14A filed by Illinois Tool Works Inc.