Board Justification

Our executive compensation philosophy is designed to deliver competitive total compensation, upon the achievement of individual and/or corporate performance objectives, which will attract, motivate and retain leaders who will drive the creation of stockholder value.

Board Justification

Annual cash incentive awards for the NEOs for 2012 were made pursuant to the 2011 Cash Incentive Plan and then adjusted downward, in the discretion of the Compensation Committee, in accordance with the ITW Executive Incentive Plan. The Compensation Committee determines and recommends for approval by the independent directors the award amount for the CEO. The Compensation Committee considers recommendations from the CEO and approves annual cash incentives for our other NEOs.

Board Justification

This number includes Company matching contributions to the ECRIP account or the Savings and Investment Plan, based on plan formulas for all participants, as follows: $115,272 for Mr. Speer. The 2012 amount for Mr. Speer also includes $95,562, representing the cost of private aircraft for personal use done at the request of our Board for health reasons.

Board Justification

The value realized upon the exercise of options is calculated using the difference between the option exercise price and the market price at the time of exercise multiplied by the number of shares underlying the option.