Committees of the Board

The Audit Committee

The Audit Committee is comprised of at least three independent Directors chosen annually. All members of the Committee are required to be financially literate, and at least one member must be an “audit committee financial expert” as defined by the Securities and Exchange Commission. The Audit Committee met four times in 2010. It is responsible for:

• Recommending the annual appointment of independent auditors;
• Reviewing the annual audit plan and reviewing the results of the annual audit with independent auditors;
• Reviewing the performance of the Company’s Internal Audit function;
• Reviewing the adequacy of internal controls with both the independent auditors and the internal auditors;
• Assisting the Board in its oversight of Grainger's financial reporting practices through the monitoring and review of Grainger's internal controls;
• Assisting the Board in risk oversight through the review of the Company's risk assessment and risk management process; and
• Overseeing the activities of the W.W. Grainger, Inc. Employees Profit Sharing Plan and Trust and other ERISA plans/trusts sponsored by Grainger and/or any of its subsidiaries that involve the investment of funds by fiduciaries for the benefit of employees.

The Board Affairs and Nominating Committee (BANC) is comprised of at least three independent Directors chosen annually. The BANC met five times in 2010. The general responsibilities of the Committee are:

• Board size;
• Specific criteria of Board membership;
• Nominees for Board membership;
• Board Committees' duties and membership;
• Management, organization and CEO succession;
• Major issues or proposals;
• Corporate governance

The Compensation Committee

The Compensation Committee is comprised of at least three independent Directors chosen annually. The Compensation Committee met five times in 2010. The general responsibilities of the Committee are to ensure:

• That a market competitive compensation structure is in place that will attract, motivate, and retain key talent necessary to help deliver performance that will increase shareholder value;
• That compensation and benefit policies and practices reflect the highest level of integrity;
• That compensation, especially senior management compensation, is linked to performance, both personal and Grainger; and
• That the Company's compensation process and practices are designed to award appropriate risk taking incentives; and
• The appropriate administration of various stock and incentive plans.

Lead Director

The Lead Director is elected annually by and from the Board's independent directors. Among the duties assigned to the Lead Director is the responsibility for:

• Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors and serving as the primary liason between the Chairman and the independent directors;
• Reviewing and approving meeting agenda, schedules and the types of information sent to the Board;
• Leading the Chairman/Chief Executive Officer evaluation and communicating to the Chairman/Chief Executive Officer the independent directors' annual evaluation of the Chairman/Chief Executive Officer's performance; and
• Calling meetings of the independent directors if appropriate.