MSM MSC Industrial Direct Co Inc

Compensation Committee Interlocks and Insider Participation  



During our 2017 fiscal year, each of Ms. Goeser and Messrs. Fradin, Kaufmann, Kelly and Paladino served as members of our Compensation Committee.  None of the members of the Compensation Committee was, during or prior to fiscal year 2017 , an officer of the company or any of our subsidiaries or had any relationship with us other than serving as a director and as a de minimis shareholder.  In addition, none of our directors has interlocking or other relationships with other boards, compensation committees or our executive officers that would require disclosure under Item 407(e)(4) of Regulation S-K.



Nominating and Corporate Governance Committee



Principal Functions







Composition and Charter



Our Nominating and Corporate Governance Committee is currently comprised of Ms. Goeser and Messrs. Byrnes, Fradin and Peller, each of whom is an independent director.  Ms. Goeser is the Chairwoman of the Nominating and Corporate Governance Committee.  The Nominating and Corporate Governance Committee has adopted a written charter, a copy of which is available on our website at www.mscdirect.com/corporategovernance .



Policy Regarding Shareholder Nominations for Director



The Nominating and Corporate Governance Committee of our Board believes that the best director candidates will be those who have a number of qualifications, including independence, knowledge, judgment, integrity, character, leadership skills, education, experience, financial literacy, standing in the community and an ability to foster a diversity of backgrounds and views and to complement our Board’s existing strengths.  There are no specific, minimum or absolute criteria for Board membership.  The Nominating and Corporate Governance Committee seeks to achieve a balance and diversity of knowledge, experience and capability on our Board, while maintaining a sense of collegiality and cooperation that is conducive to a productive working relationship within the Board and between the Board and management.  The Nominati ng and Corporate Governance Committee also believes that it is important for directors to have demonstrated an ethical and successful career.  Such a career may include:



At all times, the Nominating and Corporate Governance Committee will make every effort to ensure that our Board and its committees include at least the required number of independent directors, as that term is defined by applicable standards promulgated by the New York Stock Exchange and the SEC.  In addition, prior to nominating an existing director for re-election to our Board, the Nominating and Corporate Governance Committee will consider and review such existing director’s attendance and pe rformance, independence, experience, skills and contributions as an existing director to our Board.



The Nominating and Corporate Governance Committee may employ third-party search firms to identify director candidates, if so desired.  The Nominating and Corporate Governance Committee will review and consider recommendations from a wide variety of contacts, including current executive officers, directors, community leaders and shareholders, as a source for potential director candidates.



The Nominating and Corporate Governance Committee will consider qualified director candidates recommended by shareholders in compliance with our procedures and subject to applicable inquiries.  The Nominating and Corporate Governance Committee does not have different standards for

evaluating nominees depending on whether they are proposed by our directors or by our shareholders.  Any shareholder may recommend a nominee for director at least 120 calendar days prior to the one year anniversary of the date on which our proxy statement was released to shareholders in connection with the previous year’s annual meeting, by writing to Corporate Secretary, MSC Industrial Direct Co., Inc., 75 Maxess Road, Melville, NY 11747, and providing the following information:



All of these communications will be reviewed by our Senior Vice President, General Counsel and Corporate Secretary and forwarded to Ms. Goeser, the Chairwoman of the Nominating and Corporate Governance Committee, for further review and consideration in accordance with this policy.  Any such shareholder recommendation should be accompanied by a written statement from the candidate of his or her consent to be named as a candidate and, if nominated and elected, to serve as a director.





Board Leade rship Structure ; Executive Sessions of the Independent Directors



Our Board functions collaboratively and emphasizes active participation and leadership by all of its members.  Our Board currently consists of nine directors, each of whom, other than Messrs. Gershwind and Jacobson, is independent under our Corporate Governance Guidelines and the applicable rules of the New York Stock Exchange.  Mr. Gershwind has served as our President and Chief Executive Officer since January  1, 2013 and as a member of our Board since 2010.  Mr. Jacobson, who is one of our principal shareholders, has served as our Non-executive Chairman since January  1, 2013 and as our Chairman since 1998.  Mr. Jacobson previously served as our President from October 199 5 through November 200 3, and as our Chief Executive Officer from October 199 5 through November 200 5.  The Board has separated the roles of Chairman and Chief Executive Officer since 2005 and has appointed a non-management, lead director since 2007.



Our Board of Directors believes that the most effective Board leadership structure for our company at the present time is for the roles of Chief Executive Officer and Chairman of the Board to be separated.  Under this structure, our Chief Executive Officer is generally responsible for setting the strategic direction for our company and for providing the day-to-day leadership over our operations, and our Chairman of the Board sets the agenda for meetings of the Board and presides over Board meetings.  In addition, our independent directors meet at regularly scheduled executive sessions without me mbers of management present.  Mr. Peller, who has served as our Lead Director since 2007, serves as the presiding director at the executive sessions of the independent directors.  The Lead Director also has such other duties and responsibilities as determined by the Board from time to time.  Those additional duties and responsibilities include:



Our Board retains the authority to modify this leadership structure as and when appropriate to best address our unique circumstances at any given time and to serve the best interests of our shareholders.





Role of the Boa rd in Risk Oversight



Our Board’s role in risk oversight involves both the full Board and its committees.  The full Board is responsible for the oversight of risk management and reviews our major financial, operational, compliance, reputational and strategic risks, including steps to monitor, manage and mitigate such risks.  In addition, each of the Board committees is responsible for oversight of risk management practices for categories of risks relevant to their functions.  For example, the Audit Committee discusses with management our major financial risk exposures and the steps that have been taken to monitor and mitigate such exposures, including with respect to risk assessment and risk management.  Similarly, the Nominating and Corporate Governance Committee has oversight responsibility over governance and compliance matters and the Compensation Committee has oversight responsibility for our overall compensation structure, including review of its compensation practices, in each case with a view to assessing associated risks.  Please see “ Compensation Risk Assessment ” on page 47 of this proxy statement.



The Board as a group is regularly updated on specific risks in the course of its review of corporate strategy, business plans and reports to the Board by management and its respective committees.  The Board believes that its leadership structure supports its risk oversight function by providing a greater role for the independent directors in the oversight of our company.





Corporate Gover nance Guidelines



We have adopted Corporate Governance Guidelines, which are available on our website at www.mscdirect.com/corporategovernance .





Director A ttendance at Shareholder Meetings



We encourage attendance by the directors at our annual meeting of shareholders.  All of our current directors attended the annual meeting held on January 26, 2017 , either in person or by telephone.





Non-Execut ive Director Stock Ownership Guidelines



To more closely align the interests of our non-executive directors with those of our shareholders, our Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, adopted stock ownership guidelines for all of our non-executive directors in 2011.  The ownership guidelines provide for each of our non-executive directors to own a minimum number of shares having a value equal to five times his or her base annual cash retainer ( i.e., a value equal to $210,000 for directors whose tenure began before the adoption of the guidelines and a value equal to $250,000 for Messrs. Kaufmann and Paladino).  All shares held by our non-executive directors, including unvested restricted stock units , count toward this guideline.  The guidelines provide for our non-executive directors to reach this ownership level within the later of five years from the date on which the guidelines were adopted or five years from the date on which the director is first appointed or elected.  Once a non-executive director has attained his or her minimum ownership requirement, he or she must maintain at least that level of ownership.  If a non-executive director has not satisfied his or her proportionate minimum stock ownership guideline, the director must retain an amount equal to 100% of the net shares received as a result of the exercise of stock options or the vesting of restricted stock units.  All of our non-executive directors are in compliance with their current stock ownership guidelines.





Code of Eth ics and Code of Business Conduct



We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer and senior financial officers and a Code of Business Conduct that applies to all of our directors, officers and associates.  The Code of Ethics and the Code of Business Conduct are available on our website at www.mscdirect.com/corporategovernance .  We intend to disclose on our website, in accordance with all applicable laws and regulations, amendments to, or waivers from, our Code of Ethics and our Code of Business Conduct.





Shareh older Communications Policy



Any shareholder or other interested party who desires to communicate with our Chairman of the Board, Lead Director or non-management members of our Board may do so by writing to: Board, c/o Philip Peller, Lead Director of the Board, MSC Industrial Direct Co., Inc., 75 Maxess Road, Melville, NY 11747.  Communications may be addressed to the Chairman of the Board, the Lead Director, an individual director, a Board committee, the non-management directors or the full Board .





Sectio n 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Exchange Act requires our executive officers, directors and persons who own beneficially more than 10% of our Class A common stock to file initial reports of ownership and reports of changes in ownership with the SEC.  Based solely on our review of the copies of such forms furnished to us and written representations from our executive officers, directors and such beneficial owners, we believe that all filing requirements of Section 16(a) of the Exchange Act were timely complied with during the fiscal year ended September 2 , 2017, except that (i) Mr. Gershwind filed one late Form 4 to report the vesting of RSUs and a late Form 5 for fiscal year 2017 reporting two gifts, and (ii) Mr. Jacobson filed one late Form 4 to report a conversion of Class B shares and two gifts.

Please refer to the section entitled “ Election of Directors (Proposal No. 1) ”   beginning on page 7   of this proxy statement for the biographical data for Mr. Gershwind.



Rustom Jilla



Mr. Jilla was appointed our Executive Vice President and Chief Financial Officer in July 201 5.  From April 201 3 through September 201 4, Mr. Jilla served as Chief Financial Officer of Dematic Group, a global provider of warehouse logistics and inventory management solutions.  From September 200 2 to April 201 3, he served as Chief Financial Officer of Ansell Limited, a global leader in protective solutions, publicly traded on the Australian Securities Exchange. Prior to that, Mr. Jilla served as Vice President, Financial Operations at PerkinElmer Inc., and earlier spent 12 years at The BOC Group, a U.K.-listed, multinational industrial gas company, where he held various Product Management and Finance leadership roles.  He began his career in auditing with Coopers & Lybrand (now PricewaterhouseCoopers LLP).



Douglas Jones



Mr. Jones was appointed our Executive Vice President, Chief Supply Chain Officer in October 201 4, having previously served as our Executive Vice President, Global Supply Chain Operations since October 200 9.  Previously, he was our Senior Vice President, Supply Chain Management from April 200 8 until October 200 9 and our Senior Vice President of Logistics from December 200 5 until April 200 8.  Mr. Jones joined our company in July 200 1, as Vice President of Fulfillment.  Prior to joining our company, he served as Vice President, Distribution Operations for the Central Region of the United States, at Fisher Scientific from 1998 to 2001.  Prior to his role at Fisher Scientific, Mr. Jones was part of the management team at McMaster-Carr Supply Company, based in Chicago.  During his tenure with McMaster-Carr, Mr. Jones held various managerial positions of increasing responsibility in fulfillment, finance, purchasing and inventory management.



Steve Armstrong



Mr. Armstrong   was appointed our   Senior Vice President, General Counsel and Corporate Secretary in October 201 2.  Previously, he served as our Vice President, General Counsel and Corporate Secretary from October 200 8 until October 201 2.  From 2006 to 2008, he was a legal consultant based in New York, New York performing services for Thomson Reuters and NBC Universal.  Mr. Armstrong was the Executive Vice President and General Counsel of the Home Shopping Network in Tampa, Florida from 2002 to 2006.  From 2000 to 2002, he was the Senior Vice President and General Counsel

of Agilera, Inc., a technology company in Denver, Colorado.  Prior to 2000, Mr. Armstrong was the Vice President, General Counsel & Secretary of Samsonite Corporation and a partner in the law firms Paul Hastings, and Baker and Hostetler.



Kari Heerdt



Ms. Heerdt was appointed our Chief People Officer in August 201 4.  Previously, Ms. Heerdt served as Partner, Strategic Account Executive at Aon Hewitt, the global talent, retirement and health business of Aon Plc (NYSE: AON), where she oversaw one of Aon Hewitt’s largest clients. Prior to that, Ms. Heerdt was a Senior Consultant at Hewitt in the Corporate Restructuring and Change, Talent and Organization Consulting practice, later becoming the Senior Manager, Operations for Cerberus Capital Management, a leading investment management firm, before becoming the Senior Vice President, Human Resources for two of Cerberus’ portfolio companies, Mervyn’s LLC and Talecris Biotheraputics, Inc.  Ms. Heerdt served as Senior Vice President, Human Resources for Mervyn’s LLC from April 200 5 until January 200 8.  In July 200 8, Mervyn’s LLC filed for protection under Chapter 11 of the United States Bankruptcy Code and, later in 2008, was liquidated.



Steven Baruch



Mr. Baruch was appointed our Executive Vice President, Chief Strategy and Marketing Officer in August 201 7.  Previously, he served as our Senior Vice President, Strategy and Marketing, a position he held from July 201 5 until August 201 7.   Prior to that, he served as our Vice President of Digital & Strategy, a position he held from 2014 until July 201 5, and as our Vice President of eCommerce from November 201 0 until May 201 4.  Mr. Baruch began his career with our company in May 200 8.  Prior to joining our company, Mr. Baruch served as Senior Vice President of Sales and Managed Services for Adecco where he was responsible for leading B2B sales and marketing with focus on digital, web and eCommerce strategy and execution.   Previously, he held various executive positions at global electronics distributor Arrow Electronics, including Director of Sales, Marketing, and Public Relations for arrow.com.



Charles Bonomo



Mr. Bonomo was appointed our Senior Vice President and Chief Information Officer in August 201 1.  Previously, he served as our Vice President and Chief Information Officer from July 200 7 through August 201 1.  From 1999 through 2007 he served as Vice President at Arrow Electronics, Inc., including in the position of Vice President of Infrastructure and Operations from January 200 6 to July 200 7, and as Vice President and Chief Architect from July 200 3 through January 200 6.  Previously, he was the Director of Clinical Technology at Mount Sinai Medical Center from 1996 to 1998, rising to Vice President and Chief Information Officer of NYU Health System in 1998.  Prior to 1996, he held various positions of increasing responsibility at J.P. Morgan in the United States and Europe and at Grumman Aerospace Corp., where he designed and tested software for the F14 Tomcat aircraft.



Christopher Davanzo



Mr. Davanzo was appointed our Senior Vice President of Finance and Corporate Controller in July 201 5.  Previously, he served as our Vice President of Finance and Corporate Controller, a position he held from 2006 until July 201 5.  From 1993 through 2006, he held various positions of increasing responsibility in the finance department at Olympus America Inc., including the role of Vice President of Finance from 2004 to 2006.  Prior to joining Olympus, Mr. Davanzo held several auditing and accounting positions, including with KPMG LLP, Coopers & Lybrand (now PricewaterhouseCoopers LLP), and Weight Watchers International.



Gregory Polli



Mr. Polli was appointed our Senior Vice President, Product Management in July 201 5.  Previously, he served as our Vice President, Product Management from November 200 5 to July 201 5, our Vice President, Metalworking from November 200 2 to November 200 5, our Vice President, Metalworking Merchandising from April 200 2 to November 200 2 and our Vice President, Product from October 199 9 to April 200 2.  Prior to that, Mr. Polli held various positions of increasing responsibility at our company in product management and merchandising since joining our company in 1988.

David Wright



Mr. Wright was appointed our Senior Vice President, Sales in July 201 5.  Previously, Mr. Wright served as our Vice President, Field Sales f rom February 200 8   to July 201 5 ,   our Vice President, North Region from May 200 6 to February 200 8 and our National Director of Sales from August 200 1 to May 200 6 .  Prior to that, Mr. Wright held various positions of increasing responsibility at our company in sales since joining our company in 1998.



There are no arrangements or understandings between any executive officer and any other person pursuant to which the executive officer was, or is to be, selected as an officer of our company.

RATIFIC ATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL NO. 2)



Our Audit Committee has appointed the firm of Ernst & Young LLP, which has been our independent registered public accounting firm since 2002, to serve as our independent registered public accounting firm for fiscal year 2018 .  Although shareholder ratification of the Audit Committee’s action in this respect is not required, our Board considers it desirable for shareholders to pass upon the selection of the independent registered public accounting firm.  If the shareholders disapprove of the selection, our Audit Committee intends to reconsider the selection of Ernst & Young LLP as our independent registered public accounting firm.



Ernst & Young LLP has advised us that neither it nor any of its members has any direct or material indirect financial interest in our company.  We expect that a representative from Ernst & Young LLP will be present at the annual meeting.  This representative will have the opportunity to make a statement if he or she so desires and is expected to be available to respond to appropriate questions.





Princ ipal Accountant Fees and Services



For the fiscal years ended September  2 , 201 7 and September  3, 2016 , Ernst & Young LLP billed us for their services the fees set forth in the table below.  All audit and permissible non-audit services reflected in the fees below were pre-approved by the Audit Committee in accordance with established procedures.





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Audit Com mittee Pre-Approval Policy



The Audit Committee is required to pre-approve all audit and non-audit services provided by our independent registered public accounting firm and is not permitted to engage the independent registered public accounting firm to perform any non-audit services proscribed by law or regulation.  The Audit Committee may delegate pre-approval authority to the Chairman of the Audit Committee, in which case decisions taken are to be presented to the full Audit Committee at its next meeting.



The Audit Committee of the Board has considered whether, and has determined that, the provision of non-audit services by Ernst & Young LLP is compatible with maintaining auditor independence.