AJG Arthur J Gallagher and Company

Voting Items

•  Elect each of the 10 nominees named in the accompanying Proxy Statement as directors to hold office until our 2021 Annual Meeting (Item 1)

FOR each nominee

•  Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020 (Item 2)

FOR

•  Approve, on an advisory basis, the compensation of our named executive officers (Item 3)

FOR

•  Vote on stockholder proposal to adopt “Rooney Rule” diversity search policy, if properly presented at the meeting (Item 4)

AGAINST

Item 1: Election of Directors

Board Leadership Structure

Director Independence

Board Committees

Board’s Role in Risk Oversight

Other Board Matters

Director Compensation

Certain Relationships and Related Person Transactions

Security Ownership by Certain Beneficial Owners and Management

Equity Compensation Plan Information

Item 2: Ratification of Appointment of Independent Auditor

Audit Committee Report

Compensation Discussion and Analysis

Overview of Our Executive Compensation Program

2019 Compensation

Compensation Decision-Making Process

Comparative Market Assessment

Pay for Performance Assessment

Compensation Committee Report

Executive Compensation Tables

Item  3: Advisory Vote to Approve the Compensation of Our Named Executive Officers

CEO Pay Ratio

Annex A: Information Regarding Non-GAAP Measures

Annex B: Resources

2020 PROXY STATEMENT

i

CEO
Experience

Finance /
Capital
Markets

Legal /
Compliance /

Regulatory

Risk
Management /

Governance

Sales and
Marketing

International

Insurance
Industry

Sherry S. Barrat

X        

X      

X        

X        

X        

William L. Bax

X      

X        

D. John Coldman

X        

X        

X        

X        

Frank E. English, Jr.

X      

X        

David S. Johnson

X        

X        

X        

X        

Kay W. McCurdy

X      

X        

X        

Christopher C. Miskel

X        

X        

X        

Ralph J. Nicoletti

X      

X        

X        

Norman L. Rosenthal

X      

X        

X        

2020 PROXY STATEMENT

1

THE BOARD RECOMMENDS THAT YOU VOTE FOR

THE ELECTION OF EACH OF THE DIRECTOR NOMINEES

LISTED BELOW

Sherry S. Barrat

Age: 70

Director Since: 2013

Independent

Committee Memberships:

Compensation (Chair)

Nominating/Governance

Public Company Boards: 2

Ms. Barrat retired in 2012 as Vice Chairman of Northern Trust Corporation, a global financial holding company headquartered in Chicago, Illinois. She assumed the role of Vice Chairman in March 2011. From 2006 to 2011, Ms. Barrat served as Global President of Northern Trust’s personal financial services business, which provides asset management, fiduciary, estate and financial planning, and private banking services to individuals and families around the world. During her 22-year career at Northern Trust, Ms. Barrat served in various other leadership roles and as a member of the Northern Trust Management Committee. Since 1998, Ms. Barrat has served as a director of NextEra Energy, Inc., one of the largest publicly traded electric power companies in the United States, where she serves on the compensation and finance/investment committees. Since 2013, Ms. Barrat has also served as an independent trustee or director of certain Prudential Insurance mutual funds, where she serves on the investment review, governance & nominating and compliance committees.

Skills and Qualifications

Ms. Barrat’s qualifications to serve on our Board and chair our Compensation Committee include her executive management, operational and financial experience, in particular her deep understanding of the financial services industry and her experience leading a global client service and sales organization.

William L. Bax

Age: 76

Director Since: 2006

Independent

Committee Memberships:

Audit (Chair)

Public Company Boards: 1

Mr. Bax was Managing Partner of the Chicago office of PricewaterhouseCoopers (PwC), an international accounting, auditing and consulting firm, from 1997 until his retirement in 2003, and was a partner in the firm for 26 years. Mr. Bax previously served as a director of Sears, Roebuck & Co., a publicly traded retail company, from 2003 to 2005; Andrew Corporation, a publicly traded communications products company, from 2006 to 2007; and mutual fund companies Northern Funds/Northern Institutional Funds, from 2006 to 2018.

Skills and Qualifications

Mr. Bax’s qualifications to serve on our Board and chair our Audit Committee include his 26 years as a partner and six years as head of PwC’s Chicago office, his tenure on the boards of two public companies and his experience advising public companies on accounting and disclosure issues.

D. John Coldman, OBE

Age: 72

Director Since: 2014

Independent

Committee Memberships:

Compensation

Public Company Boards: 1

Mr. Coldman began his career at WT Greig, a reinsurance broker. In 1988, he became Managing Director and in 1996 was appointed Chairman of The Benfield Group, the world’s leading independent reinsurance and risk intermediary, until its acquisition by Aon Corporation in 2008. From 2001 to 2006, Mr. Coldman served as Deputy Chairman and a Member of Council of Lloyd’s of London. He is also a past Chairman of Brit PLC, a publicly traded global specialty insurer and reinsurer, from 1996 to 2000, and Omega Insurance Holdings Limited, a publicly traded insurance and reinsurance group, from 2010 to 2012. Mr. Coldman served as the non-executive Chairman of Roodlane Medical Ltd., a privately held healthcare services provider, from 2007 to 2011. A U.K. citizen, Mr. Coldman was appointed an Officer of the Order of the British Empire (OBE) in the Queen’s Birthday Honours List 2017, for “services to business, young people, and charity.”

Skills and Qualifications

Mr. Coldman’s qualifications to serve on our Board include his international insurance industry knowledge, his experience within the Lloyd’s and London marketplaces, and his experience with public company matters and mergers and acquisitions.

2

2020 PROXY STATEMENT

Frank E. English, Jr.

Age: 74

Director Since: 2009

Independent

Committee Memberships:

Audit

Public Company Boards: 3

From 1976 to 2009, Mr. English served in various senior roles at Morgan Stanley, a multinational investment bank and financial services company, finishing his tenure there as Managing Director and Vice Chairman of Investment Banking. Since 2012, Mr. English has served on the board of directors of Cboe Global Markets, a publicly traded holding company for various securities exchanges, including the largest options exchange in the United States, where he serves on the finance and strategy, nominating and governance, and compensation committees. From 2010 to 2019, Mr. English served as either a board member or board adviser of Tower International, Inc., a publicly traded global automotive components manufacturer. From 2011 to 2017, Mr. English also served as a senior advisor to W.W. Grainger, a publicly traded broad-based distributor of industrial maintenance, repair and operations supplies.

Skills and Qualifications

Mr. English’s qualifications to serve on our Board include his extensive investment banking expertise, particularly in the areas of capital planning, strategy development, financing and liquidity management.

J. Patrick Gallagher, Jr.

Age: 68

Director Since: 1986

Chairman of the Board Since:

2006

Public Company Boards: 1

Mr. Gallagher has spent his entire career with Arthur J. Gallagher & Co. in a variety of management positions, starting as a Production Account Executive in 1974, then serving as Vice President of Operations from 1985 to 1990, as President and Chief Operating Officer from 1990 to 1995, and as President and Chief Executive Officer since 1995. From 2011 to 2019, Mr. Gallagher served on the board of directors of InnerWorkings, Inc., a global, publicly traded provider of managed print, packaging and promotional solutions, where he was appointed to its compensation and nominating/governance committees. He serves on the Board of Trustees of the American Institute for Chartered Property Casualty Underwriters and on the Board of Founding Directors of the International Insurance Foundation.

Skills and Qualifications

Mr. Gallagher is the only member of management serving on the Board. His 45 years of experience with our company and 33 years of service on the Board, his deep knowledge of our company and the insurance industry and his extensive leadership experience greatly enhance the Board’s decision making and enable Mr. Gallagher to serve as a highly effective Chairman of the Board.

David S. Johnson

Age: 63

Director Since: 2003

Independent Lead Director
Since: 2016

Committee Memberships:

Compensation

Nominating/Governance

Public Company Boards: 1

Mr. Johnson has served as Chief Executive Officer of North America for Aryzta AG, a publicly traded global food business, since January 2018, where he also serves on the company’s group executive committee. From 2009 to 2017, he served as President and Chief Executive Officer of the Americas for Barry Callebaut AG, the world’s largest manufacturer of cocoa and chocolate products, where he also served on the global executive committee. Mr. Johnson served as President and Chief Executive Officer, and as a member of the board, of Michael Foods, Inc., a food processor and distributor, from 2008 to 2009, and as Michael Foods’ President and Chief Operating Officer from 2007 to 2008. From 1986 to 2006, Mr. Johnson served in a variety of senior management roles at Kraft Foods Global, Inc., a global food and beverage company, most recently as President of Kraft Foods North America, and as a member of Kraft Foods’ Management Committee. Prior to that, he held senior positions in marketing, strategy, operations, procurement and general management at Kraft Foods.

Skills and Qualifications

Mr. Johnson’s qualifications to serve on our Board and as Lead Director include his experience as a senior executive of global businesses and his knowledge of corporate governance and executive compensation best practices.

2020 PROXY STATEMENT

3

Kay W. McCurdy

Age: 69

Director Since: 2005

Independent

Committee Memberships:

Compensation

Nominating/Governance (Chair)

Public Company Boards: 1

Ms. McCurdy practiced corporate and finance law from 1975 to 2019 at the law firm of Locke Lord LLP, where she was a partner from 1983 to 2012 and Of Counsel from 2012 to 2019. She served on the firm’s Executive Committee from 2004 to 2006. During her career as a corporate and finance attorney, Ms. McCurdy represented numerous companies on a wide range of matters, including financing transactions, mergers and acquisitions, securities offerings, executive compensation and corporate governance. Ms. McCurdy served as a director of Trek Bicycle Corporation, a leading bicycle manufacturer, from 1998 to 2007. In recognition of her ongoing commitment to director education and boardroom excellence, the National Association of Corporate Directors (NACD) has named Ms. McCurdy a NACD Governance Fellow every year since 2010. She is also a director of the Chicago chapter of NACD.

Skills and Qualifications

Ms. McCurdy’s qualifications to serve on our Board and chair the Nominating/Governance Committee include her experience advising companies regarding legal, public disclosure, corporate governance, mergers and acquisitions and executive compensation issues.

Christopher C. Miskel

Age: 45

Director Since: 2020

Independent

Committee Memberships:

Audit

Public Company Boards: 1

Since 2017, Mr. Miskel has served as President and Chief Executive Officer of Versiti, Inc., one of the largest independent blood products supply companies in the United States. From 2013 to 2017, Mr. Miskel served in senior management roles at Baxter International Inc., a publicly traded healthcare company, Baxalta Incorporated, which spun off from Baxter in July 2015, and Shire plc, which acquired Baxalta in June 2016. During this period, Mr. Miskel served as Vice President, U.S. BioScience National Accounts from 2013 to 2014, as Vice President, Plasma Strategy and New Product Development from 2014 to 2015, and as Head – Global Immunology from 2015 to 2017. Prior to 2013, he served in roles of increasing responsibility at Eli Lilly and Company, a publicly traded healthcare company. His tenure at Lilly included management experience in Australia and New Zealand. Mr. Miskel also currently serves as a member of the Medical College of Wisconsin Board of Trustees, the Board of Directors of the Milwaukee Regional Medical Center, and on the Executive Committee of the Board of Blood Centers of America.

Skills and Qualifications

Mr. Miskel’s qualifications to serve on our Board include his senior executive experience, his involvement in setting strategy for large businesses such as Lilly, Baxter, Baxalta and Shire, his extensive sales and marketing experience, and his knowledge of the healthcare industry and related privacy and cybersecurity issues.

Ralph J. Nicoletti

Age: 62

Director Since: 2016

Independent

Committee Memberships:

Audit

Public Company Boards: 1

Mr. Nicoletti has served as Senior Vice President and Chief Financial Officer of The AZEK Company LLC, a building products company, since January 2019. Mr. Nicoletti served as Executive Vice President and Chief Financial Officer of Newell Brands, Inc., a publicly traded consumer goods company, from June 2016 to December 2018, and as Executive Vice President and Chief Financial Officer of Tiffany & Co., a publicly traded jewelry business, from April 2014 to May 2016. Prior to joining Tiffany, Mr. Nicoletti was Executive Vice President and Chief Financial Officer of Cigna Corporation, a publicly traded global health services and insurance company, from 2011 to 2013; and of Alberto Culver, Inc., a publicly traded manufacturer and distributor of beauty products, from 2007 to 2011. Prior to that, Mr. Nicoletti held a number of financial management positions at Kraft Foods, Inc., finishing his tenure there as Senior Vice President of Corporate Audit.

Skills and Qualifications

Mr. Nicoletti’s qualifications to serve on our Board include his experience as a senior executive of global businesses, his deep financial management expertise and his experience managing privacy and cybersecurity issues.

4

2020 PROXY STATEMENT

Norman L. Rosenthal,
Ph.D.

Age: 68

Director Since: 2008

Independent

Committee Memberships:

Audit

Public Company Boards: 1

Since 1996, Dr. Rosenthal has been President of Norman L. Rosenthal & Associates, Inc., a management consulting firm that specializes in the property and casualty insurance industry. He is also an affiliated partner of Lindsay Goldberg LLC, a private equity firm. Dr. Rosenthal served on the board and as a member of the compensation committee of National Interstate Corporation, a publicly traded insurance company specializing in commercial transportation exposures, from June 2015 until it was acquired by another insurance company in November 2016. He currently serves on the board of The Plymouth Rock Company, a privately held group of auto and homeowners’ insurance companies, as well as that of its subsidiary, Plymouth Rock Management Company of New Jersey. Prior to 1996, Dr. Rosenthal spent 15 years practicing in the property and casualty insurance industry at Morgan Stanley & Co., finishing his tenure there as Managing Director. Dr. Rosenthal holds a Ph.D. in Business and Applied Economics, with an insurance focus, from the Wharton School of the University of Pennsylvania. Dr. Rosenthal has been named a NACD Leadership Fellow every year since 2017.

Skills and Qualifications

Dr. Rosenthal’s qualifications to serve on our Board include his extensive experience in the insurance and finance industries, his experience as an investment analyst and his knowledge of enterprise risk management practices.

2020 PROXY STATEMENT

5

Independent Lead Director Duties & Responsibilities

Act as a liaison between the Chairman and the independent directors

Be available for consultation and communication with stockholders as appropriate

Call and preside over executive sessions of the independent directors without the Chairman or other members of management present

Consult with the Chairman and approve Board meeting agendas and schedules

Consult with the Chairman and approve information provided to the Board

Consult with committee chairs with respect to agendas and information needs relating to committee meetings

Work closely with and act as an advisor to the Chairman; be available to discuss with other directors concerns about the company or the Board and relay those concerns, where appropriate, to the Chairman or other members of the Board; and be familiar with corporate governance best practices

Provide leadership to the Board if circumstances arise in which the role of the Chairman may be, or may be perceived to be, in conflict

Perform such other duties and responsibilities as the Board may determine

6

2020 PROXY STATEMENT

Audit Committee

Met 5 times in 2019

Committee Members:

William L. Bax (Chair)

Frank E. English, Jr.

Christopher C. Miskel*

Ralph J. Nicoletti

Norman L. Rosenthal

*Appointed to the Audit

 Committee on

 March 12, 2020.

The Audit Committee’s responsibilities include general oversight of the integrity of our financial statements; enterprise risk assessment and management; finance activities; our compliance with legal and regulatory requirements; our independent registered public accounting firm’s qualifications and independence; and the performance of our internal audit function and independent registered public accounting firm.

The Audit Committee manages our relationship with our independent registered public accounting firm and is responsible for the appointment, retention, termination and compensation of the independent auditor.

Independence and Audit Committee Financial Experts

Each member of the Audit Committee meets the additional heightened independence and other requirements of the NYSE listing standards and SEC rules. In addition, the Board has determined that each of Mr. Bax and Mr. Nicoletti qualifies as an “audit committee financial expert” under SEC rules.

Compensation
Committee

Met 5 times in 2019

Committee Members:

Sherry S. Barrat (Chair)

D. John Coldman

David S. Johnson

Kay W. McCurdy

The Compensation Committee’s responsibilities include reviewing and approving compensation arrangements for our executive officers, including our CEO; administering our equity compensation and other benefit plans and reviewing our overall compensation structure to avoid incentives that promote excessive risk-taking by executive officers and other employees. In addition, the Compensation Committee has responsibility to review the company’s strategies and policies related to human capital management, including with respect to matters such as diversity and inclusion, workplace environment and culture, and talent development and retention. The Committee receives annual reports on diversity and inclusion from the company’s Chief Human Resources Officer.

The Compensation Committee engaged a compensation consultant to assist it in carrying out its duties and responsibilities. The Committee has the sole authority to retain and terminate such compensation consultant and the sole authority to approve such consultant’s fees and other retention terms. For more information regarding the role of the Committee’s compensation consultant in setting compensation, see page 23.

Independence

Each member of the Compensation Committee meets the additional heightened independence and other requirements of the NYSE listing standards.

Nominating/

Governance Committee

Met 5 times in 2019

Committee Members:

Kay W. McCurdy (Chair)

Sherry S. Barrat

David S. Johnson

The Nominating/Governance Committee’s responsibilities include identifying qualified Board and Board committee candidates; recommending changes to the Board’s size and composition; reviewing and making recommendations to the Board with respect to outside director compensation; recommending director independence standards and governance guidelines; reviewing and approving related person transactions and reviewing legal and regulatory compliance risks relating to corporate governance.

The Committee also engages in succession planning for the Board and key leadership roles on the Board and its committees, taking into consideration skills and characteristics the Board may find valuable in light of the company’s anticipated business needs.

Independence

Each member of the Nominating/Governance Committee is independent under NYSE standards.

2020 PROXY STATEMENT

7

In evaluating its oversight of risk management, the Board has tentatively determined that it will form a Risk and Compliance Committee during 2020. It is currently contemplated that the Risk and Compliance Committee will be formed and begin holding meetings in July 2020. The Committee Charter and other details regarding the Risk and Compliance Committee will be available at www.ajg.com/ir, under the heading “Corporate Governance.”

8

2020 PROXY STATEMENT

Name

    Fees Earned    

    or Paid in Cash    

    ($)    

    Stock Awards    

    ($)⁽²⁾    

        Total        

        ($)        

Sherry S. Barrat

123,750

152,588

    276,338    

William L. Bax

128,750

152,588

    281,338    

D. John Coldman

103,750

152,588

    256,338    

Frank E. English, Jr.

103,750

152,588

    256,338    

Elbert O. Hand⁽¹⁾

25,000

—

    25,000    

David S. Johnson

133,750

152,588

    286,338    

Kay W. McCurdy

118,750

152,588

    271,338    

Ralph J. Nicoletti

103,750

152,588

    256,338    

Norman L. Rosenthal

103,750

152,588

    256,338    

Mr. Hand did not stand for re-election at our 2019 Annual Meeting.

This column represents the full grant date fair value of restricted stock units granted in 2019 in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, except that in accordance with SEC rules, any estimate for forfeitures is excluded from, and does not reduce, such amounts. For additional information on the valuation assumptions with respect to awards of restricted stock units, refer to Note 12 to our consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2019. Each director had 1,850 unvested restricted stock units outstanding as of December 31, 2019.

2020 PROXY STATEMENT

9

Nature of the related person’s interest in the transaction

Material transaction terms, including the amount involved

Whether the transaction is on terms no less favorable than could have been reached with an unrelated third party

For employment arrangements, whether compensation is commensurate with that of other employees with equivalent qualifications and responsibilities and holding similar positions

Importance and potential benefits of the transaction to the related person and to the company

Whether the transaction would impair a director or executive officer’s judgment to act in the company’s best interest

Whether the transaction was undertaken in the ordinary course of business

Any other matters the Committee deems appropriate, including the conflicts of interest and corporate opportunity provisions of our Global Standards of Business Conduct.

10

2020 PROXY STATEMENT

Name

Shares of

Common
Stock⁽¹⁾

Restricted Stock

Units ⁽²⁾

Total Beneficial

Ownership

Percent of

Common Stock

Outstanding

5% Stockholders

The Vanguard Group ⁽³⁾

100 Vanguard Blvd.

Malvern, PA 19355

BlackRock, Inc. ⁽⁴⁾

55 East 52^nd Street

New York, NY 10055

Named executive officers, directors and nominees

Pat Gallagher

Doug Howell

Tom Gallagher

Scott Hudson

Walt Bay

Sherry S. Barrat

William L. Bax

D. John Coldman

Frank E. English, Jr.

David S. Johnson

Kay W. McCurdy

Christopher C. Miskel

Ralph J. Nicoletti

Norman L. Rosenthal

All directors and executive officers as a group (18 people)

Less than 1%

Includes “notional stock units” held under our Supplemental Plan (see page 27) for executive officers. Under this plan, some of our executive officers have deferred equity awards upon vesting or elected to invest other deferred amounts into a Gallagher common stock fund. These deferred notional stock units are included because the plan permits participants to elect to move in and out of the Gallagher common stock fund and, as a result, participants have investment power with respect to the underlying shares.

2020 PROXY STATEMENT

11

All non-employee director unvested restricted stock units vest immediately upon a director’s departure from the Board, and are included because a director could depart the Board at his or her discretion and acquire rights to the underlying stock within 60 days.

Share total obtained from a Schedule 13G/A filed on February 12, 2020 by The Vanguard Group. Vanguard disclosed that it had sole voting power with respect to 281,528 of these shares, shared voting power with respect to 61,326 shares, sole investment power with respect to 21,064,700 shares, and shared investment power with respect to 322,925 shares.

Share total obtained from a Schedule 13G/A filed on February 4, 2020 by BlackRock, Inc. BlackRock disclosed that it had sole voting power with respect to 18,151,065 of these shares and sole investment power with respect to the full number of shares disclosed.

Includes 52,548 notional stock units (see footnote (1) above); 219,897 shares held in trust for the benefit of his children by his wife, Anne M. Gallagher, and another, as trustees, and over which he has shared voting and shared investment power; 246,538 shares held in a revocable trust of which his wife is the sole trustee and over which he has no voting or investment power and therefore disclaims beneficial ownership; 205,965 shares held by Elm Court LLC, a limited liability company of which the voting LLC membership interests are owned by Pat Gallagher and the non-voting LLC membership interests are owned by a grantor retained annuity trust of which Pat Gallagher is the trustee; and 66,703 shares held in an irrevocable trust of which he is the sole trustee.

Includes 181,868 notional stock units (see footnote (1) above) and 2,895 shares held by his wife, over which he has no voting or investment power and therefore disclaims beneficial ownership.

Includes 6,729 notional stock units (see footnote (1) above); 96,007 shares held in a grantor retained annuity trust of which he is the sole beneficiary; 55,280 shares held in trusts for the benefit of his children, of which his wife is the sole trustee, and over which he has no voting or investment power and disclaims beneficial ownership; 31,671 shares held by his wife, over which he has no voting or investment power; and 66,709 shares held in an irrevocable trust of which he is the sole trustee.

Includes 1,090 notional stock units (see footnote (1) above).

Includes 2,500 shares held in a joint brokerage account with Caryl G. Rosenthal and 2,000 shares held in a joint brokerage account with Marisa F. Rosenthal. These are both margin securities accounts with no loans outstanding. Dr. Rosenthal has shared voting and investment power with respect to these shares.

12

2020 PROXY STATEMENT

Plan Category

Number of securities

to be issued

upon exercise of
outstanding options,

warrants and rights

Weighted-average

exercise price of
outstanding options,

warrants and rights

Number of securities remaining

available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))

Equity compensation plans approved by security holders

10,125,238

(1) 

56.40

(2) 

19,642,213

(3) 

Equity compensation plans not approved by security holders

8,000

(4) 

—

—

Total

10,133,238

56.40

(2) 

19,642,213

This amount includes the following:

7,945,836 shares that may be issued in connection with outstanding stock options;

238,075 shares that may be issued in connection with earned performance share units, and unearned performance share units valued at target levels; and

1,941,327 unvested restricted stock units.

Indicates the weighted average exercise price of the outstanding stock options included in column (a).

This amount includes the following:

13,235,416 shares available under the 2017 Long-Term Incentive Plan; and

6,406,797 shares available under our Employee Stock Purchase Plan.

This amount represents deferred restricted stock units under the Restricted Stock Plan, an equity compensation plan not approved by stockholders under which we have outstanding awards. All of our directors, officers and employees were eligible to receive awards under the plan, which provided for the grant of contingent rights to receive shares of our common stock. Awards under the plan were granted at the discretion of the Compensation Committee. Each award granted under the plan represents the right of the holder of the award to receive shares of our common stock, cash or a combination of shares and cash, subject to the holder’s continued employment with us for a period of time after the grant date of the award. The Compensation Committee determined each recipient of an award under the plan, the number of shares of common stock subject to such an award and the period of continued employment required for the vesting of such award. The last year we made awards under this plan was 2009.

2020 PROXY STATEMENT

13

2019

Audit Fees⁽¹⁾

$

4,590,000

$

4,653,000

Audit-Related Fees⁽²⁾

1,251,000

853,000

Tax Compliance Fees⁽³⁾

873,000

938,000

Tax Advisory Fees⁽⁴⁾

1,810,000

3,554,000

All Other Fees⁽⁵⁾

24,000

34,000

Totals

$

8,548,000

$

10,032,000

Audit fees include fees associated with the annual audit of our company and our subsidiaries and the effectiveness of internal control over financial reporting, the review of our Quarterly Reports on Form 10-Q and Annual Report on Form 10-K, and statutory audits required internationally.

Audit-related fees principally include due diligence in connection with acquisitions, issuance of service auditor reports (SOC 1 and SOC 2) related to operations at one of our subsidiaries and advisory work related to our compliance with foreign statutory requirements.

Tax compliance fees include fees associated with the preparation of our annual Federal and state tax returns.

Tax advisory fees include tax advice and tax planning related to Federal, state and international tax matters.

All other fees principally include fees for access to an online accounting and tax information database.

14

2020 PROXY STATEMENT

2020 PROXY STATEMENT

15

This Compensation Discussion and Analysis discusses the compensation of the following named executive officers:

•  Pat Gallagher

Chairman, President and Chief Executive Officer

•  Doug Howell

Chief Financial Officer

•  Tom Gallagher

President – Global P/C Brokerage

•  Scott Hudson

•  Walt Bay

General Counsel and Secretary

Non-GAAP financial measures. See Annex A for additional information regarding the non-GAAP financial measures referred to in this Proxy Statement (adjusted revenue, adjusted EBITDAC, and adjusted EBITDAC per share, as defined for our annual cash incentive and performance share unit programs, and adjusted EBITDAC margin and organic revenue growth), including required reconciliations to the most directly comparable GAAP financial measures.

Principle

Program Features

Pay for Performance

•  Our program emphasizes at-risk incentive award opportunities tied to key financial measures.

•  Maximum award opportunities under our annual cash incentive program are determined based on achievement of adjusted revenue and adjusted EBITDAC growth goals set by the Committee. Final award determinations reflect the Committee’s consideration of additional factors including organic revenue growth, adjusted EBITDAC margin, divisional performance and individual achievement.

•  Performance share units, representing 75% of our CEO’s and a significant portion of other executive officers’ long-term incentive compensation, are tied to three-year growth in adjusted EBITDAC per share.

Stockholder Alignment

•  Performance share units, stock options, restricted stock units and Deferred Equity Participation Plan (DEPP) awards encourage executive officers to pursue the growth of our business in a way that benefits stockholders over the long term.

•  Collectively, our executive officers own significant amounts of Gallagher stock and are subject to rigorous stock ownership guidelines (six times salary for CEO, four times for CFO and three times for other executive officers). All of our executive officers meet these guidelines.

Attract and Retain
World-Class Talent

•  Compensation elements and award opportunities enable us to compete effectively for executive talent.

•  The Compensation Committee engages a compensation consultant to conduct a market assessment to ensure that our program is highly competitive.

•  High performers are awarded above-target pay when company performance goals are exceeded.

•  DEPP awards encourage retention over the long term by requiring executives to remain employed with us through at least age 62 in order to vest in their awards.

Committee Discretion

•  While annual incentive awards are determined primarily based on achievement of company performance objectives, the Committee exercises discretion when necessary to adjust awards based on factors such as individual or division performance, changes in accounting standards, economic or business conditions, adherence to our cultural values or similar matters.

16

2020 PROXY STATEMENT

2020 PROXY STATEMENT

17

Compensation Element

Objective

Key Features

Base Salary

Recognize the experience and expertise of our named executive officers and compensate them for fulfilling the duties and responsibilities of their positions

Base salaries reflect internal pay equity considerations and may be increased from time to time based on job performance, promotion into a new role, expansion of duties, or market conditions

Annual Cash Incentives

Reward strong operational and financial performance that further short-term strategic objectives

Maximum annual cash incentive opportunities are tied to significant growth in adjusted revenue and adjusted EBITDAC. Final awards are subject to the Committee’s discretion and are determined by the Committee based on various factors, including the company’s organic revenue growth, divisional financial performance and individual achievement

See page 19 for more information

Long-Term Incentives

Performance share units (PSUs), stock options and restricted stock units

Tie a significant portion of compensation to our long-term performance, promote retention of named executive officers and align the financial interests of named executive officers with those of stockholders

PSUs, stock options and restricted stock units each tie named executive officers’ long-term wealth to the performance of our stock while multi-year vesting requirements reinforce sustainable value creation and promote retention of key executives

Long-term incentive opportunities are greater for named executive officers with a greater direct impact on long-term company performance

See pages 19 to 22 for more information

Deferred Equity Participation Plan (DEPP)

Promote retention of named executive officers and align their financial interests with those of stockholders

Vesting of awards is delayed until named executive officers reach age 62, and for one-year increments after such age

Each named executive officer has made irrevocable elections to invest their awards in a fund representing our common stock

See page 27 for more information

18

2020 PROXY STATEMENT

We define “adjusted revenue” the same here as we do in our other filings (i.e., revenue for the brokerage segment and revenue before reimbursements for the risk management segment excluding gains on sales of books of business and adjusted to remove the effect of foreign currency translation). However, we define “adjusted EBITDAC” for our annual cash incentives and performance share units as follows: EBITDAC for the brokerage and risk management segments excluding (i) gains on sales of books of business, (ii) lease abandonment and workforce termination charges, and (iii) the effect of foreign currency translation. Unlike adjusted EBITDAC as presented in our most recent earnings release, in this context the measure does not exclude acquisition integration costs and other acquisition-related adjustments.

incentivize our executives to make business decisions that align with the long-term interests of our stockholders,

hold our executives accountable for acquisition-related expenses associated with our merger and acquisition activity, and

provide strong line of sight between operating decisions and the annual cash incentives earned by our executives.

incentivizes our executives to make business decisions that align with the long-term interests of our stockholders,

holds our executives accountable for acquisition-related expenses associated with our merger and acquisition activity,

provides strong line of sight between operating decisions and the annual cash incentives earned by our executives, and

by calculating it on a per-share basis, ensures that we maintain an optimal capital structure and act as effective stewards of our stockholders’ investment.

2020 PROXY STATEMENT

19

Named Executive

Officer

Target Percent      

of Salary      

Target Grant

Amount

Performance      

Share Units      

Stock      

Options      

Restricted      

Stock      

Units      

Pat Gallagher

225%      

    $

2,812,500

75%      

25%      

—

Doug Howell

125%      

    $

1,125,000

60%      

20%      

20

%    

Tom Gallagher

125%      

    $

1,125,000

60%      

40%      

—

Scott Hudson

125%      

    $

875,000

60%      

40%      

—

Walt Bay

125%      

    $

843,750

40%      

30%      

30

% 

20

2020 PROXY STATEMENT

Pat Gallagher – Chairman and CEO

Performance

The Compensation Committee believes that Pat Gallagher performed extremely well in 2019, leading the company to 13.9% adjusted revenue growth, 15.9% adjusted EBITDAC growth and 14.0% adjusted EBITDAC per share growth in our combined brokerage and risk management segments (for definitions of these measures see Annual Cash Incentives above). Gallagher’s total return to stockholders in 2019 was 31.8%. This performance compares favorably to the S&P 500 and S&P P&C Insurance indices, which had total shareholder returns of 31.5% and 25.9%, respectively.

In addition, the Committee recognized the following aspects of Mr. Gallagher’s performance:

Organic growth. The company achieved 5.6% organic revenue growth during the year, 5.8% in the brokerage segment and 4.4% in the risk management segment.

Mergers and acquisitions. The company completed 49 acquisitions representing $468 million in acquired annualized revenue.

Quality and productivity. The company increased its adjusted EBITDAC margin 76 basis points to 26.9%.

Capital management. The company returned $323.9 million to stockholders as dividends, maintained significant liquidity and remained well within its debt covenants.

Culture. Mr. Gallagher was effective in promoting our culture to colleagues around the world. For the ninth consecutive year, the company was proud to be recognized by Ethisphere as a World’s Most Ethical Company.

Based on Pat Gallagher’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2019:

Base salary – remained the same, at $1,250,000.

Annual cash incentive – $3,750,000, 200% of his target award.

2019 target PSU award – 26,425 PSUs with a grant date value of $2,103,166.

Stock option award – 44,050 stock options with an exercise price of $79.59 and a grant date value of $471,776.

DEPP award – $1,000,000.

Over the past three years, our total return to stockholders (including dividends) was 96.4%, while Pat Gallagher’s compensation increased by 56.1%. However, as discussed under Comparative Market Assessment, at target levels, Pat Gallagher’s total compensation for 2019 remained below the median for similarly situated CEOs in our peer group. In light of his pay position versus market and his and the company’s strong performance over recent years, the Compensation Committee approved certain changes to his 2020 compensation opportunities. His target annual cash incentive award was increased from 150% to 200% of base salary and his target long-term incentive award from 225% to 315% of base salary.

The Compensation Committee believes that, with these changes, Mr. Gallagher’s compensation is appropriately aligned with the long-term interests of the company and its stockholders.

Doug Howell – Chief Financial Officer

Performance

The Committee evaluated Doug Howell’s performance in light of the company’s overall performance as described above for Pat Gallagher. In addition, the Committee considered the following items:

•  his contributions as a member of the senior management team to the company’s strong overall financial performance;

•  his leadership of expense saving initiatives critical to increasing our adjusted EBITDAC margin;

•  $825 million of debt placements;

•  successful execution and financing of our acquisition program using primarily cash and debt; and

•  $88.5 million of net earnings from our clean energy investments.

Based on Doug Howell’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2019:

Base salary – remained the same, at $900,000.

Annual cash incentive – $1,800,000, 200% of his target award.

2019 target PSU award – 8,450 PSUs with a grant date value of $672,536.

Stock option award – 14,100 stock options with an exercise price of $79.59 and a grant date value of $151,011.

Restricted stock unit award – 2,825 restricted stock units with a grant date value of $224,842.

DEPP award – $500,000.

2020 PROXY STATEMENT

21

Tom Gallagher – President, Global P/C Brokerage

Performance

In evaluating Tom Gallagher’s performance in 2019, the Committee considered the following items:

•  his contributions as a member of the senior management team to the company’s strong overall financial performance;

•  the strong financial performance of our global P/C brokerage business, including 16.8% adjusted revenue growth, 21.5% adjusted EBITDAC growth and 7.0% organic revenue growth;

•  completion by our global P/C brokerage business of 28 acquisitions representing $327 million in acquired annualized revenue; and

•  a successful transition of leadership of our U.K. brokerage operation from Grahame Chilton to Simon Matson.

Based on Tom Gallagher’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2019:

Base salary – remained the same, at $900,000.

Annual cash incentive – $1,800,000, 200% of his target award.

2019 target PSU award – 8,450 PSUs with a grant date value of $672,536.

Stock option award – 28,200 stock options with an exercise price of $79.59 and a grant date value of $302,022.

DEPP award – $450,000.

Scott Hudson – President, Risk Management

Performance

In evaluating Scott Hudson’s performance in 2019, the Committee considered the following items:

•  his contributions as a member of the senior management team to the company’s strong overall financial performance;

•  the financial performance of our risk management segment, including 6.2% adjusted revenue growth, 6.8% adjusted EBITDAC growth and 4.4% organic revenue growth;

•  significant progress by the risk management segment in expanding adoption of our service centers in India and Las Vegas; and

•  successful operational initiatives including continued growth in insurance carrier claim-handling clients and the acquisition of several key specialized partners.

Based on Scott Hudson’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2019:

Base salary – remained the same, at $700,000.

Annual cash incentive – $1,225,000, 175% of his target award. Although Scott Hudson qualified for a maximum bonus of 200% of target, the Committee exercised discretion to reduce the annual cash incentive award because the risk management segment fell short of its budget for revenue and adjusted EBITDAC growth.

2019 target PSU award – 6,575 PSUs with a grant date value of $523,304.

Stock option award – 21,900 stock options with an exercise price of $79.59 and a grant date value of $234,549.

DEPP award – $400,000.

Walt Bay – General Counsel and Secretary

Performance

In evaluating Walt Bay’s performance in 2019, the Committee considered the following items:

•  his contributions as a member of the senior management team to the company’s strong overall financial performance;

•  strong leadership of the company’s legal and compliance departments;

•  successful management of the company’s legal and reputational risks, including litigation, mergers and acquisitions and regulatory compliance issues; and

•  his role as a strategic advisor to our Board, CEO and executive management team on key legal and business matters.

Based on Walt Bay’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2019:

Base salary – remained the same, at $675,000.

Annual cash incentive – $1,350,000, 200% of his target award.

2019 target PSU award – 4,225 PSUs with a grant date value of $336,268.

Stock option award – 15,850 stock options with an exercise price of $79.59 and a grant date value of $169,754.

Restricted stock unit award – 3,500 restricted stock units with a grant date value of $278,565.

DEPP award – $350,000.

22

2020 PROXY STATEMENT

2020 PROXY STATEMENT

23

24

2020 PROXY STATEMENT

2020 PROXY STATEMENT

25

Salary

($)

Stock

Awards

($) ⁽¹⁾

Option

Awards

($) ⁽²⁾

Non-Equity

Incentive Plan

Compensation

($) ⁽³⁾

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($) ⁽⁴⁾

All Other

Compensation

($) ⁽⁵⁾

Total

($)

Pat Gallagher

Chairman, President and
Chief Executive Officer

Doug Howell

Chief Financial Officer

Tom Gallagher

President – Global P/C Brokerage

Scott Hudson

President – Risk
Management