The company delivered strong results in 2016. We remained focused on the four components of our long-term strategy: (i) organic growth; (ii) mergers and acquisitions; (iii) quality and productivity; and (iv) maintaining our unique culture. Executing on these strategies, we achieved revenue growth of 5% (to $4.25 billion) and EBITAC growth of 17% (to $923.0 million) in our combined brokerage and risk management segments.

Our stock price increased from $40.94 to $51.96, resulting in total return to stockholders (including dividends) of 31.1%. This performance compares favorably to the S&P 500 and S&P 500 Financials indices, which increased 12.0% and 22.6%, respectively.

The following table provides summary information about each director ~~nominations~~nominee and ~~other items~~the committees on which they serve.

Key features of the plan and share authorization request submitted for stockholder approval at ~~Arthur J. Gallagher & Co.,~~ this Annual Meeting include the following:

For ~~these purposes, “close of business” means 5:00 pm CST. We will not entertain any nominations or other items of business at~~additional information regarding the Annual Meeting that do not meet the requirements in our bylaws. If we do not receive notice of a matter by February 16, 2017, SEC rules permit the people named as proxy holders on the proxy card to vote proxies in their discretion when and ~~if the matter is raised at~~this Proxy Statement, please seeQuestions & Answers About the Annual ~~Meeting. Any stockholder proposal relating~~Meeting on page 45. See also the links to other company filings and resources in Exhibit C.

The Nominating/Governance Committee considers director candidates suggested by stockholders, management or other members of the Board and may hire consultants or search firms to help identify and evaluate potential director candidates. For more information regarding how stockholders can submit a director nomination should set forth all information relating to such person required to be disclosed in solicitations of proxies for contested director elections under Regulation 14A of the Exchange Act, including, among other things, the particular experience, qualifications, attributes or skills of the nominee that, in light of our business and structure, led to the stockholder’s conclusion that the nominee should serve on the Board. The proposal should also include the director nominee’s written consent to be named in our proxy statement as a nominee and to serve as a director if elected. Stockholders are also advised to review our bylaws, which contain additional requirements regarding the information to be included in the advance notices of stockholder proposals and director nominations.

~~How do I submit a proposed director nominee to the Board for consideration?~~

~~Any stockholder who wishes to propose director nominees~~candidate for consideration by the ~~Board’s~~ Nominating/Governance Committee, but does not wish to present such proposal at an annual meeting, may do so at any time by directing a description of each nominee’s name and qualifications for Board membership to the Chair of the Nominating/Governance Committee, c/o our Secretary at Arthur J. Gallagher & Co., The Gallagher Centre, Two Pierce Place, Itasca, Illinois 60143-3141. The recommendation should contain all of the information regarding the nominee described in the question and answer above and in our bylaws relating to director nominations brought before the Annual Meeting. see page 47.

The Nominating/Governance Committee evaluates ~~nominee proposals submitted by stockholders in the same manner in which it evaluates other nominees.~~

An automated system administered by Broadridge will tabulate the votes. Voting results will be reported in a Current Report on Form 8-K that we will file with the SEC within four business days following the Annual Meeting.

Set forth below is a description of the background of each member of our Board of Directors standing for election at the Annual Meeting, including public and investment company directorships each member currently holds or held during the past five years and the experience, qualifications, attributes or skills that led the Board to conclude that each such individual should be elected to serve as one of our directors at the Annual Meeting. Our Chairman of the Board, J. Patrick Gallagher, Jr., is the brother of Thomas J. Gallagher, one of our executive officers.

Sherry S. Barrat, 66, currently serves on the Compensation Committee. 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 is currently chair of the Governance & Nominating Committee and a member of the Audit Committee. Since January 1, 2013, Ms. Barrat has also served as an independent trustee or director of certain Prudential Insurance mutual funds. Ms. Barrat’s extensive management, operational and financial experience, in particular her deep understanding of the financial services industry and the privacy and cybersecurity issues facing that industry, greatly enhances the Board’s decision making.

William L. Bax, 72, currently serves as Chair of the Audit Committee. 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 a partner in the firm for 26 years. He currently serves as a director and audit committee chair of several affiliated mutual fund companies (Northern Funds and Northern Institutional Funds since 2005, and Northern Multi-Manager Funds since 2006). Mr. Bax previously served as a director of Sears Roebuck & Co., a publicly traded retail company, from 2003 to 2005, and Andrew Corporation, a publicly traded communications products company, from 2006 to 2007. During his 26 years as a partner and 6 years as head of PwC’s Chicago office, Mr. Bax gained extensive experience advising public companies regarding accounting and strategic issues. This experience, along with his tenure on the boards of public companies such as Sears and Andrew, strengthen the Board’s decision making. Mr. Bax’s experience advising public companies on accounting and disclosure issues enhances the Board’s ability to oversee our assessment and management of material risks. Additionally, Mr. Bax’s experience as a director of various mutual funds provides us with valuable insight into the perspectives and concerns of our institutional stockholders.

D. John Coldman, 68, currently serves on the Audit Committee. Mr. Coldman began his career working for 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 at the time, 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 has also been 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 non-publicly traded healthcare services provider, from 2007 to 2011. The Board greatly benefits from Mr. Coldman’s 45 years of insurance brokerage, management and financial services experience. In addition, Mr. Coldman’s international insurance industry knowledge, his experience within the Lloyd’s and London marketplaces, and his experience with public company matters and mergers and acquisitions all strengthen the Board’s decision making as we continue our international expansion.

Frank E. English, Jr., 70, currently serves on the Audit Committee. Mr. English also serves on the board of directors and audit committee of Tower International, Inc., a publicly traded global automotive components manufacturer, of which he has been a

board member or board advisor since August 2010. Since June 2012, Mr. English has also served on the board of directors and the finance and strategy committee, and since 2013 on the compensation committee, of CBOE Holdings, Inc., a publicly traded holding company for various securities exchanges, including the largest U.S. options exchange. Since April 2011, Mr. English has been a Senior Advisor to W.W. Grainger, a publicly traded broad-based distributor of industrial maintenance, repair and operations supplies. From 1976 to 2009, Mr. English served in various senior roles at Morgan Stanley, most recently as Managing Director and Vice Chairman of Investment Banking. Following his retirement in 2009, Mr. English served as a Senior Advisor at Morgan Stanley & Co. until April 2011. The Board greatly benefits from Mr. English’s extensive investment banking expertise, particularly in the areas of capital planning, strategy development, financing and liquidity management.

J. Patrick Gallagher, Jr., 64, has served as Chairman of the Board since 2006. 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–Operations from 1985 to 1990, as President and Chief Operating Officer from 1990 to 1995, and as President and CEO since 1995. In 2011, Mr. Gallagher joined the board of directors of InnerWorkings, Inc., a publicly traded global provider of managed print, packaging and promotional solutions, and was appointed to its compensation and nominating/governance committees. He also 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. Mr. Gallagher’s 42 years of experience with our company and 30 years of service on the Board provide him with a deep knowledge of our company and the insurance and insurance brokerage industries, as well as a depth of leadership experience. This depth of knowledge and experience greatly enhances the Board’s decision making and enables Mr. Gallagher to serve as a highly effective Chairman of the Board.

Elbert O. Hand, 76, currently serves as Chair of the Compensation Committee and as a member of the Nominating/Governance Committee. Mr. Hand was Chairman of the Board of Hartmarx Corporation, an apparel marketing and manufacturing company, from 1992 to 2004, and served as a member of Hartmarx’s board from 1984 to 2010. He served as Chief Executive Officer of Hartmarx from 1992 to 2002 and as President and Chief Operating Officer from 1987 to 1992. From 1982 to 1989, Mr. Hand also served as President and Chief Executive Officer of Hartmarx’s Men’s Apparel Group. Mr. Hand was a director of Austin Reed Group PLC, a U.K.-based apparel company, from 1995 to 2002, and served as an advisor to the board for a number of years after 2002. From January 2010 to February 2011, Mr. Hand served as a member of the board and non-executive Chairman of Environmental Solutions Worldwide, Inc., a publicly traded manufacturer and marketer of environmental control technologies. He has also served as a member of Northwestern University’s Kellogg Advisory Board. The Board benefits from Mr. Hand’s business acumen gleaned from three decades of leadership roles in the apparel marketing and manufacturing industry, including significant experience in sales and marketing. Mr. Hand’s long association with U.K. apparel company Austin Reed is valuable to the Board as we continue to expand our U.K. and other international operations.

David S. Johnson, 59, currently serves as Chair of the Nominating/Governance Committee and as a member of the Compensation Committee. Mr. Johnson has served as President and Chief Executive Officer of the Americas for Barry Callebaut AG, the world’s largest manufacturer of cocoa and chocolate products, since 2009. He is also a member of Barry Callebaut’s 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. The Board benefits from Mr. Johnson’s business acumen gleaned from over three decades of experience in the food and beverage industry, including significant experience in sales and marketing. His experience as a senior executive of multinational businesses such as Barry Callebaut and Kraft are valuable in the Board’s oversight of our international expansion. In addition, his knowledge of corporate governance and executive compensation best practices as a member of Kraft’s Management Committee, as a board member of Michael Foods and as a member of Barry Callebaut’s global executive committee, strengthens the Board’s decision making.

Kay W. McCurdy, 65, currently serves on the Compensation and Nominating/Governance Committees. Since 1975, Ms. McCurdy has practiced corporate and finance law at the law firm of Locke Lord LLP, where she has been Of Counsel since 2012 and was a partner from 1983 to 2012. 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) named Ms. McCurdy a 2015 NACD Governance Fellow. Ms. McCurdy’s experience advising companies regarding legal, public disclosure, corporate governance, mergers and acquisitions and executive compensation issues provide her with a depth and breadth of expertise that enhances our ability to navigate legal and strategic issues and allows her to make valuable contributions to the Board.

Ralph J. Nicoletti, 57, currently serves on the Audit Committee. Since April 2014, Mr. Nicoletti has served as Executive Vice President and Chief Financial Officer of Tiffany & Co., the publicly traded jeweler founded in New York in 1837. 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. from 1979 to 2007, finishing his tenure there as Senior Vice President of Finance for Kraft Foods North America from 2001 to 2006, and as Senior Vice President of Corporate Audit of Kraft Foods Inc. from 2006 to 2007. The Board benefits from Mr. Nicoletti’s financial expertise in various retail industries and his experience managing the privacy and cybersecurity issues faced by retail companies. Mr. Nicoletti’s experience as a senior executive of global, multi-national businesses such as Kraft, Alberto Culver, Cigna and Tiffany are valuable to the Board as we continue to expand in the United States and abroad. In addition, his deep experience as a finance leader of publicly traded companies strengthens the Board’s ability to oversee accounting and disclosure issues, as well as the assessment and management of material risks.

Norman L. Rosenthal, Ph.D., 64, currently serves on the Audit Committee. Since 1996, he has been President of Norman L. Rosenthal & Associates, Inc., a management consulting firm that specializes in the property and casualty insurance industry. Since June 2015, Dr. Rosenthal has 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. He also currently serves on the private company board of The Plymouth Rock Company, a group of auto and homeowners’ insurance companies. Dr. Rosenthal served on the boards of Aspen Insurance Holdings, Ltd., a publicly traded global property and casualty insurance and reinsurance company, from 2002 to 2009, Mutual Risk Management Ltd., a publicly traded off-shore provider of alternative commercial insurance and financial services, from 1997 to 2002, Vesta Insurance Group, Inc., a publicly traded group of insurance companies, from 1996 to 1999, and Alliant Insurance Group Inc., a private insurance brokerage and financial services company, from 2005 to 2007. 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’s extensive experience in the insurance and finance industries is a valuable resource to us and greatly enriches the Board’s decision making. In addition, Dr. Rosenthal’s academic expertise in applied economics, combined with his decades of experience as a management consultant and director in the insurance sector, greatly enhances the Board’s ability to oversee our assessment and management of material risks.

As of the date of this proxy statement, there is no material proceeding to which any of our directors or executive officers, or any associate of any such director or executive officer, is a party or has a material interest adverse to us or any of our subsidiaries. To our knowledge, none of our directors or executive officers has been subject to any of the events described in Item 401(f) of Regulation S-K, as promulgated by the SEC, during the past ten years.

We are committed to sound and effective corporate governance. To that end, the Board of Directors has adopted Governance Guidelines that set forth principles to assist the Board in determining director independence and other important corporate governance matters. Over the years we have taken steps to strengthen our corporate governance in various areas, including the following:

The Board has also adopted Global Standards of Business Conduct (the Global Standards) that apply to all directors, executive officers and employees. The Global Standards, along with our Governance Guidelines and the charters of the Audit, Compensation and Nominating/Governance Committees, are available at www.ajg.com/ir, under the heading “Corporate Governance.” We will provide a copy of the Global Standards or Governance Guidelines without charge to any person who requests a copy by writing to our Secretary at The Gallagher Centre, Two Pierce Place, Itasca, Illinois 60143-3141. We intend to satisfy the disclosure requirements of Item 5.05 of Form 8-K regarding any amendment to, or waiver from, the Global Standards by posting such information on our website.

The Board currently has Audit, Compensation and Nominating/Governance Committees, all of the members of which are independent. The following table sets forth the members of, and the number of meetings held by, each committee during 2015:

~~Audit Committee~~. The Audit Committee’s responsibilities include general oversight of the integrity of our financial statements, risk assessment and risk management, 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. Each member of the Audit Committee meets the additional heightened independence and other requirements of the NYSE listing standards and SEC rules. The Board has determined that each of Mr. Bax and Mr. Nicoletti qualifies as an “audit committee financial expert” under SEC rules.

~~Compensation Committee~~. The Compensation Committee’s responsibilities include reviewing 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. The Compensation Committee may, and in 2015 did, engage a compensation consultant to assist it in carrying out its duties and responsibilities, and has the sole authority to retain and terminate any compensation consultant, including sole authority to approve

any consultant’s fees and other retention terms. For more information regarding the role of our compensation consultant in setting compensation, please see page 14. Each member of the Compensation Committee meets the additional heightened independence and other requirements of the NYSE listing standards.

~~Nominating/Governance Committee.~~ The Nominating/Governance Committee’s responsibilities include identifying qualified Board and Board committee candidates, recommending changes to the Board’s size and composition, determining outside director compensation, recommending director independence standards and governance guidelines, and reviewing and approving related party transactions.

~~Director Qualifications~~~~. When identifying~~ director candidates in addition to evaluating the candidates’ independence under applicable SEC rules and NYSE listing standards, the Nominating/Governance Committee considers other factors as it deems appropriate, including the candidate’sby considering their judgment, ~~skill,~~skills, integrity, diversity, ~~and~~ business or other ~~experience. Directors should~~experience, and other factors it deems appropriate. The committee looks for candidates who are leaders in the organizations with which they are affiliated and have experience in positions with a high degree of ~~responsibility, be leaders in the organizations with which they are affiliated, be selected based on~~responsibility. The committee considers their potential contributions ~~they can make~~ to the Board and to management, and belooks for candidates free from relationships or conflicts of interest that could interfere with the director’s duties to us and our stockholders. The ~~Nominating/Governance Committee may consider candidates suggested by stockholders, management or members of the Board~~committee also evaluates candidates’ independence under applicable Securities and ~~may hire consultants or search firms to help identify~~Exchange Commission (SEC) rules and evaluate potential nominees for director. For more information regarding how stockholders can submit a proposed director nominee for consideration by the Nominating/Governance Committee, please see page 3.New York Stock Exchange (NYSE) listing standards.

The Nominating/Governance Committee seeks Board members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. The ~~Nominating/Governance Committee~~committee implements this policy through discussions among ~~committee~~its members and assesses its effectiveness annually as part of the committee’s and the Board’s self-evaluation ~~process~~process. The committee has also used a search firm on occasion to help it identify highly qualified and diverse candidates.

Upon the recommendation of the Nominating/Governance Committee, the Board has nominated our Chairman and CEO and each of the nine individuals listed below to hold office until the next annual meeting and the election and qualification of their successors or, if earlier, until their resignation, death or removal. Each of the nominees currently serves on the Board and has consented to serve for a new term if elected. However, if any nominee should become unable or unwilling to serve, the Board may nominate another person to stand for election or reduce the number of directors.

Each director nominee who receives more “FOR” votes than “AGAINST” votes at the Annual Meeting will be elected. Any incumbent director nominees who receive a greater number of votes “AGAINST” election than votes “FOR” election are required to tender their offer of resignation for consideration by the Nominating/Governance Committee in accordance with our Governance Guidelines.

The table below summarizes the key qualifications and areas of experience that led our Board to conclude that each independent director nominee is qualified to serve on our Board, but is not intended to be an exhaustive list of their qualifications or contributions to the Board.

We are committed to sound and effective corporate governance. To that end, the Board has adopted Governance Guidelines that set forth principles to assist it in determining director independence and other important corporate governance matters. Over the past year, we have taken steps to strengthen our corporate governance in various areas, including the following:

We believe that effective corporate governance should include regular, constructive conversations with our stockholders. In 2016, we continued to engage with our stockholders, seeking and encouraging feedback about our corporate governance and executive compensation practices from stockholders representing approximately 50% of our outstanding shares.

The Board currently has Audit, Compensation and Nominating/Governance Committees, all of the members of which are independent. The tables below set forth the primary responsibilities, members and the number of meetings held in 2016 for each committee.

Pat Gallagher currently serves as Chairman of the Board and CEO. With the exception of the Chairman, all Board members are independent and actively oversee the activities of the Chairman and other members of the senior management team. At the end of each regularly scheduled meeting of the Board, the independent directors select an independent Lead Director who serves until the end of the next regularly scheduled meeting of the Board. The responsibilities of the Lead Director include acting as a liaison between the Chairman and the independent directors, coordinating with the Chairman regarding information sent to the Board, coordinating with the Chairman regarding Board meeting agendas and schedules, and being available for consultation and communication with stockholders as appropriate. In addition, the Lead Director is authorized to call and preside over executive sessions of the independent directors without the Chairman or other members of management present. The independent directors also meet regularly in executive sessions. An executive session is held in conjunction with each regularly scheduled Board meeting, and other executive sessions may be called by the Lead Director at his or her discretion or at the request of the Board. The committees of the Board also meet regularly in executive sessions without management. We believe that our Board leadership structure allows us to take advantage of Pat Gallagher’s extensive experience and knowledge of our business, which enriches the Board’s decision making. Pat Gallagher’s role as Chairman and CEO also enhances communication and coordination between management and the Board on critical issues.

David Johnson was elected by the Board in 2016 to serve as our independent Lead Director for atwo-year term. Under our Governance Guidelines, the Lead Director may serve up to two consecutivetwo-year terms. The Board also expanded the duties and responsibilities of the independent Lead Director as set forth below.

The independent directors meet regularly in executive sessions. Executive sessions are held at the beginning and at the end of each regularly scheduled Board meeting. Other executive sessions may be called by the Lead Director at his or her discretion or at the request of the Board. The committees of the Board also meet regularly in executive sessions.

The Board sets the amount and form of director compensation based upon recommendations made by the Nominating/Governance Committee. Pat Gallagher ~~Centre, Two Pierce Place, Itasca, Illinois 60143-3141. These communications~~receives no additional compensation for his service as a director. A substantial portion of eachnon-employee director’s total annual compensation consists of equity grants, in the form of restricted stock units. Under our stock ownership guidelines, directors with at least five years of service are expected to own an amount of our common stock with a value equal to five times the cash portion of the annual director retainer. In 2016, the annual cash retainer was $90,000.

On June 1, 2016, eachnon-employee director was granted 2,950 restricted stock units, which vest on the first anniversary of the date of grant (or immediately upon a director’s departure from the Board). Mr. Nicoletti, who joined our Board in January 2016, was also granted 867 restricted stock units on March 1, 2016 (representing a prorated stock award for the 2015/2016 service period), subject to the same vesting conditions. Committee Chairs receive additional annual fees as follows: $25,000 for the Audit Committee, $20,000 for the Compensation Committee and $15,000 for the Nominating/Governance Committee. The Lead Director receives an additional annual fee of $30,000. Directors are reimbursed for travel and accommodation expenses incurred in connection with attending Board and committee meetings.

Directors may elect to defer all or a portion of their annual cash retainer or restricted stock units under our Deferral Plan for Nonemployee Directors. Deferred cash retainers and restricted stock units are converted to notional stock units, which are credited with dividend equivalents when dividends are paid on our common stock. Deferred restricted stock units are distributed in the form of common stock, and deferred cash retainers and accrued dividend equivalents are distributed in cash, at a date specified by each director or upon such director’s departure from the Board.

We review all relationships and transactions in which the company and our directors and executive officers or their immediate family members participate if the amount involved exceeds $120,000. The purpose of this review is to determine whether such related parties have a material interest in the transaction, including a material indirect interest. The company’s legal staff is primarily responsible for making these determinations based on the facts and circumstances, and for developing and implementing processes and controls for obtaining and evaluating information about related party transactions. As required by SEC rules, we disclose in this Proxy Statement all such transactions that are determined to be directly or indirectly material to a related party. In addition, the Nominating/Governance Committee reviews and approves, ratifies or disapproves any such related party transaction. In the course of reviewing and determining whether or not to approve or ratify a disclosable related party transaction, the committee considers the following factors:

In 2016, the following relatives of Pat Gallagher were employed with us: (i) his sister is the head of a specialty sales unit within our brokerage segment, and received total compensation of $736,297; (ii) hisbrother-in-law is a vice president of niche strategy within our brokerage segment, and received total compensation of $687,539; (iii) one of his sons is a regional leader within our brokerage segment, and received total compensation of $745,487; (iv) another son is a branch manager within our brokerage segment, and received total compensation of $525,396; and (v) a third son is a producer within our brokerage segment, and received total compensation of $409,732. Additionally, a brother of Jim Durkin is a divisional leader within our UK brokerage operation. He received salary, benefits and performance-based compensation of $825,641 (in addition tocost-of-living adjustments, taxgross-ups and other expenses related to working overseas totaling $544,211) in 2016. The compensation of each related party described above was commensurate with that of other employees with equivalent qualifications and responsibilities and holding similar positions.

Tom Gallagher, one of our named executive officers, is a brother of our CEO. Because of their status as our named executive officers, their compensation arrangements with us are disclosed in the “2016 Summary Compensation Table” below.

The table below presents information concerning beneficial ownership of our common stock by: (i) each person we know to be the beneficial owner of more than 5% of our outstanding shares of common stock (as of December 31, 2016); (ii) each of our named executive officers, directors and director nominees (as of March 20, 2017); and (iii) all of our executive officers and directors as a group (as of March 20, 2017). The percentage calculations in this table are based on a total of 179,475,539 shares of our common stock outstanding as of the close of business on March 20, 2017. Unless otherwise indicated below, to our knowledge, the individuals and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned by them, subject to community property laws where applicable. In addition, unless otherwise indicated, the address for all persons named below is c/o Arthur J Gallagher & Co., 2850 Golf Road, Rolling Meadows, Illinois 60008-4002.

Our executive officers, directors and 10% stockholders are required under the Exchange Act to file reports of ownership and changes in ownership with the SEC and the NYSE. Copies of these reports must also be furnished to us. Based on a review of copies of Forms 3, 4 and 5 furnished to us or ~~individual director, as applicable.~~filed with the SEC, or written representations that no additional reports were required, we believe that, during the last fiscal year, our executive officers, directors and 10% stockholders timely filed all reports required by Section 16(a) of the Exchange Act.

~~COMPENSATION COMMITTEE REPORT~~Item 2 – Approval of the Arthur J. Gallagher & Co. 2017 Long-Term Incentive Plan, Including Approval of 16,000,000 Shares Authorized for Issuance Thereunder and the Material Terms of the Performance Goals for Purposes of Section 162(m) Under the Internal Revenue Code of 1986, as Amended

The Board has approved, and is asking our stockholders to approve, the 2017 Long-Term Incentive Plan (2017 LTIP). The 2017 LTIP provides for the grant of incentive awards tonon-employee directors, officers and other employees of the company. If approved, the 2017 LTIP will replace the 2014 Long-Term Incentive Plan (2014 LTIP) and no new awards will be made under the 2014 LTIP. The maximum number of shares that may be awarded under the 2017 LTIP is 16,000,000 shares, plus any shares subject to outstanding awards under the 2014 LTIP, 2011 Long-Term Incentive Plan (2011 LTIP) or the 2009 Long-Term Incentive Plan (2009 LTIP, and together with the 2011 LTIP and 2014 LTIP, the Prior LTIPs) that are outstanding as of the effective date of the 2017 LTIP and are subsequently settled for cash, forfeited, expired, or for any reason are cancelled or terminated, without resulting in the issuance of shares. A maximum of 4,000,000 shares may be issued under the 2017 LTIP for full value awards (i.e., awards other than stock options or stock appreciation rights (SARs)).

Broad-Based Employee Participation

The Board believes that long-term equity compensation is an extremely important way to attract, retain and motivate a talented executive team. The Board also firmly believes that broad-based equity participation is a necessary and powerful employee incentive and retention tool that benefits all of our stockholders. From 2011 to 2017, employee participation in our equity compensation plan grew from 2.4% to 3.4% even as our employee population more than doubled. If the 2017 LTIP is approved, our intention is to continue to increase the number of equity plan participants over time consistent with the growth of our business. We believe it is important to continue to align the interests of both our executive team and our key employees with those of our stockholders. Our Board believes that approval of the 2017 LTIP is important to our long-term growth and is in the best interest of our stockholders.

Key Equity Metrics

Approval of the 2017 LTIP will enable us to compete effectively for executive and key employee talent in the coming years, while maintaining reasonable burn rates and overhang. The following table shows key equity metrics over the prior three years:



Fiscal Year	Stock Options Granted		RSUs Granted		PSUs Granted		Actual PSUs Earned		Total Granted⁽¹⁾		Weighted Average Number of Shares		Unadjusted Burn Rate⁽²⁾

2016		2,583,200		496,567		72,900		51,551		3,131,318		177,559,560		1.8	%

2015		1,964,000		394,975		53,900		48,850		2,407,825		172,238,538		1.4	%

2014		1,933,200		376,541		48,850		—		2,309,741		152,854,379		1.5	%

(1)	Total number of shares granted in a particular fiscal year includes all stock options, RSUs and PSUs for which the performance criteria was approved as attained and earned during such fiscal year.

(2)	PSUs granted in the applicable fiscal year and not yet earned are excluded from the calculation of burn rate.

As of March 20, 2017, the record date of the Annual Meeting, our projected “overhang,” or voting power dilution, will be approximately 13.6% if the 2017 LTIP is approved. This calculation does not include the 2,143,274 shares remaining under the 2014 LTIP as of March 20, 2017, as they will be canceled upon approval of the 2017 LTIP. The calculation reflects the following updated share information:

12,198,530 shares that may be issued under equity compensation plans approved by stockholders (10,441,976 shares in connection with outstanding stock options with a weighted-average exercise price of $44.59 and a weighted-average remaining term of 4.64 years; 120,336 shares in connection with earned PSUs; and 1,636,218 shares in connection with unvested RSUs); and

16,897 shares that may be issued under equity compensation plans not approved by stockholders (8,000 shares in connection with unvested RSUs under the Restricted Stock Plan; and 8,897 shares in connection with unvested RSUs under the Wesfarmers Inducement Award Plan). See “Equity Compensation ~~Committee oversees~~Plan Information” for more information regarding these two plans.

2017 PROXY STATEMENT

ITEM 2 – APPROVAL OF THE ARTHUR J. GALLAGHER & CO. 2017 LONG-TERM INCENTIVE PLAN

Selected Features of the 2017 LTIP

The structure of the 2017 LTIP is based on the 2014 LTIP, but also includes the following material differences:

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Minimum Vesting: the 2017 LTIP includes minimum vesting periods for awards (one year for options, one year for SARs, one year for full value awards tonon-employee directors and three years for full value awards to other participants), subject to certain exceptions discussed in further detail below.

•

Annual Limit on Director Compensation: the 2017 LTIP imposes a $500,000 annual limit on equity awards and cash compensation under the 2017 LTIP and otherwise to eachnon-employee director; provided, however, that in the calendar year in which anon-employee director first joins the Board or is first designated as Chairman of the Board or Lead Director, the maximum aggregate dollar value of equity-based and cash compensation granted to the participant may be up to 200% of the foregoing limit.

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No Liberal Share Recycling: the 2017 LTIP does not permit liberal share recycling, including with respect to shares withheld by the company to pay withholding taxes related to awards.

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Elimination of Single-Trigger Change in Control Vesting: the 2017 LTIP does not provide for automatic single-trigger change in control award vesting and provides instead for Committee discretion to determine award treatment in connection with a change in control.

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Prohibits Dividends or Dividend Equivalents on Unvested Awards:the 2017 LTIP includes an express prohibition on the payment of dividends or dividend equivalents on unvested awards.

These changes continue our approach of aligning our equity compensation program ~~for named executive officers on behalf~~with the interests of our stockholders and with evolving best practices in equity and incentive compensation. These new features are in addition to the following “best-practice” features included in the 2014 LTIP and continued in the 2017 LTIP:

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No Increase in Shares Without Stockholder Approval: the 2017 LTIP prohibits any amendment that would increase the number of shares available under the plan without stockholder approval.

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No “Liberal” Change in Control: the definition of change in control included in the 2017 LTIP requires an actual change in control to occur and is not triggered by commencement of a tender offer, stockholder approval of an acquisition transaction or similar events.

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No Repricings: the 2017 LTIP prohibits “repricing” stock options and SARs and cashing out underwater stock options or SARs without stockholder approval.

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Clawback: all awards granted under the 2017 LTIP are subject to recoupment or “clawback,” to the extent required by law, regulation or any company policy (including our existing compensation recovery policy).

The Share Reserve under the 2017 LTIP

As part of the ~~Board. In fulfilling~~Compensation Committee’s recommendation to the Board to approve the 2017 LTIP, including the total number of shares available for issuance under the 2017 LTIP, the Committee solicited advice from Sibson, its ~~oversight responsibilities,~~independent compensation consultant, and other internal and external experts to analyze historical share usage (generally referred to as “burn rate”), expected future needs for equity awards within the organization, as well as the dilutive impact of various increases in the total shares available under the plan and the estimated duration of the 2017 LTIP under various scenarios. The Committee also took into account the views of several of our largest stockholders with respect to such issues, which management solicited during an outreach conducted in 2016. Specifically, the Compensation Committee ~~reviewed~~considered:

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Shares Available under the 2014 LTIP: If our stockholders do not approve the 2017 LTIP, then we will not have sufficient shares available for grants in 2018. This would result in the loss of an important tool to attract, motivate and retain the most highly qualified and experienced employees andnon-employee directors. In addition, we would be unable to implement management’s plan to continue expansion, in 2018, of the group of employees to whom we grant equity compensation.

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Historical Burn Rate: Our equity plan share usage during 2014, 2015 and 2016 represents an average three-year burn rate, factored for a full-value share premium, of 2.2%. This burn rate is below the Institutional Shareholder Services Inc. established burn rate benchmark for our industry and index of 3.4%.

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Dilution: Also referred to as “voting power dilution,” dilution is commonly measured by “overhang,” which generally refers to the amount of potential dilution to current stockholders that could result from the future issuance of the shares reserved for issuance under an equity compensation plan. Overhang is typically expressed as a percentage (equal to a fraction where the numerator is the sum of the number of shares reserved but not issued under equity compensation plans plus the number of shares subject to outstanding awards and the denominator is the sum of the numerator plus the total number of shares outstanding). If the 2017 LTIP is approved, our voting power dilution will be approximately 13.6% as of March 20, 2017.

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Stockholder Outreach: During 2016, management conducted an outreach initiative with our largest stockholders, soliciting their views on various executive compensation and governance issues, including their views on acceptable levels of dilution, shareholder value transfer, burn rate and other issues relevant to the share authorization request under our 2017 LTIP. The Committee received reports from management on the results of this outreach, and took the views of our largest stockholders into account when determining features of our plan and the level of our share authorization request.

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Estimated Duration of the 2017 LTIP:If the 2017 LTIP is approved by our stockholders, based on historical and expected future usage, we estimate that the shares we are requesting under the 2017 LTIP would be sufficient for approximately four to five years of grants, understanding that the share reserve could last for a longer or shorter period of time, depending on the growth of our employee population, our future grant practices, or our stock price and prevailing market conditions, which cannot be predicted at this time.

2017 PROXY STATEMENT

ITEM 2 – APPROVAL OF THE ARTHUR J. GALLAGHER & CO. 2017 LONG-TERM INCENTIVE PLAN

The Full Value Award Limit Under the 2017 LTIP

The 2017 LTIP also imposes a 4,000,000 share limit on the maximum number of shares that may be awarded in the form of full value awards. We are requesting that stockholders approve this number of full value shares because we would like to continue to provide full value share awards to key employees to encourage ongoing retention and to focus their efforts on long-term stockholder value creation.

The Material Terms of the Performance Goals Under the 2017 LTIP

In addition, we are asking our stockholders to approve the 2017 LTIP so that grants of performance-based compensation under the 2017 LTIP may be structured in a manner that is intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), thereby preserving the company’s tax deduction for such compensation. As part of approving the 2017 LTIP, we are asking our stockholders to approve the material terms of the performance goals that may be used for purposes of granting awards that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

For purposes of Section 162(m) of the Code, the material terms of the performance goals include: (1) the individuals eligible to receive compensation under the 2017 LTIP; (2) a description of the business criteria on which the performance goals are based; and (3) the maximum amount of compensation that can be paid to certain employees under the performance goal. We discuss each of these aspects of the 2017 LTIP below under the headings “Plan Term and Eligibility,” “Covered Employee Limits” or “Performance Goals” and stockholder approval of the 2017 LTIP will be deemed to constitute approval of each of these aspects of the 2017 LTIP for purposes of the approval requirements of Section 162(m) of the Code.

Generally, Section 162(m) of the Code limits the deduction a public company can claim for compensation in excess of $1 million paid in a given year to its chief executive officer and its three other most highly-compensated executive officers (other than its chief financial officer). “Performance-based” compensation that meets certain requirements does not count against the $1 million deductibility limitation. Because of their nature as appreciation-only awards, stock options and SARs awarded under the 2017 LTIP, if approved by stockholders, will generally qualify as performance-based compensation. Other awards that we may grant under the 2017 LTIP may be structured in a manner intended to qualify as performance-based compensation if the payment, retention or vesting of the award is subject to the achievement during a performance period of performance goals selected by the Compensation Committee. The Compensation Committee retains the discretion to set the level of performance for a given performance measure and the performance period under a performance-based award. As such, for such awards to qualify as performance-based compensation, our stockholders must approve the material terms of the performance goals at least every five years. Such approval does not guarantee that incentive compensation that we pay to our employees will qualify as performance-based compensation for purposes of Section 162(m) of the Code, but will permit the Compensation Committee to structure incentive compensation in a manner intended to qualify as performance-based compensation if it chooses to do so.

Summary of the Material Terms of the 2017 LTIP

The following is a brief summary of the 2017 LTIP. This summary is qualified in its entirety by reference to the plan document, a copy of which is attached to this Proxy Statement as Exhibit A and incorporated herein by reference.

Plan Term and Eligibility. The 2017 LTIP term begins upon the date of stockholder approval and terminates on the date of the annual meeting of stockholders that occurs during the year of the tenth anniversary of its effective date, unless terminated earlier by the Board. All of the officers, employees andnon-employee directors of the company and its subsidiaries are eligible to be selected to receive awards under the 2017 LTIP. As of December 31, 2016, approximately 40 officers, 24,800 employees and ninenon-employee directors were eligible for consideration to participate in the 2017 LTIP.

Shares Authorized. 16,000,000 shares of our common stock are available under the 2017 LTIP, plus any shares subject to outstanding awards under the Prior LTIPs as of the date of the Annual Meeting that after such date are settled for cash, forfeited, expired, or for any reason are cancelled or terminated, without resulting in the issuance of shares. A maximum of 4,000,000 shares may be used for full value awards.

Share Counting. If an outstanding award granted under the 2017 LTIP is cancelled or forfeited, expires, terminates or is settled in cash, the shares underlying such award will again be available under the 2017 LTIP (and will not count against the limit on full value awards). Shares that are not issued upon the net settlement of a stock-settled SAR under the 2017 LTIP or Prior LTIPs, shares that are delivered to or withheld by the company to pay the exercise price of a stock option under the 2017 LTIP or Prior LTIPs, shares delivered to or withheld by the company to pay withholding taxes related to awards under the 2017 LTIP or Prior LTIPs and shares that are purchased on the open market with the proceeds of a stock option exercise under the 2017 LTIP or Prior LTIPs will not again be available under the 2017 LTIP.

Administration. The Compensation Committee, which is made up entirely of independent directors, will administer the 2017 LTIP, and may delegate some or all of its authority to our President and CEO or another executive officer as it deems appropriate, except to the extent such delegation is prohibited by applicable law.

Award Types. The 2017 LTIP provides for: (1) nonqualified and incentive stock options (NQSOs and ISOs, respectively); (2) SARs; (3) restricted stock awards (RSAs); and (4) restricted stock units (RSUs).

Covered Employee Limits. Subject to adjustment for any changes in capitalization, only to the extent that such adjustment will not affect the status of any award intended to qualify as “performance-based” compensation under Section 162(m) of the Code: (i) the maximum number of shares of common stock with respect to which options or SARs or a combination thereof that may be granted during any calendar year to any person under the 2017 LTIP will be 200,000; (ii) the maximum number of shares of common stock with respect to which awards other than options or SARs that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code and are denominated in shares of common stock that may be earned pursuant to such awards granted during any calendar year to any

2017 PROXY STATEMENT

ITEM 2 – APPROVAL OF THE ARTHUR J. GALLAGHER & CO. 2017 LONG-TERM INCENTIVE PLAN

person under the 2017 LTIP will be 200,000; and (iii) the maximum amount that may be payable with respect to all awards that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code and are denominated in cash granted during any calendar year to any person under the 2017 LTIP will be $5,000,000. For clarity, the Performance Unit Program (PUP) awards discussed in a footnote to the 2016 Option Exercises and Stock Vested table below are cash-settled awards which are presently granted under the SMIP. However, both cash-settled performance restricted stock units and stock-settled performance restricted stock units may be granted under the 2017 LTIP.

Non-Employee Director Limit. The aggregate dollar value of all equity awards (determined based upon the grant date fair value of such awards) and cash compensation granted under the 2017 LTIP or otherwise during any calendar year to a singlenon-employee director may not exceed $500,000; provided, however, that in the calendar year in which anon-employee director first joins the Board or is first designated as Chairman of the Board or Lead Director, the maximum aggregate dollar value of equity-based and cash compensation granted to the participant may be up to two hundred percent (200%) of the foregoing limit and the foregoing limit will not count any tandem SARs.

Stock Options and SARs.Except for substitute awards, the exercise price of a stock option and the base price of a SAR may not be less than 100% of the fair market value of our common stock on the date of grant. A SAR typically will provide for payment of an amount (in cash or shares of common stock) based upon the increase in the price of our common stock over the base price per share. The exercise price and the required withholding taxes of a stock option may be paid in cash, in shares of our common stock, through anet-exercise or a broker-assisted cashless exercise. Stock options and SARs must expire no later than seven years from the date of grant. The Compensation Committee may provide that an option or SAR with an exercise or base price, as applicable, less than the fair market value per share of common stock shall automatically be exercised immediately prior to expiration. Options and SARs granted under the 2017 LTIP may not become exercisable, vest or be settled, in whole or in part, prior to theone-year anniversary of the date of grant, except that the Compensation Committee may provide that options or SARs become exercisable, vest or settle prior to such date in the event of the participant’s death or disability or in the event of a change in control. Further, up to 5% of the aggregate number of shares of common stock authorized for issuance under the 2017 LTIP may be issued pursuant to awards subject to any, or no, vesting conditions, as the Compensation Committee determines appropriate. Subject to adjustment for changes in capitalization, without the prior approval of the stockholders of the company, the Compensation Committee will not amend or replace any previously granted option or SAR in a transaction that constitutes a “repricing,” including, but not limited to: (i) the reduction, directly or indirectly, in theper-share price of an outstanding option or SAR by amendment, cancellation or substitution; (ii) any action that is treated as a repricing under generally accepted accounting practices; (iii) at any time when the per-share price of an outstanding option or SAR is above the fair market value of a share of common stock, canceling (or accepting the surrender of) an option or SAR in exchange for another option, SAR or other equity security or cash (unless the cancellation and exchange occurs in connection with a merger, acquisition, or similar transaction); and (iv) any other action that is treated as a repricing by the rules or regulations of the New York Stock Exchange.

Stock Awards. The 2017 LTIP provides for the grant of stock awards, consisting of RSAs and RSUs, which will be subject to the restrictions, if any, that the Compensation Committee deems appropriate, including a continued employment or service requirement. The Compensation Committee may determine that any stock award will be subject to the attainment of performance measures (which may include the Qualifying Performance Measures described below) over an established performance period. Generally, the holder of an RSA will have the rights of a stockholder, including the right to vote and receive dividends. The holder of an RSU will have no rights as a stockholder of the company but may be entitled to receive dividend equivalents. Notwithstanding the foregoing, dividends or dividend equivalents credited/payable in connection with RSAs or RSUs that are not yet vested will be subject to the same restrictions and risk of forfeiture as the underlying RSAs or RSUs and will not be paid until the underlying RSAs or RSUs vest.

RSAs and RSUs granted under the 2017 LTIP may not become exercisable, vest or be settled, in whole or in part, for non-employee directors, prior to theone-year anniversary, and for all other participants, prior to the three-year anniversary, of the date of grant, except that the Compensation Committee may provide that RSAs or RSUs become exercisable, vest or settle prior to such date in the event of the participant’s death or disability or in the event of a change in control. Further, up to 5% of the aggregate number of shares of common stock authorized for issuance under the 2017 LTIP may be issued pursuant to awards subject to any, or no, vesting conditions, as the Compensation Committee determines appropriate.

Qualifying Performance Measures.The Compensation Committee may specify that an award or a portion of an award is intended to satisfy the requirements for “performance-based” compensation under Section 162(m) of the Code, provided that the performance criteria for such award or portion of an award that is intended to satisfy the requirements for “performance-based” compensation under Section 162(m) of the Code will be a measure based on one or more Qualifying Performance Measures (defined below) selected by the Compensation Committee and specified at the time the award is granted. “Qualifying Performance Measures” means one or more of the following (or a derivation of the following) objective corporate-wide or subsidiary, division, operating unit or individual measures, stated in either absolute terms,per-share or relative terms, such as rates of growth or improvement, compared to a previous year’s results or to a designated comparison group, either based upon United States Generally Accepted Accounting Principles (GAAP) ornon-GAAP financial results, individually or in combination, measured annually or cumulatively over a period of years: (1) the attainment by a share of common stock of a specified fair market value for a specified period of time, (2) earnings per share, (3) return to stockholders, (4) return on assets, (5) return on equity, (6) revenue (organic or otherwise), (7) cash flow, (8) operating expense reduction, (9) return on investment, (10) return on capital, (11) operating margin, (12) net income, (13) earnings before interest, taxes, depreciation, amortization and/or change in estimated earnout payables or net earnings (either before or after interest, taxes, depreciation, amortization and/or change in estimated earnout payables), (14) operating earnings, (15) net cash provided by operations, or (16) strategic business criteria, consisting of one or more objectives such as geographic business expansion goals, cost targets, customer satisfaction ratings, reductions in errors and omissions, reductions in lost business, management of employment practices and employee benefits, supervision of litigation, risk management, audit scores, productivity,

2017 PROXY STATEMENT

ITEM 2 – APPROVAL OF THE ARTHUR J. GALLAGHER & CO. 2017 LONG-TERM INCENTIVE PLAN

efficiency, and goals relating to acquisitions or divestitures, or any combination of the foregoing.

In the sole discretion of the Compensation Committee, but subject to Section 162(m) of the Code, the Compensation Committee may provide that one or more objectively determinable adjustments shall be made to one or more of the Qualifying Performance Measures. Such adjustments may include one or more of the following: (i) items related to a change in accounting principles or applicable law; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) othernon-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the company during the performance period; (vii) items related to the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under GAAP; (ix) items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the performance period; (x) any other items of significant income or expense which are determined to be appropriate adjustments if such adjustment is timely approved in connection with the establishment of such Qualifying Performance Measures; (xi) items relating to infrequently occurring corporate transactions, events or developments; (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the company’s core,on-going business activities; (xiv) items relating to any other infrequently occurring events or changes in applicable laws, accounting principles or business conditions; (xv) items relating to foreign currency impacts; or (xvi) items relating to such other events as the Compensation Committee deems appropriate, if such adjustment is timely approved in connection with the establishment of such Qualifying Performance Measures. For all awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code, such determinations will be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.

Amendment or Termination of the 2017 LTIP. The Board may amend or terminate the 2017 LTIP, subject to any requirement of stockholder approval required by law or the rules of the New York Stock Exchange; provided, however, that no amendment may impair in any material way an award holder’s rights without his or her consent; provided that no such consent will be required if the Compensation Committee determines in its sole discretion and prior to the date of any change in control that such amendment either is required or advisable in order for the company, the 2017 LTIP or the award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard, or is not reasonably likely to significantly diminish the benefits provided under such award, or that any such diminishment has been adequately compensated.

Adjustment. In the event of any change in capitalization or any distribution to holders of our common stock other than a regular cash dividend, the Compensation Committee will equitably adjust the number of shares available under the plan, the share limitations described above and the terms of outstanding awards.

Change in Control. In the event of the consummation of any acquisition by any person or group of 50% or more of the combined voting power of our outstanding securities then entitled to vote for the election of directors or in the event of any change during anytwo-year period in the majority of the members of the Board whose election is not approved by at leasttwo-thirds of the members of the Board who either were directors at the beginning

of such period or whose election was previously so approved, then the Compensation Committee may through the terms of an award or otherwise provide that any or all of the following will occur, either immediately upon the change in control, or upon termination of a participant’s employment or service within six months prior to or twenty-four months following the change in control: (i) all outstanding options and SARs will immediately become vested and exercisable in full; (ii) the restriction period applicable to any outstanding RSA or RSU will lapse; (iii) the performance period applicable to any outstanding award will lapse; and/or (iv) the performance measures applicable to any outstanding award will be deemed to be satisfied at their target levels or, if greater, on a pro rata basis based on actual achievement as of the date of the change in control. The Board may require that the acquiring company substitute or cash out outstanding awards. Certain additional requirements apply to awards that are subject to Section 409A of the Code.

Substitute Awards. The Committee may grant awards in substitution for any award previously granted by a company or other entity in connection with a corporate transaction, such as a merger or consolidation with another entity or acquisition of property or stock of another entity. Substitute awards will not count against the 2017 LTIP overall share limit or any sublimit in the 2017 LTIP (nor will shares of common stock subject to substitute awards be added to the shares available for awards under the 2017 LTIP), except as may be required by the Code. As permitted by applicable stock exchange rules, the Committee may grant awards pursuant to apre-existing plan of a company acquired by or combined with the company and such awards will not reduce the shares available under the 2017 LTIP (nor will shares of common stock subject to such awards be added to the shares available for awards under the 2017 LTIP), provided that such awards are made only to those who were not employed by or providing services to the company immediately prior to the acquisition.

United States Federal Income Tax Consequences.The following discussion is intended to be a summary only of the federal income tax aspects of awards granted under the 2017 LTIP and not of state, local or foreign taxes that may apply. Individual tax consequences may vary.

Section 162(m). Under Section 162(m) of the Code, compensation attributable to stock options and SARs will qualify as performance-based compensation, provided that: (1) the 2017 LTIP contains aper-person limitation on the number of shares for which options or SARs may be granted during a specified period; (2) theper-person limitation is approved by our stockholders; (3) the award is granted by a compensation committee comprised solely of outside directors (as defined in Section 162(m) of the Code); and (4) the exercise price of the option or SAR is not less than the fair market value of the stock on the date of grant. For the above reasons, our 2017 LTIP provides for an annualper-person limitation and our Compensation Committee is comprised solely of outside directors. Accordingly, stock options or SARs granted by the Compensation Committee may qualify as performance-based compensation, and the other awards subject to Qualifying Performance Measures also may be structured in a manner intended to qualify.

ISOs. A participant who is granted an ISO does not realize any taxable income upon the date of grant or the date of exercise (except possibly for alternative minimum tax). Similarly, we are not entitled to any deduction at the time of grant or at the time of exercise. If the participant makes no disposition of the shares

2017 PROXY STATEMENT

ITEM 2 – APPROVAL OF THE ARTHUR J. GALLAGHER & CO. 2017 LONG-TERM INCENTIVE PLAN

acquired pursuant to an ISO before the later of two years from the date of grant or one year from the date of the exercise of such shares by the participant, any gain or loss realized on a subsequent disposition of the shares will be treated as a long-term capital gain or loss. Under such circumstances, we will not be entitled to any deduction for federal income tax purposes.

NQSOs and SARs. A participant who is granted a NQSO or a SAR does not have taxable income at the date of grant. Taxable, ordinary income occurs on the date of exercise in an amount equal to the difference between the exercise or base price of the shares and the market value of the shares on the date of exercise. We are entitled to a corresponding deduction for the same amount.

RSAs. A participant who has been granted an RSA will not realize taxable income at the time of the grant, and we will not be entitled to a deduction at the time of the grant, assuming that the restrictions constitute a substantial risk of forfeiture for U.S. income tax purposes. When such restrictions lapse, the participant will receive ordinary income in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. We will be entitled to a corresponding deduction. The participant may elect to include the value the RSA as income at the time it is granted under Section 83(b) of the Code, and we will take a corresponding income tax deduction.

RSUs. Recipients of RSUs generally should not recognize income until such units are converted into cash or shares of our common stock. Upon conversion, the recipient will normally recognize ordinary income equal to the amount of cash and fair market value of the shares, if any, received upon such conversion. If the recipient is an employee, such ordinary income generally is subject to withholding of income and employment taxes. We generally will be allowed a deduction for federal income tax purposes in an amount equal to the ordinary income recognized by the employee.

New Plan Benefits. Because benefits under the 2017 LTIP will depend on the Compensation Committee’s actions and the fair market value of our common stock at various future dates, it is not possible to determine at this time the benefits that might be received by officers, employees andnon-employee directors if the 2017 LTIP is approved by stockholders. As of December 30, 2016, the closing price of our common stock was $51.96 per share.

Vote Required. The approval of the 2017 LTIP requires the affirmative vote of the holders of a majority of the shares of our common stock having voting power, present in person, deemed to be present or represented by proxy at the Annual Meeting.


		THE BOARD RECOMMENDS THAT YOU VOTEFOR THE APPROVAL OF THE ARTHUR J. GALLAGHER & CO. 2017 LONG-TERM INCENTIVE PLAN, INCLUDING 16,000,000 SHARES AUTHORIZED FOR ISSUANCE THEREUNDER AND THE MATERIAL TERMS OF THE PERFORMANCE GOALS

2017 PROXY STATEMENT

Equity Compensation Plan Information

The following table provides information as of December 31, 2016, regarding the number of shares of our common stock that may be issued under our equity compensation plans. See page 16 for certain updated information as of March 20, 2017.



	(a)			(b)			(c)

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		11,142,800	⁽¹⁾	$	41.45	⁽²⁾		11,925,178	⁽³⁾

Equity compensation plans not approved by security holders⁽⁴⁾		16,897	⁽⁵⁾		—			—

Total		11,159,697			41.45	⁽²⁾		11,925,178

(1)	This amount includes the following:

9,504,846 shares that may be issued in connection with outstanding stock options;

169,186 shares that may be issued in connection with earned performance share units; and

1,468,768 unvested restricted stock units.

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

(3)	This amount includes the following:

4,377,712 shares available under the 2014 Long-Term Incentive Plan; and

7,547,466 shares available under our Employee Stock Purchase Plan.

(4)	Set forth below are equity compensation plans not approved by stockholders, under which we have outstanding awards:

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The Restricted Stock Plan. 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.

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The Wesfarmers Inducement Award Plan. In connection with the closing of our acquisition of Crombie/OAMPS in 2014, the Compensation Committee approved this plan so that we could grantone-time employment inducement awards of restricted stock units to three employees of the acquired businesses under NYSE Rule 303A.08. The Compensation Committee determined the amount of each award, along with vesting and other terms.

(5)	This amount includes the following:

8,000 unvested restricted stock units under the Restricted Stock Plan; and

8,897 unvested restricted stock units under the Wesfarmers Inducement Award Plan.

2017 PROXY STATEMENT

Audit Matters

Item 3—Ratification of Appointment of Independent Auditor

The Audit Committee has considered the qualifications of Ernst & Young LLP and has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017. As a matter of good governance, the Board wishes to obtain stockholders’ ratification of the Audit Committee’s action in such appointment. A resolution ratifying the appointment will be offered at the Annual Meeting. If the appointment of Ernst & Young LLP is not ratified, the Audit Committee will consider the outcome of this vote in its future deliberations regarding the selection of our independent registered public accounting firm.

Principal Accountant Fees and Services

The following is a summary of Ernst & Young LLP’s fees for professional services rendered to us for the fiscal years ended December 31, 2016 and 2015:



	2016		2015

Audit Fees		$ 4,729,000	$	4,904,000

Audit-Related Fees		814,000		1,056,000

Tax Compliance Fees		1,271,000		1,117,000

Tax Advisory Fees		3,955,000		3,500,000

All Other Fees		9,000		17,000

Totals		$10,778,000	$	10,594,000

Fees for audit services 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. These fees were lower in 2016 due in part to a reduction in statutory audits required internationally from the elimination of some legal entities. 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. Audit-related fees were lower in 2016 due in part to the lesser amount of due diligence performed in 2016 in connection with our international acquisitions and a reduction in fees for our SOC 2 related work. 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, and were higher in 2016 due in part to the greater amount of international tax planning work required in 2016 because of our international operations. All other fees principally include fees for access to an online accounting and tax information database.

Audit CommitteePre-Approval Policies and Procedures

All audit services, audit-related services, tax services and other services for fiscal years 2016 and 2015 werepre-approved by the Audit Committee. It is the policy of the Audit Committee topre-approve the engagement of Ernst & Young LLP before we engage such firm to render audit or other permittednon-audit services. The Audit Committee has adopted procedures forpre-approving all audit and permittednon-audit services provided by Ernst & Young LLP. The Audit Committee annuallypre-approves a list of specific services and categories of services, subject to a specified cost level. Part of this approval process includes making a determination as to whether permittednon-audit services are consistent with the SEC’s rules on auditor independence. The Audit Committee has delegatedpre-approval authority to the Chairman of the Audit Committee for the types of services that Ernst & Young LLP has historically been retained to perform related to integrated audit and other recurring services, subject to reporting any such approvals at the next Audit Committee meeting.

A representative of Ernst & Young LLP will be present at the Annual Meeting to respond to appropriate questions and to make a statement if the representative so desires.


		THE BOARD RECOMMENDS THAT YOU VOTEFORRATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2017

2017 PROXY STATEMENT

Audit Committee Report

The Audit Committee represents and assists the Board in fulfilling its responsibilities for general oversight of the integrity of the company’s financial statements, risk assessment and risk management, and compliance with legal and regulatory requirements. The Audit Committee manages the company’s relationship with and is responsible for the appointment, retention, termination and compensation of Ernst & Young LLP. Ernst & Young LLP was the company’s independent registered public accounting firm at the time of its initial public offering in 1984 and has continued in that role since. The Audit Committee reviews Ernst & Young LLP’s independence, capabilities, expertise, performance and fees in deciding whether to retain its services.

The company’s management is responsible for the preparation, presentation and integrity of its consolidated financial statements, accounting and financial reporting principles, and internal controls designed to assure compliance with accounting standards and applicable laws and regulations. Ernst & Young LLP is responsible for auditing the company’s consolidated financial statements and expressing an opinion as to their conformity with U.S. generally accepted accounting principles and for auditing the effectiveness of the company’s internal controls over financial reporting. The Audit Committee monitors the financial reporting process and reports its findings to the Board.

The Audit Committee carried out its duties and responsibilities, including the following specific actions:

•

Reviewed and discussed with management and Ernst & Young LLP the company’s audited consolidated financial statements as of and for the fiscal year ended December 31, 2016 and its internal control over financial reporting as of December 31, 2016;

•

Reviewed and discussed with Ernst & Young LLP all matters required to be discussed by the standards of the Public Company Accounting Oversight Board (PCAOB); and

•

Obtained the written disclosures and letter from Ernst & Young LLP regarding its communications with the Audit Committee concerning Ernst & Young LLP’s independence as required by the PCAOB, including the requirements under PCAOB Rule 3526, and has discussed with Ernst & Young LLP its independence.

Based on these reviews and discussions with management and Ernst & Young LLP, the ~~Compensation Discussion and Analysis set forth below.~~

~~Based on the review and discussion referred to above, the Compensation~~Audit Committee recommended to the Board that the company’s audited consolidated financial statements be included in its Annual Report on Form10-K for the fiscal year ended December 31, 2016, for filing with the SEC. The Audit Committee believes that the retention of Ernst & Young LLP to serve as the company’s independent registered public accounting firm is in the best interests of the company.

AUDIT COMMITTEE

William L. Bax (Chair)

Frank E. English, Jr.

Ralph J. Nicoletti

Norman L. Rosenthal

2017 PROXY STATEMENT

Compensation Discussion and Analysis ~~be included~~


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

•Pat Gallagher		Chairman, President and Chief Executive Officer

•Doug Howell		Chief Financial Officer

•Jim Gault		Corporate VP and Chairman - Global P/C Brokerage

•Jim Durkin		Corporate VP and Chairman - Employee Benefit Consulting and Brokerage

•Tom Gallagher		Corporate VP and CEO - Global P/C Brokerage

Recent leadership changes. In November 2016, Jim Gault was promoted to the role of Chairman - Global P/C Brokerage, and Tom Gallagher, who was Chairman - International Brokerage, assumed the role of CEO - Global P/C Brokerage. In January 2017, Jim Durkin was promoted to the role of Chairman - Employee Benefit Consulting and Brokerage. Non-GAAP financial measures.For additional information regarding thenon-GAAP financial measures referred to in this Proxy Statement (EBITAC, EBITDAC, adjusted EBITDAC margin, and organic revenue growth), including reconciliations to the most directly comparable GAAP financial measures, see Exhibit B.

2016 Financial Results

Additional highlights of our 2016 ~~proxy statement~~performance include the following:

We achieved organic revenue growth of 3.1% for the combined brokerage and ~~incorporated by reference~~risk management segments.

We increased our adjusted EBITDAC margin for the combined brokerage and risk management segments from 24.8% to 25.3%.

We completed 37 acquisitions, representing $138 million in acquired annualized revenue.

We funded our ~~2015 Annual Report on Form 10-K,~~acquisition program from free cash flow and debt, using zero shares (after share repurchases).

~~COMPENSATION COMMITTEE~~

2017 PROXY STATEMENT

~~Elbert O. Hand~~~~(Chair)~~

~~Sherry S. Barrat~~

~~David S. Johnson~~

~~Kay W. McCurdy~~

~~This Compensation Discussion and Analysis discusses compensation awarded or paid to, or earned by, the following named executive officers (whom we sometimes refer to as NEOs):~~

This discussion and analysis contains statements regarding our performance measures, targets, goals, objectives and thresholds, which we disclose in the limited context of our named executive officer compensation program. These disclosures should not be interpreted as statements of management’s expectations, estimates of results or other guidance.

The Compensation Committee believes that our compensation program for named executive officers is balanced and reasonable and helps us retain and motivate highly talented business leaders through a range of economic cycles. We reward performance by emphasizing a balance of ~~short~~short- and long-term compensation ~~vehicles:~~vehicles. Annual cash incentives are awarded based on achievement of financial performance metrics and the Committee’s assessment of individual performance. Further details on the principles and objectives of our compensation program are set forth below.

• Our long-term incentive program awards are tied to a combination of stock price performance and achievement of performance objectives established by the Compensation Committee.

The Compensation Committee continually evaluates developing practices in executive compensation ~~awards~~and governance and considers modifications to our executive compensation program that support our business strategies, provide an appropriate balance of risk and reward for our named executive officers, and align their compensation with long-term stockholder interests. The following charts summarize certain of our key pay and governance practices.

Our Board of Directors pays close attention to the views of our stockholders, including the 89% “say on pay” approval rate our compensation program received in 2016, when making determinations regarding corporate governance and executive compensation.

In addition, members of our management team engaged with stockholders representing approximately 50% of our outstanding shares to discuss corporate governance and executive compensation matters. Based in part on feedback we received from our stockholders, the Compensation Committee ~~evaluates~~made certain changes to our ~~performance primarily on~~compensation program for 2017. These changes, which will be reflected in next year’s Proxy Statement, include the ~~basis of two measures. The Committee believes these measures provide meaningful representations of our core operating performance and a comparable view of our results between periods:~~following:

¹ ~~Reconciliations of non-GAAP measures to the most closely comparable GAAP measures are presented inExhibit A~~ ~~to this proxy statement.~~

~~In 2015, we had strong revenue and EBITAC performance, achieving year-over-year revenue growth of 13.2% (to $4.1 billion) and EBITAC growth of 14.1% (to $786.6 million).~~

~~We also had strong financial performance on other measures. We achieved organic revenue growth~~² ~~of 5.1% in our combined brokerage and risk management segments and improved~~ adjusted EBITDAC ~~margin~~² ~~in these combined segments by nearly one percentage point,~~per share, and will be subject to 24.5%. We experienced excellent results with our strategy of acquiring smaller firms in attractive geographies and market niches. During the year, we completed 44 acquisitions with total annualized revenues of approximately $231 million.

~~These results carried forward our strong~~a three-year, rather thanone-year, performance in prior years. Over the past three years, we increased revenue and EBITAC by compound annual growth rates of 19.1% and 22.2%, respectively, and over the same period expanded our adjusted EBITDAC margin from 21.1% to 24.5%.

Based on our financial performance summarized above and Pat Gallagher’s achievement of individual performance objectives, the Compensation Committee awarded him an annual cash incentive payment of $2,250,000 (the maximum amount he was eligible to receive under our stockholder-approved plan). Over the past three years, our total shareholder return was 30.1%, while Pat Gallagher’s compensation increased by 21.7%.period. The Compensation Committee believes ~~Pat Gallagher’s compensation~~this new performance measure is ~~appropriately aligned with our long-term total return~~responsive to ~~stockholders.~~

~~The following provides an overview~~stockholder preference for a longer performance period and additional accountability around the use of ~~our compensation philosophy and program for named executive officers:~~

~~We structure our compensation program~~ for named executive officers will be based on a combination of adjusted revenue growth and adjusted EBITDAC growth. Maximum payouts will be calculated using a more formulaic approach than in prior years, using a two metric payout grid. Final awards will remain subject to ~~link a significant portion of~~downward adjustment in the compensation paid to the performance of our business. We provide the variable elements of our program (annual cash incentive compensation and long-term incentive compensation) primarily to encourage and reward performance that leads to strong financial results and creation of long-term stockholder value. In addition, our program is not overly weighted toward annual cash incentive compensation and does not otherwise have the potential to threaten long-term stockholder value by promoting unnecessary or excessive risk-taking by our named executive officers.Compensation Committee’s discretion.

² ~~Reconciliations of non-GAAP measures to the most closely comparable GAAP measures are presented inExhibit A~~ ~~to this proxy statement.~~

~~Key Pay and Governance Practices~~2016 Performance Measures for Annual Cash Incentives

The Compensation Committee ~~continually evaluates developing practices~~administers our annual cash incentive plan using performance measures approved by stockholders under our Senior Management Incentive Plan (SMIP), which was last approved in ~~executive compensation~~2015. The performance objectives selected by the Compensation Committee for 2016 were revenue and ~~governance~~EBITAC growth. The committee believes that these objectives measure performance against key components of our long-term strategy: organic revenue growth, mergers and ~~considers modifications~~acquisitions, and productivity and quality. The committee also believes that revenue and EBITAC growth are key drivers of our stock price.

For 2016 SMIP awards, the Compensation Committee established performance thresholds for funding and for maximum awards. To determine final award amounts, the committee assessed each NEO’s individual performance, placing strong emphasis on the NEO’s contributions to ~~our executive compensation program that support our business strategies, provide an appropriate balance~~the company’s overall performance. Target award opportunities are 150% of ~~risk and reward~~base salary for our ~~named executive officers,~~CEO and ~~align their compensation with long-term stockholder interests. Key pay~~100% of base salary for our other NEOs. Maximum awards under the plan are 150% of these target award opportunities (i.e., 225% of base salary for our CEO and ~~governance practices include~~150% of base salary for our other NEOs). The company-wide performance measures and thresholds approved by the ~~following:~~committee for 2016, and our actual achievement against these measures, are set forth below.

Based on our 2016 performance, each NEO qualified for a maximum award of 150% of target.

To encourage a focus on increasing our core earnings, the number of PSUs granted in 2016 that were actually earned following the completion of the 2016 performance year was based on EBITAC growth thresholds set by the Compensation Committee (see the table below). PSUs earned in 2016 will cliff vest on the third anniversary of the date of grant and settle in shares.

Based on our 2016 EBITAC growth of 17%, each NEO earned 100% of his provisionally granted PSUs.

Role of the Compensation Consultant

The Compensation Committee ~~has~~ retained Sibson Consulting (Sibson) as its independent executive compensation consultant. Sibson provides expertise on various matters coming before the Compensation Committee. Sibson works with our management team at the direction of the Compensation Committee and only on matters for which the Compensation Committee is responsible, and does not receive compensation from us for any other matters. In connection with its ~~2015~~ engagement, Sibson reviewed ~~2015~~2016 proxy season results and implications for our pay practices; assisted in the review and confirmation of our peer group for executive compensation and ~~company~~ performance review purposes; advised the Compensation Committee in connection with the new equity plan described in this Proxy Statement; provided updates on emerging executive compensation trends, including proxy advisory firm and regulatory developments; and reviewed and assessed all elements of our pay programs for executive officers, including the competitiveness of pay levels and incentive program design.

The Compensation Committee ~~has~~ assessed Sibson’s independence pursuant to SEC and NYSE rules and concluded that no conflict of interest exists that would prevent Sibson from serving as an independent consultant to the Compensation Committee.

~~COMPARATIVE MARKET ASSESSMENT~~

~~The Compensation Committee reviews compensation data from two different comparison groups, as a market reference for its named executive officer compensation decisions, as described below.~~

~~Survey Comparison Group~~

This group consists of insurance and general industry companies similar to our company in terms of total assets, revenues or number of employees, which the Compensation Committee uses as a reference point for individual pay levels. In 2015, the Compensation Committee reviewed pay data from two published surveys: (i) the~~Executive Compensation Survey~~ ~~conducted by Mercer, and (ii) the~~~~Top Management Industry Compensation Survey~~ conducted by Towers Watson. Sibson updated this data based on findings from its own annual private study. When available, information for individual positions was drawn from the “Insurance – Non Healthcare” category; otherwise, general industry data was used. The Compensation Committee also reviewed general industry long-term incentive target award data from both surveys.

~~Proxy Comparison Group~~

This group is focused on our direct competitors for executive talent rather than companies of comparable size. The members of this group are selected from the insurance industry (brokers and carriers), and from professional and financial services companies that may compete with us for executive talent or in specific lines of business.

The only other insurance brokers for which compensation data is publicly available, Aon plc, Brown & Brown, Inc., Marsh & McLennan Companies Inc. and Willis Group Holdings Ltd, compete with us the most directly and are the most relevant members of this comparison group. However, Aon plc and Marsh & McLennan Companies Inc. are significantly larger than we are in revenue, number of employees, insurance premiums written, value of claims paid, assets and market capitalization. The Compensation Committee uses this proxy comparison group primarily as a reference point for our compensation plan structure, pay mix, and general equity granting practices. The Compensation Committee uses it to a lesser extent as a reference point for individual pay levels.

~~The same group of companies was used for both the 2015 and 2014 analyses:~~


~~American Financial Group Inc.~~		~~Carrier~~
~~Aon plc~~		~~Broker~~
~~Arch Capital Group Ltd~~		~~Carrier~~
~~Axis Capital Holdings Ltd~~		~~Carrier~~
~~Berkley (W R) Corp~~		~~Carrier~~
~~Brown & Brown, Inc.~~		~~Broker~~
~~CNA Financial Corp~~		~~Carrier~~
~~Fidelity National Financial, Inc.~~		~~Professional / Financial Services~~
~~Marsh & McLennan Companies, Inc.~~		~~Broker~~
~~Old Republic International Corp~~		~~Carrier~~
~~Raymond James Financial, Inc.~~		~~Professional / Financial Services~~
~~Towers Watson & Co.~~		~~Professional / Financial Services~~
~~Unum Group~~		~~Carrier~~
~~Willis Group Holdings Ltd~~		~~Broker~~
~~XL Capital Plc~~		~~Carrier~~

~~Results of the Comparative Market Assessment~~

In 2015, the Compensation Committee examined the total direct compensation opportunity (base salary, annual cash incentives and long-term incentives) for each named executive officer, as well as each individual element of compensation. External compensation data for our survey and proxy comparison groups is used as a market reference for compensation decisions. The Compensation Committee does not target total compensation to a specific percentile of comparison group compensation. The review of survey and proxy comparison group data shows that aggregate base salaries and annual cash incentive opportunities for our named executive officer group approximate the median for similarly situated named executive officer groups. The data also shows our named executive officer group’s aggregate long-term incentive compensation opportunity, and total direct compensation, are below the comparison peers’ median. Pat Gallagher’s total direct compensation is significantly below the median for similarly situated CEOs in the proxy comparison group.

~~2015 DECISIONS – BY COMPENSATION ELEMENT~~

~~Base Salary~~

The Compensation Committee did not increase the base salary of any of the named executive officers in 2015. Base salaries for our named executive officers can be found in the 2015 Summary Compensation Table.

~~Annual Cash Incentive Compensation~~

Our annual cash incentive plan is administered under our Senior Management Incentive Plan (SMIP), which was approved by our stockholders in 2015. This plan rewards our named executive officers for achieving key annual financial, operational, risk management and strategic goals that drive stockholder value. During the first quarter of each year, the Compensation Committee establishes a minimum level of company financial performance required to fund the plan for that year. If we attain this minimum company financial performance, the Compensation Committee awards cash incentive compensation to our named executive officers based upon a combination of company and/or business unit financial performance targets and individual performance objectives.

Target award opportunities are 150% of base salary for our CEO and 100% of base salary for our other named executive officers. The maximum amount that can be awarded is 150% of these target award opportunities (i.e., 225% of base salary for Pat Gallagher and 150% of base salary for our other named executive officers).



~~Position~~	~~Target Award~~	~~Maximum Award~~
~~CEO~~	~~150% of base salary~~	~~150% of target (225% of base salary)~~
~~Other NEOs~~	~~100% of base salary~~	~~150% of target (150% of base salary)~~

During the first quarter of each year, the Compensation Committee establishes company financial performance targets that must be reached in order for our named executive officers to qualify for maximum SMIP awards. Each named executive officer who leads a business unit must also achieve performance targets for his business unit. The Compensation Committee establishes business unit performance targets and approves individual performance objectives that are aggressive and ensure that maximum awards are difficult to achieve. Final award determinations are made in light of each named executive officer’s target award opportunity, the maximum award for which he qualifies given company and business unit performance, and the level of achievement of individual performance objectives.

~~Company Performance Measures and Results~~

In the first quarter of 2015, the Compensation Committee established minimum company revenue and EBITAC thresholds for funding the plan and for maximum awards under the plan. The thresholds for maximum awards required at least 5% growth in revenue and 10% growth in EBITAC over 2014 levels. These thresholds, and actual company performance, are set forth below.



~~Measure~~	~~Minimum Financial~~ ~~Performance for Funding~~	~~Performance Required~~ ~~for Maximum Awards~~	~~Actual 2015 Performance~~
~~Revenue~~	~~$2.50 billion~~	~~$3.76 billion~~	~~$4.05 billion~~
~~EBITAC~~	~~$175.0 million~~	~~$757.1 million~~	~~$786.6 million~~

The Compensation Committee uses revenue and EBITAC growth for our combined brokerage and risk management segments in the context of determining incentive compensation awards. The Committee believes these measures provide meaningful representations of our operating performance and a comparable view of our results between periods. See~~Exhibit A~~ ~~for more information regarding EBITAC.~~

Based on company performance, the maximum available award under the SMIP for each named executive officer was 150% of his target award opportunity (i.e., 225% of base salary for Pat Gallagher and 150% of base salary for the other named executive officers). The Compensation Committee determined final award amounts using its discretion, based on these results, achievement of overall financial goals (for Pat Gallagher and Doug Howell), achievement of the business unit performance targets described below (for Jim Gault, Jim Durkin and Tom Gallagher), achievement of individual performance objectives, and an overall assessment of each named executive officer’s performance.

~~Business Unit Performance Targets and Results~~

In the first quarter of 2015, the Compensation Committee established revenue and EBITAC targets for the business units led by Jim Gault, Jim Durkin and Tom Gallagher, and which are set forth below along with actual performance toward such targets.



~~Retail Property/Casualty and International Brokerage (Jim Gault)~~

	~~Target~~	~~Actual~~	~~Percent Achieved~~
~~Revenue~~	~~$2,365.3 million~~	~~$2,265.8 million~~	~~95.8%~~
~~EBITAC~~	~~$485.0 million~~	~~$413.3 million~~	~~85.2%~~


~~Employee Benefit Consulting and Brokerage (Jim Durkin)~~

	~~Target~~	~~Actual~~	~~Percent Achieved~~
~~Revenue~~	~~$760.2 million~~	~~$798.2 million~~	~~105.0%~~
~~EBITAC~~	~~$208.5 million~~	~~$214.0 million~~	~~102.6%~~


~~International Brokerage (Tom Gallagher)~~

	~~Target~~	~~Actual~~	~~Percent Achieved~~
~~Revenue~~	~~$1,304.3 million~~	~~$1,201.2 million~~	~~92.1%~~
~~EBITAC~~	~~$196.5 million~~	~~$137.8 million~~	~~70.1%~~

Under the SMIP, the maximum annual incentive award for Jim Gault, Jim Durkin and Tom Gallagher is established based on the level of attainment of the business unit targets, based on the following performance criteria:



~~Target Achievement~~		~~Maximum Award (as a percentage of target)~~
~~100% of Revenue and EBITAC~~		~~150%~~
~~75% – 100% of Revenue and EBITAC~~		~~100%~~
~~Less than 75% of Revenue or EBITAC~~		~~50%~~

Based on 2015 company and business unit performance, Jim Gault’s maximum award opportunity under the SMIP was 100% of base salary, Jim Durkin’s was 150% and Tom Gallagher’s was 50%. The Compensation Committee determined actual awards, using its discretion, after considering each named executive officer’s achievement of individual performance objectives (as described in detail below).

~~Our CEO’s Annual Cash Incentive Compensation~~

The Compensation Committee reviewed Pat Gallagher’s performance in light of our overall financial performance. Pat Gallagher and Doug Howell both had the goal of increasing revenue and EBITAC by 10% for the combined brokerage and risk management segments. These goals, and actual company performance, are set forth below.



~~Combined Brokerage and Risk Management Segment Results (Pat Gallagher and Doug Howell)~~

	~~Goal~~	~~Actual~~	~~Percent Achieved~~
~~Revenue~~	~~$3.94 billion~~	~~$4.05 billion~~	~~103%~~
~~EBITAC~~	~~$757.1 million~~	~~$786.6 million~~	~~104%~~

In 2015, Pat Gallagher achieved 103% and 104%, respectively, of his revenue and EBITAC growth goals. The Compensation Committee also took into consideration the following operating and financial achievements in 2015:

•

~~Organic growth.~~ ~~We achieved organic revenue growth~~⁴ ~~of 5.1% in our combined brokerage and risk management segments.~~

•

~~Acquisition program.~~ ~~We continued our successful “tuck-in” acquisition strategy, completing 44 acquisitions for a total of approximately $231 million in annualized revenues.~~

•

~~Culture and quality.~~ We continued our focus on our unique culture and the quality of our professional services. This was demonstrated, in part, by the recognition we received from J.D. Power & Associates for ranking the highest in customer satisfaction among brokers for large commercial insurance; from~~Strategic Risk~~ ~~magazine for being the best broker for service in the United Kingdom; and from~~~~Advisen’s~~ ~~claims satisfaction survey of risk managers and brokers, which ranked Gallagher Bassett the best Third Party Administrator for casualty claims handling.~~

•

~~Margins.~~ ~~We increased our adjusted EBITDAC margin~~⁴ ~~by 92 basis points, year over year, from 23.6% to 24.5%.~~

•

~~Workforce and expense discipline.~~ ~~We improved our adjusted compensation ratio~~⁴ ~~from 57.6% to 56.9%, and our adjusted operating expense ratio~~⁴ ~~from 18.7% to 18.5%.~~

•

~~Clean energy investments.~~ ~~Our clean energy investments contributed $100.9 million to net earnings.~~

•

~~Continued financial stability.~~ ~~We continued to maintain significant liquidity and remained well within our debt covenants.~~

~~In addition to the above achievements, the Compensation Committee noted that Pat Gallagher achieved substantially all of his individual performance objectives, as follows:~~

~~Refine strategy and capital plan for the company as necessary~~

~~Maintain sales culture, with a focus on driving organic growth~~

~~Continue to aggressively target expense control~~

~~Continue to build organizational talent~~

~~Maintain our unique Gallagher culture~~

~~Continue our successful M&A strategy~~

~~Promote the company to stakeholders~~

~~Advance the company’s clean-energy strategy~~

~~Continue to integrate recent large acquisitions.~~

Based on the company’s operating and financial results and Pat Gallagher’s individual performance, the Compensation Committee awarded him an annual cash incentive payment of $2,250,000 (150% of his target award opportunity).

~~Annual Cash Incentive Compensation of our Other Named Executive Officers~~

Pat Gallagher assessed and documented the performance of our other named executive officers and recommended award amounts in light of the maximum award for which each named executive officer was eligible, the level of achievement of applicable financial performance targets and each officer’s individual performance objectives. The Compensation Committee then reviewed and discussed the performance of each named executive officer and approved awards as described in more detail below.

~~Doug Howell~~ has been our chief financial officer since 2003. As the leader of our finance organization, his financial objectives focused on our overall performance and were the same as Pat Gallagher’s (see above). Doug Howell continued to implement and maintain expense savings initiatives critical to increasing our adjusted EBITDAC margin and successfully managed our tax-advantaged clean energy investments. In addition, he achieved substantially all of his individual performance objectives, as follows:

~~Onboard key staff in the finance, information technology and accounting organizations~~

~~Work on initiatives to strengthen capital management~~

~~Maximize earnings contribution from our clean-energy investments~~

⁴ ~~Reconciliations of non-GAAP measures to the most closely comparable GAAP measures are presented inExhibit A~~ ~~to this proxy statement.~~

~~Improve margins in select international operations~~

~~Explore divestitures of lower-performing operations.~~

~~Based on this performance, Doug Howell received an annual cash incentive payment of $1,125,000 (150% of his target award opportunity).~~

~~Jim Gault~~is the leader of our U.S. retail property/casualty brokerage unit and has held this position since 2002. In 2011, he also assumed management responsibility for our international brokerage unit. In 2015, his business unit missed its combined target for both revenue and EBITAC growth, due in large part to underperformance in our U.K. brokerage operations. As previously disclosed, during the first quarter of 2015, five members of our U.K. executive management team resigned from the company. These included the chief executive officer and chief financial officer and the heads of our U.K. retail and underwriting businesses. Notwithstanding these challenges, his combined units achieved year-over-year EBITAC growth of 6.1% on revenue growth of 13.5%. Excluding the U.K. brokerage operations, Jim Gault’s business unit achieved its revenue and EBITAC targets for the year. In addition, Jim Gault achieved most of his individual performance objectives, as follows:

•

~~Achieve new business sales (an internal measure of new business production) of $112 million~~~~(the unit achieved new business sales of $104 million)~~

•

~~Complete acquisitions in the retail property/casualty brokerage unit totaling $60 million in annualized revenues (~~~~the unit completed acquisitions representing incremental annualized revenue of approximately $83 million~~)

•

~~Continue to focus on professional standards in branch offices; achieve professional standards audit grades of 91% (~~~~achieved the objective, in over 60% of 2015 audits~~)

•

~~Reduce payroll by $12 million as a result of moving to “model office” platform, a project to streamline and standardize branch office operations (~~~~reduced payroll by over $12 million~~)

•

~~Continue to focus on cross selling with other units; contribute $6 million in new business to the employee benefits brokerage business and $6 million to the domestic wholesale brokerage business~~~~(the unit contributed $9 million in new revenue to the employee benefits brokerage business and $9 million to the domestic wholesale brokerage business)~~

•

~~Increase unit’s net number of producers in existing operations by 50, and hire summer interns as part of long-term strategy to strengthen producer hiring (~~~~the unit increased the net number of producers in existing operations by 10~~).

~~Based on this performance, Jim Gault received an annual cash incentive payment of $800,000 (100% of his target award opportunity).~~

~~In addition, the Compensation Committee awarded Jim Gault a discretionary bonus of $200,000. See “Discretionary Bonuses” below.~~

~~Jim Durkin~~ is the leader of our employee benefits brokerage unit and has held this position since 1985. In 2015, his unit exceeded its target for both revenue and EBITAC, achieving year-over-year EBITAC growth of 21.6% on revenue growth of 18.6%. In addition, Jim Durkin achieved substantially all of his individual performance objectives, as follows:

~~Continue to extend capabilities and geographic reach of the unit through acquisitions~~

~~Create and deploy a formalized sales development program to promote consistent future organic revenue growth across the unit and promote cross selling with other units~~

•

~~Increase unit’s net number of producers in existing operations by 20~~~~(the unit increased the net number of producers in existing operations by 20)~~

~~Continue to leverage Healthcare Reform to differentiate Gallagher Benefit Services from its competitors~~

~~Ensure alignment of the current mission and value proposition of the unit with the new business environment and future customer needs~~

~~Better meet the needs of North American-based companies by extending the reach of our services to include international human resources, benefits and retirement consulting services~~

~~Expand capabilities internationally, with a focus on the United Kingdom and Canada.~~

~~Based on this performance, Jim Durkin received an annual cash incentive payment of $1,087,500 (150% of his target award opportunity).~~

~~Tom Gallagher~~is the leader of our international brokerage unit, and has held this position since 2010. In 2015, his unit missed its target for both revenue and EBITAC growth, due in large part to the underperformance in our U.K. brokerage operations attributable to the executive management departures discussed above. The international brokerage unit achieved year-over-year revenue growth of 17.0% to $1,201.1 million, while EBITAC decreased 8.4% to $137.9 million.

~~In assessing his performance, the Committee took note that Tom Gallagher achieved substantially all of his individual performance objectives, as follows:~~

~~Continue to focus on integration of recent large international acquisitions (Oamps/Crombie, Noraxis, Oval/Giles and AJG Retail)~~

~~Achieve revenue and expense synergies as part of acquisition integration efforts~~

~~Continue to build the sales organization and strengthen the selling culture of the retail teams~~

~~Strengthen the unit’s efforts in South America.~~

In addition, as noted below, he was instrumental in recruiting a new chief executive officer for our U.K. brokerage operation and putting plans in place to retain key employees and customers following the executive management departures in the U.K.

~~Based on this performance, Tom Gallagher received an annual cash incentive payment of $350,000 (50% of his target award opportunity).~~

~~In addition, the Compensation Committee awarded Tom Gallagher a discretionary bonus of $525,000. See “Discretionary Bonuses” below.~~

~~Discretionary Bonuses~~

As noted above, the Compensation Committee awarded discretionary bonuses to Jim Gault and Tom Gallagher. The Compensation Committee has the authority to exercise positive discretion in compensation decision-making, when appropriate, in response to extraordinary circumstances, unusual events or overall company or individual performance. In making these awards, the Compensation Committee assessed Jim Gault’s and Tom Gallagher’s performance in light of the executive management departures in the U.K., noting their leadership during a disruptive time for the business and their instrumental roles in assisting with the transition to new leadership in the U.K. and securing the retention of key employees. In particular, the Committee noted that Tom Gallagher quickly recruited a new chief executive officer and implemented a program to retain key employees. As a result of Jim Gault’s and Tom Gallagher’s leadership following the executive management departures in the U.K., the business did not lose any key employees or customers during 2015. The efforts of these two individuals contributed significantly to the company’s overall performance highlighted above. Based on these contributions and the company’s overall financial performance, the Committee awarded Jim Gault a discretionary bonus of $200,000 and Tom Gallagher a discretionary bonus of $525,000.

~~Long-Term Incentive Compensation~~

Long-term incentives are designed to tie a significant portion of our named executive officers’ compensation to our performance, create a meaningful alignment of our named executive officers’ financial interests with those of stockholders, and encourage long-term retention. Long-term incentive opportunities are greater for those named executive officers who have greater direct impact on our financial results. In 2015, each named executive officer was eligible to receive a long-term incentive award value based on a percentage of base salary. The Compensation Committee determined this percentage of base salary using its discretion based upon a number of factors, including retention considerations, internal pay equity considerations, external market data (including long-term incentive opportunities provided to similarly situated executives in the survey and proxy comparison groups – see~~pages 14-15)~~ ~~and our historical practices.~~

~~Target Awards~~

The target award amount for each named executive officer set forth in the table below was converted into performance share units, stock options and restricted stock units. Because of the Compensation Committee’s commitment to aligning named executive officers’ long-term incentive compensation opportunities with company performance, performance-based performance share units represented 60% of target long-term incentive awards for our CEO and 50% for each other named executive officer. For Doug Howell, who has a shorter tenure with us and consequently less equity in the company than the other named executive officers, the Compensation Committee determined it was appropriate to grant a portion of his target award in the form of restricted stock units. At the same time, the Compensation Committee increased the cliff vesting period for restricted stock units from four to five years.

~~Target award amounts in 2015 and the approximate allocation among performance share units, stock options, and restricted stock units, are presented below:~~

NAMED EXECUTIVE OFFICER
  TARGET PERCENT
OF SALARY
  TARGET GRANT
AMOUNT   PERFORMANCE
SHARE UNITS STOCK
    OPTIONS         RESTRICTED
STOCK
UNITS
Pat Gallagher
125% $1,250,000 60% 40% —
Doug Howell
100% $   750,000 50% 25% 25%
Jim Gault
  75% $   600,000 50% 50% —
Jim Durkin
  75% $   543,750 50% 50% —
Tom Gallagher
  75% $   525,000 50% 50% —

~~Performance Share Units (PSUs)~~

In 2015, the Compensation Committee granted a provisional number of PSUs to each named executive officer under our stockholder-approved long-term incentive plan. To encourage a focus on increasing our core earnings, the number of PSUs actually earned is based on EBITAC growth thresholds set annually by the Compensation Committee. Earned PSUs cliff vest on the third anniversary of the date of grant and settle in shares. For 2015, the number of PSUs earned by our named executive officers was based on the EBITAC growth thresholds set forth below:


~~EBITAC GROWTH~~		~~PERCENTAGE OF TARGET AWARD EARNED~~
~~15% or greater~~		~~100% of target award~~
~~5% to 15%~~		~~Amount interpolated between 50% and 100% of target award on a straight-line basis~~
~~5.0%~~		~~50% of target award~~
~~Less than 5.0%~~		0%

We achieved 2015 EBITAC growth of 14.1%. Accordingly, each named executive officer earned 95.7% of his provisionally granted PSUs, which will cliff vest and distribute in shares of our common stock on March 11, 2018. For details, see our “Outstanding Equity at 2015 Fiscal Year-End” table below.

~~Performance Unit Program (PUP)~~

PUP awards are similar to PSUs in that the Compensation Committee grants provisional awards, in the form of units, and the portion of PUP awards actually earned is based on the same EBITAC growth threshold set annually by the Compensation Committee. PUP awards cliff vest on the third anniversary of the first day of the year in which the awards were granted (i.e., January 1, 2016 for awards made in 2013). PUP awards settle in cash and pay out based on the trailing twelve month average price of our common stock for the calendar year prior to the vesting date (the TTM Price). The TTM Price is subject to an upper limit of 150% and a lower limit of 50% of our stock price on the date of grant.

Beginning in 2014, the Compensation Committee replaced PUP awards with PSUs for named executive officers. PUP awards granted and earned in 2012 and 2013 vested on January 1, 2015 and January 1, 2016, respectively.

~~Deferred Equity Participation Plan (Age 62 Plan)~~

Deferred cash awards under the Age 62 Plan are nonqualified deferred compensation awards under Section 409A of the Internal Revenue Code. Each named executive officer has made an irrevocable election to have such awards deemed invested in a fund representing shares of our common stock. Awards under the Age 62 Plan do not vest until participants reach age 62 (or the one-year anniversary of the date of grant for participants over the age of 61, which include Pat Gallagher, Jim Gault and Jim Durkin). Accordingly, amounts in the plan are subject to forfeiture in the event of a voluntary termination of employment prior to age 62 (or the minimum one-year vesting period). Awards deemed invested in our common stock provide an incentive for our named executive officers to manage our company for earnings growth and total shareholder return. In addition, the deferred realization of these awards encourages retention of our named executive officers until a normal retirement age, and for one-year increments after such age.

In determining 2015 awards, the Compensation Committee took into account an overall assessment of each individual, including consideration of individual and company performance in 2014 (as described in our 2015 proxy statement). This assessment does not rely on predetermined performance targets. As a result of these assessments, during the first quarter of 2015, the Compensation Committee approved Age 62 Plan awards for each named executive officer as follows: Pat Gallagher – $750,000; Doug Howell – $400,000; Jim Gault – $400,000; Jim Durkin – $350,000; and Tom Gallagher – $350,000.

~~Benefits and Perquisites~~

Under our 401(k) Savings and Thrift Plan (401(k) Plan), a tax qualified retirement savings plan, participating employees, including our named executive officers, may contribute up to 75% of their earnings on a before-tax or after-tax basis into their 401(k) Plan accounts, subject to limitations imposed by the Internal Revenue Service (IRS). Under the 401(k) Plan, we match an amount equal to one dollar for every dollar an employee contributes on the first 5% of his or her regular earnings. The 401(k) Plan has other standard terms and conditions. We also have a Supplemental Savings and Thrift Plan (Supplemental Plan), which allows certain highly compensated employees, including our named executive officers, to defer additional amounts on a before-tax basis. For a description of the Supplemental Plan, see pages 26-27 under “Nonqualified Deferred Compensation.” We also provide minimal perquisites, including reimbursement of certain expenses for named executive officers related to automobile use and certain club memberships. The value of the benefits and perquisites received by our named executive officers can be found in the 2015 Summary Compensation Table. Our named executive officers are also participants in a pension plan, which we froze as to future benefit accruals in 2005. Please see “Pension Benefits” on page 26 for more details.

~~Change-in-Control Payments~~

The change-in-control agreements we have in place with each of our named executive officers provide for severance payments if the executive is terminated within 24 months following a change in control, a so-called “double trigger” (see “Change-in-Control Agreements” beginning on page 27 for more information). We believe it is appropriate to provide a double trigger for such payments because it helps ensure that our named executive officers do not receive an unintended benefit by receiving a severance payment while maintaining their positions following a change in control.

Our equity plans contain a so-called “single trigger” for accelerated vesting of awards upon a change in control. We believe a single trigger is appropriate for equity awards because it gives executives the same right as other stockholders to sell their equity in the company at the time of a change in control. Moreover, it may not be possible to replace executives’ existing equity awards with comparable awards of the acquiring company’s stock. Finally, company performance may be negatively affected by integration activities, and individual executives’ ability to affect the performance of the company (and the value of their awards) may be significantly different following a change in control. Our nonqualified plans in which NEOs participate (the Age 62 Plan and the Supplemental Plan) also contain a single trigger for vesting and payment upon a change in control. Because the benefits under these plans are subject to the claims of our creditors, accelerated vesting and payment provide certainty with respect to benefits that represent a primary source of retirement income and ensures that executives receive deferred compensation they have earned. Our equity and nonqualified plans do not contain “liberal” change in control definitions (i.e., they do not provide for buyout thresholds lower than 50%, and a change in control is deemed to occur upon completion, rather than stockholder approval, of a transaction).

~~TAX CONSIDERATIONS~~Tax Considerations

Section 162(m) of the ~~Internal Revenue~~ Code limits the deductibility for Federal income tax purposes of certain compensation payable in a taxable year to certain of our named executive officers to the extent that such compensation exceeds $1 million. However, certain types of compensation are not subject to that limitation, including compensation that meets the requirements under Section 162(m) for “qualified performance-based compensation.” Our 2014 Long-Term Incentive Plan, and the ~~SMIP~~2017 Long-Term Incentive Plan described in this ~~proxy statement~~Proxy Statement, are structured to permit, but not require, the Compensation Committee to award compensation that meets the requirements for “qualified performance-based compensation.” However, the Compensation Committee has on ~~certain~~rare occasions authorized the payment of nondeductible compensation and expressly reserves the right to do so in the future when appropriate. We make no representation that the compensation of our named executive officers will be fully deductible for Federal income tax purposes.



		~~Arthur J. Gallagher & Co.~~
		~~PROXY~~ ~~STATEMENT~~
		~~Annual Meeting of Stockholders~~
		~~May 17, 2016~~ ~~8:30 AM EDT~~		J. Patrick Gallagher, Jr. Chairman of the Board, President and Chief Executive Officer


	~~Page~~

~~Proxy Statement~~		1

~~Questions and Answers about the Proxy Materials and Annual Meeting~~		1

~~Board of Directors~~		4

~~Corporate Governance~~		7

~~Compensation Committee Report~~		10

~~Compensation Discussion and Analysis~~		10

~~Executive Summary~~		10

~~Our Compensation Program~~		11

~~Compensation Decision-Making Process~~		13

~~Comparative Market Assessment~~		14

~~2015 Decisions – By Compensation Element~~		15

~~Tax Considerations~~		21

~~Executive Compensation Tables~~		22

~~Director Compensation~~		30

~~Certain Relationships and Related Party Transactions~~		31

~~Security Ownership by Certain Beneficial Owners and Management~~		32

~~Equity Compensation Plan Information~~		33

~~Audit Committee Report~~		35

~~Proposals Requiring a Stockholder Vote~~		36

~~Item 1: Election of Directors~~		36

~~Item 2: Ratification of Appointment of Independent Auditor~~		36

~~Item 3: Advisory Vote on the Compensation of our Named Executive Officers~~		37

~~EXHIBIT A: Reconciliation of Non-GAAP Measures~~		~~A-1~~


Items of business:	•		•To elect each of the ~~ten~~10 nominees named in the accompanying Proxy Statement as directors to hold office until our ~~2017~~2018 Annual Meeting.

		• To approve the Arthur J. Gallagher & Co. 2017 Long-Term Incentive Plan, including 16,000,000 shares authorized for issuance thereunder and material terms of the performance goals for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended.

		• To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.

		• To approve, on an advisory basis, the compensation of our named executive officers.

		• To approve, on an advisory basis, the frequency of holding future advisory stockholder votes to approve the compensation of our named executive officers.

		• To transact such other business that properly comes before the meeting.

Attending the Annual Meeting:		Stockholders who wish to attend the Annual Meeting in person should bring a driver’s license, passport or other form of government-issued identification to verify their identities. In addition, if you hold your shares through a broker, you will need to bring either (1) a letter from your broker stating that you held Gallagher shares as of the record date, or (2) a copy of the notice of Annual Meeting document you received in the mail.


~~Purpose:~~		~~Annual Meeting of Stockholders~~

~~Date and Time:~~		~~May 17, 2016, 8:30 AM EDT~~

~~Place:~~		~~Bay Adelaide Centre, 333 Bay Street, Toronto, Ontario, Canada~~

~~Record Date:~~		~~March 23, 2016~~

~~Mailing Date:~~		The Notice of Internet Availability of Proxy Materials (Internet Availability Notice) was first mailed to stockholders of record, and these proxy materials were first made available to stockholders on the Internet, on or about March 31, 2016.

~~Attending the~~ ~~Annual Meeting:~~		Stockholders who wish to attend the Annual Meeting in person should bring a driver’s license, passport or other form of government-issued identification to verify their identities. In addition, if you hold your shares through a broker, you will need to bring either (1) a letter from your broker stating that you held Gallagher shares as of the record date, or (2) a copy of the notice of Annual Meeting document you received in the mail.



~~VOTING ITEM~~PROXY STATEMENT SUMMARY	~~VOTING STANDARD~~		~~TREATMENT OF ABSTENTIONS &~~ ~~BROKER NON-VOTES~~		~~BOARD~~ ~~RECOMMENDATION~~
		1
~~Election of directors~~~~(Item 1)~~				~~Majority of votes cast~~		~~Not counted as votes cast and therefore no effect~~	~~For~~
CORPORATE GOVERNANCE
~~Auditor ratification~~(Item 2)	~~Majority~~1 – Election of ~~stock having voting power and present~~		~~Abstentions treated as votes against. Broker non-votes not applicable (routine matter, so brokers can vote)~~		~~For~~
Directors		4
~~Say-on-pay~~Corporate Governance Highlights~~(Item 3)~~	~~Majority of stock having voting power and present~~	9
Stockholder Outreach	~~Abstentions treated as votes against. Broker non-votes have no effect~~	9
Board Committees	~~For~~	9
Board Leadership Structure		10
Board’s Role in Risk Oversight		11
Other Board Matters		11
Director Compensation		12
Certain Relationships and Related Party Transactions		13
Security Ownership by Certain Beneficial Owners and Management		14
Item 2 – Approval of the Arthur J. Gallagher & Co. 2017 Long-Term Incentive Plan, Including Approval of 16,000,000 Shares Authorized for Issuance Thereunder and the Material Terms of the Performance Goals for Purposes of Section 162(m) Under the Internal Revenue Code of 1986, as Amended		16
Equity Compensation Plan Information		22

AUDIT MATTERS
Item 3 – Ratification of Appointment of Independent Auditor		23
Audit Committee Report		24

EXECUTIVE COMPENSATION
Compensation Discussion and Analysis		25
2016 Financial Results		25
Our Compensation Program		26
2016 Compensation		28
Compensation Decision-Making Process		31
Comparative Market Assessment		32
Compensation Committee Report		33
Executive Compensation Tables		34
Item 4 – Advisory Vote to Approve the Compensation of Our Named Executive Officers		44
Item 5 – Advisory Vote on the Frequency of Future Stockholder Votes to Approve the Compensation of Our Named Executive Officers		44

QUESTIONS & ANSWERS ABOUT THE ANNUAL MEETING		45

EXHIBITS
Exhibit A: Arthur J. Gallagher & Co. 2017 Long-Term Incentive Plan		A-1
Exhibit B: Information RegardingNon-GAAP Measures		B-1
Exhibit C: Resources		C-1


		Rolling Meadows, Illinois 60008-4002

Record date:		Stockholders of record at the close of business on March ~~23, 2016~~20, 2017 are entitled to notice of and to vote at the Annual Meeting.


Date:		May 16, 2017
Time:		9:00 AM CST
Place:		Arthur J. Gallagher & Co. offices at 2850 Golf Road, Rolling Meadows, Illinois 60008-4002
Record Date:		March 20, 2017



Item	Voting Item	Recommendation	Page

1	Election of directors	FOR each nominee	4

2	2017 Long-Term Incentive Plan, including approval of the share authorization and material terms of the performance goals under Section 162(m) of the Internal Revenue Code	FOR	16

3	Ratification of independent auditor for 2017	FOR	23

4	Approval, on an advisory basis, of named executive officer compensation	FOR	44

5	Approval, on an advisory basis, of the frequency of holding future advisory stockholder votes to approve the compensation of our named executive officers	1 YEAR	44



Name	Director Since		Experience	Other Public Company Boards		Audit	Compensation	Nominating / Governance

Sherry S. Barrat*		2013	Former Vice Chairman of Northern Trust Corporation		1

William L. Bax*		2006	Former Managing Partner of PricewaterhouseCoopers’ Chicago office		0

D. John Coldman*		2014	Former Chairman of The Benfield Group		0

Frank E. English, Jr.*		2009	Former Managing Director and Vice Chairman of Investment Banking, Morgan Stanley & Co.		2

J. Patrick Gallagher, Jr.		1986	Chairman of the Board, President and Chief Executive Officer		1

Elbert O. Hand*		2002	Former Chairman of the Board and Chief Executive Officer, Hartmarx Corporation		0

David S. Johnson*		2003	Lead Director, Arthur J. Gallagher & Co; President and Chief Executive Officer of the Americas, Barry Callebaut AG		0

Kay W. McCurdy*		2005	Of Counsel, Locke Lord LLP		0

Ralph J. Nicoletti*		2016	Executive Vice President and Chief Financial Officer, Newell Brands, Inc.		0

Norman L. Rosenthal*		2008	President, Norman L. Rosenthal & Associates, Inc.		0


Director⁽¹⁾	Audit	Compensation	Nominating/Governance
Sherry S. Barrat		X
William L. Bax	Chair
D. John Coldman	X
Frank E. English, Jr.	X
J. Patrick Gallagher, Jr.
Elbert O. Hand		Chair	X
David S. Johnson		X	Chair
Kay W. McCurdy		X	X
Norman L. Rosenthal	X
Meetings Held in 2015	5	4	3


				THE BOARD RECOMMENDS THAT YOU VOTEFORTHE ELECTION OF EACH OF THE DIRECTOR NOMINEES LISTED BELOW



Sherry S. Barrat Age: 67 Director Since: 2013 Independent Committee Memberships: Compensation Nominating/Governance		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 her22-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 is currently Lead Director, Chair of the Governance & Nominating Committee and a member of the Audit Committee. Since 2013, Ms. Barrat has also served as an independent trustee or director of certain Prudential Insurance mutual funds.
		Skills and Qualifications Ms. Barrat’s extensive management, operational and financial experience, in particular her deep understanding of the financial services industry and the privacy and cybersecurity issues facing that industry, greatly enhances the Board’s decision making.



William L. Bax Age: 73 Director Since: 2006 Independent Committee Memberships: Audit (Chair)		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. He currently serves as a director and audit committee chair of several affiliated mutual fund companies (Northern Funds and Northern Institutional Funds since 2005, and Northern Multi-Manager Funds since 2006). Mr. Bax previously served as a director of Sears Roebuck & Co., a publicly traded retail company, from 2003 to 2005, and Andrew Corporation, a publicly traded communications products company, from 2006 to 2007.
		Skills and Qualifications During his 26 years as a partner and six years as head of PwC’s Chicago office, Mr. Bax gained extensive experience advising public companies regarding accounting and strategic issues. This experience, along with his tenure on the boards of public companies, such as Sears and Andrew, strengthen the Board’s decision making. Additionally, Mr. Bax’s experience advising public companies on accounting and disclosure issues enhances the Board’s ability to oversee our assessment and management of material risks.



D. John Coldman Age: 69 Director Since: 2014 Independent Committee Memberships: Compensation		Mr. Coldman began his career working for 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 at the time, 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 has also been 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 thenon-executive Chairman of Roodlane Medical Ltd., anon-publicly traded healthcare services provider, from 2007 to 2011.
		Skills and Qualifications The Board greatly benefits from Mr. Coldman’s 45 years of insurance brokerage, management and financial services experience. In addition, Mr. Coldman’s international insurance industry knowledge, his experience within the Lloyd’s and London marketplaces, and his experience with public company matters and mergers and acquisitions all strengthen the Board’s decision making.



Frank E. English, Jr. Age: 71 Director Since: 2009 Independent Committee Memberships: Audit		Mr. English serves on the board of directors and audit committee of Tower International, Inc., a publicly traded global automotive components manufacturer, where he has been a board member or board advisor since 2010. Since 2012, Mr. English has also served on the board of directors and the finance and strategy committee, and since 2013 on the compensation committee, of CBOE Holdings, Inc., a publicly traded holding company for various securities exchanges, including the largest U.S. options exchange. Since 2011, Mr. English has been a Senior Advisor to W.W. Grainger, a publicly traded broad-based distributor of industrial maintenance, repair and operations supplies. From 1976 to 2009, Mr. English served in various senior roles at Morgan Stanley, most recently as Managing Director and Vice Chairman of Investment Banking. Following his retirement in 2009, Mr. English served as a Senior Advisor at Morgan Stanley & Co. until 2011.
		Skills and Qualifications The Board greatly benefits from Mr. English’s extensive investment banking expertise, particularly in the areas of capital planning, strategy development, financing and liquidity management.


Place:		~~Toronto, Ontario, Canada~~2850 Golf Road



J. Patrick Gallagher, Jr. Age: 65 Director Since: 1986 Chairman of the Board Since:2006		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. In 2011, Mr. Gallagher joined the board of directors of InnerWorkings, Inc., a publicly traded global provider of managed print, packaging and promotional solutions, and was appointed to its compensation and nominating/governance committees. He also 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’s 42 years of experience with our company and 30 years of service on the Board provide him with a deep knowledge of our company and the insurance and insurance brokerage industries, as well as a depth of leadership experience. This depth of knowledge and experience greatly enhances the Board’s decision making and enables Mr. Gallagher to serve as a highly effective Chairman of the Board.



Elbert O. Hand Age: 77 Director Since: 2002 Independent Committee Memberships: Compensation (Chair) Nominating/Governance		Mr. Hand is the managing member of Alister MacKenzie Apparel, LLC, a manufacturer and distributor of sports and dress apparel, which heco-founded in 2016. Prior to that, he was Chairman of the Board of Hartmarx Corporation, a publicly traded apparel marketing and manufacturing company, from 1992 to 2004, and served as a member of Hartmarx’s board from 1984 to 2010. He served as Chief Executive Officer of Hartmarx from 1992 to 2002 and as President and Chief Operating Officer from 1987 to 1992. From 1982 to 1989, Mr. Hand also served as President and Chief Executive Officer of Hartmarx’s Men’s Apparel Group. Mr. Hand was a director of Austin Reed Group PLC, a U.K.-based apparel company, from 1995 to 2002, and served as an advisor to the board for a number of years after 2002. From 2010 to 2011, Mr. Hand served as a member of the board andnon-executive Chairman of Environmental Solutions Worldwide, Inc., a publicly traded manufacturer and marketer of environmental control technologies.
		Skills and Qualifications The Board benefits from Mr. Hand’s business acumen gleaned from three decades of leadership roles in the apparel marketing and manufacturing industry, including significant experience in sales and marketing. Mr. Hand’s long association with U.K. apparel company Austin Reed is valuable to the Board in its oversight of our U.K. and other international operations.



David S. Johnson Age: 60 Director Since: 2003 Independent Lead Director Since:2016 Committee Memberships: Compensation Nominating/Governance		Mr. Johnson has served as President and Chief Executive Officer of the Americas for Barry Callebaut AG, the world’s largest manufacturer of cocoa and chocolate products, since 2009. He is also a member of Barry Callebaut’s 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 The Board benefits from Mr. Johnson’s business acumen gleaned from over three decades of experience in the food and beverage industry, including significant experience in sales and marketing. His experience as a senior executive of multinational businesses, such as Barry Callebaut and Kraft, are valuable in the Board’s oversight of our international operations. In addition, his knowledge of corporate governance and executive compensation best practices as a member of Kraft’s Management Committee, as a board member of Michael Foods and as a member of Barry Callebaut’s global executive committee, strengthens the Board’s decision making.



Kay W. McCurdy Age: 66 Director Since: 2005 Independent Committee Memberships: Compensation Nominating/Governance (Chair)		Since 1975, Ms. McCurdy has practiced corporate and finance law at the law firm of Locke Lord LLP, where she has been Of Counsel since 2012 and was a partner from 1983 to 2012. 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 experience advising companies regarding legal, public disclosure, corporate governance, mergers and acquisitions and executive compensation issues provide her with a depth and breadth of expertise that enhances our ability to navigate legal and strategic issues, and allows her to make valuable contributions to the Board.



Ralph J. Nicoletti Age: 59 Director Since: 2016 Independent Committee Memberships: Audit		Mr. Nicoletti has served as Executive Vice President and Chief Financial Officer of Newell Brands, Inc., a publicly traded consumer goods company, since June 2016. From April 2014 to May 2016, Mr. Nicoletti served as Executive Vice President and Chief Financial Officer of Tiffany & Co., the publicly traded jeweler. 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 The Board benefits from Mr. Nicoletti’s financial expertise in various industries and his experience managing privacy and cybersecurity issues. Mr. Nicoletti’s experience as a senior executive of global, multi-national businesses, such as Kraft, Alberto Culver, Cigna, Tiffany and Newell Brands, are valuable to the Board as we continue to expand in the United States and abroad. In addition, his deep experience as a finance leader of publicly traded companies strengthens the Board’s ability to oversee accounting and disclosure issues, as well as the assessment and management of material risks.



Norman L. Rosenthal, Ph.D. Age: 65 Director Since: 2008 Independent Committee Memberships: Audit		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 Lindsey 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 private company board of The Plymouth Rock Company, a 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. In addition, in 2016, the NACD named Dr. Rosenthal a Leadership Fellow.
		Skills and Qualifications Dr. Rosenthal’s extensive experience in the insurance and finance industries is a valuable resource to us and greatly enriches the Board’s decision making. In addition, Dr. Rosenthal’s academic expertise in applied economics, combined with his decades of experience as a management consultant and director in the insurance sector, greatly enhances the Board’s ability to oversee our assessment and management of cybersecurity issues and other material risks.



		Our independent directors appointed David Johnson as independent Lead Director for atwo-year term

		The Board enhanced the independent Lead Director’s duties and responsibilities (see page 10)

		We added new talent to our Board



Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)⁽¹⁾		Option Awards ($)⁽²⁾		All Other Compensation ($)		Total ($)
Sherry S. Barrat		90,000		139,211		—		—		229,211
William L. Bax		113,750		139,211		—		—		252,961
D. John Coldman		90,000		139,211		—		—		229,211
Frank E. English, Jr.		90,000		139,211		—		—		229,211
Elbert O. Hand		108,750		139,211		—		—		247,961
David S. Johnson		115,000		139,211		—		—		254,211
Kay W. McCurdy		101,250		139,211		—		—		240,461
Ralph J. Nicoletti		90,000		174,419		—		—		264,419
Norman L. Rosenthal		90,000		139,211		—		—		229,211



				Common Stock Issuable Within 60 Days of March 20, 2017

Name	Shares of Common Stock⁽¹⁾			Stock Options		Restricted Stock Units⁽²⁾		Total Beneficial Ownership		Percent of Common Stock Outstanding

5% Stockholders

The Vanguard Group⁽³⁾ 100 Vanguard Blvd. Malvern, PA 19355		17,002,774			N/A		N/A		17,002,774		9.5	%

BlackRock, Inc.⁽⁴⁾ 55 East 52^nd Street New York, NY 10022		14,488,986			N/A		N/A		14,488,986		8.1	%

JPMorgan Chase & Co.⁽⁵⁾ 270 Park Ave. New York, NY 10017		13,609,878			N/A		N/A		13,609,878		7.6	%

NEOs, directors and nominees

Pat Gallagher		829,502⁽⁶	⁾		125,330		—		954,832		*

Doug Howell		168,764⁽⁷	⁾		93,563		—		262,327		*

Jim Gault		178,345⁽⁸	⁾		37,134		—		215,479		*

Jim Durkin		311,751⁽⁹	⁾		45,205		—		356,956		*

Tom Gallagher		408,919⁽¹⁰	⁾		50,135		—		459,054		*

Sherry S. Barrat		9,096			—		2,950		12,046		*

William L. Bax		34,320			—		2,950		37,270		*

D. John Coldman		2,782			—		2,950		5,732		*

Frank E. English, Jr.		10,150			—		2,950		13,100		*

Elbert O. Hand		29,316			—		2,950		32,266		*

David S. Johnson		45,878			—		2,950		48,828		*

Kay W. McCurdy		31,095			—		2,950		34,045		*

Ralph J. Nicoletti		867			—		2,950		3,817		*

Norman L. Rosenthal		24,675⁽¹¹	⁾		—		2,950		27,625		*

All directors and executive officers as a group (20 people)		2,282,849			502,910		26,550		2,812,309		1.6	%

•

Principle		~~Short-Term Incentives~~~~. We tie~~Features of Compensation Program Aligned to Principle

Pay-for-Performance		• Our program emphasizesat-risk incentive award opportunities, which are tied to specified financial objectives. • Our annual ~~cash incentives to company and/or business unit financial performance metrics, as well as~~incentive program is based primarily on the achievement of ~~individual~~key company performance ~~objectives.~~

•
Attract and Retain World-Class Talent		~~Long-Term Incentives~~. • Compensation elements and award opportunities are designed to position us to compete effectively for insurance, business, financial or other 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 with above-target pay when company performance goals are exceeded.

Stockholder Alignment		• We align the long-term financial interests of our named executive officers and ~~our~~ stockholders through (i) ~~equity awards (performance~~performance share units, stock options and restricted stock ~~units)~~units with long vesting periods and (ii) our Deferred Equity Participation Plan, ~~(Age 62 Plan),~~ which ~~we believe~~ encourages retention and alignment with long-term stockholder interests by requiring our named executive officers to remain employed with us through at least age 62 in order to vest in their ~~awards under the plan. In addition, our executive officers are subject~~awards. • Pursuant to ~~robust~~ stock ownership ~~guidelines.~~guidelines, senior executives own significant amounts of Gallagher stock throughout the term of their employment (6 times salary for CEO, 4 times for CFO and 3 times for other NEOs).

Committee Discretion		• While annual incentive awards are determined primarily based on achievement of company performance objectives, the Compensation Committee exercises negative discretion when necessary to adjust awards based on factors such as individual or business unit performance, changes in economic or business conditions or similar unanticipated occurrences.



Compensation Element	Objective	Key Features

Base Salary	Compensate named executive officers for fulfilling the regular duties and responsibilities of their positions	Base salary 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	~~Align the~~Reward strong operational and financial ~~interests of named executive officers with those of stockholders~~performance that further short-term strategic objectives	Annual cash incentives ~~are considered at-risk. Award amounts (including target and maximum payouts)~~ are determined based on the company’s achievement of performance measures tied to revenue and EBITAC growth ~~as well as other key annual financial~~ and ~~operational goals that drive stockholder value creation~~the Compensation Committee’s assessment of individual performance See below for more information

Long-Term Incentives Performance share units (PSUs), stock options and restricted stock units	~~Promote~~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	Long-term incentive opportunities are consideredat-risk. They are greater for named executive officers with a greater direct impact on long-term company performance PSUs, stock options and restricted stock units each tie named executive officers’ long-term wealth creation to the performance of our stock and provide multi-year vesting and overlapping maturity See pages 29-30 for more information

Deferred Equity Participation Plan ~~(Age 62 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 forone-year increments after such age Each NEO has ~~elected~~made an irrevocable election to invest their awards in a fund representing our common stock See page 35 for more information

•

Measure	Minimum ~~vesting~~ Performance	Performance Required for ~~equity awards. Our equity plans mandate (subject~~Maximum Awards	Actual 2016 Performance

Revenue – for the combined brokerage and risk management segments.	$3.00 billion	$4.25 billion (5% above 2015)	$4.25 billion (5% above 2015)

EBITAC – for the combined brokerage and risk management segments.	$250.0 million	$865.3 million (10% above 2015)	$923.0 million (17% above 2015)



EBITAC Growth		Percentage of Target Award Earned

15% or greater		100% of target award

5% to ~~certain very limited exceptions)~~15%		Amount interpolated between 50% and 100% of target award on a ~~minimum vesting period~~straight-line basis

5.0%		50% of target award

Less than 5.0%		0%



Pat Gallagher		Compensation

Chairman and CEO Age: 65 Gallagher tenure:43 years		Based on Pat Gallagher’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2016: Base salary – remained the same, at $1,000,000. Annual cash incentive – $2,250,000, the maximum award. Equity award – target value of $1,250,000, 60% in PSUs and 40% in stock options. Based on our 2016 performance (EBITAC growth of 17% against a 15% goal), 100% of his granted PSUs were earned. DEPP award – $900,000. Over the past three years, our total return to stockholders (including dividends) was 21.9%, while Pat Gallagher’s compensation increased by 24.3%. The Compensation Committee believes Mr. Gallagher’s compensation is appropriately aligned with our long-term total return to stockholders.
Performance
The Compensation Committee believes that Pat Gallagher performed extremely well in 2016, leading the company to 5% revenue growth and 17% EBITAC growth in our combined brokerage and risk management segments. Gallagher’s total return to stockholders in 2016 was 31.1%. In addition to these outstanding results, the committee specifically recognized the following aspects of Mr. Gallagher’s performance: Organic growth. The company achieved 3.1% of organic revenue growth during the year, 3.6% in the brokerage segment and 1.3% in the risk management segment. Mergers and acquisitions.The company completed 37 acquisitions representing $138 million in acquired annualized revenue. Quality and productivity. The company increased its adjusted EBITDAC margin from 24.8% to 25.3%. Capital management. Clean energy investments contributed $114 million to net earnings; the company returned $272 million to stockholders as dividends; no shares were issued for ~~all awards to our named executive officers. In practice, our PSUs cliff vest in three years,~~acquisitions (after stock ~~options vest ratably over years three through five,~~repurchases); the company maintained significant liquidity; and ~~our restricted stock units cliff vest in five years.~~the company remained well within its debt covenants.



Doug Howell		Compensation

Chief Financial Officer Age: 55 Gallagher tenure:14 years		Based on Doug Howell’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2016: Base salary – increased from $750,000 to $850,000. Annual cash incentive – $1,275,000, the maximum award. Equity award – target value of $850,000, 50% PSUs, ~~aligned with stockholder interests. PSUs are earned based~~25% stock options, and 25% restricted stock units. Based on our ~~financial~~2016 performance ~~during the year~~(EBITAC growth of ~~grant and paid~~17% against a 15% goal), 100% of his granted PSUs were earned. DEPP award – $450,000.
Performance
The Compensation Committee assessed Doug Howell’s performance in ~~stock on the third anniversary~~light of the ~~grant date. Earned PSUs are capped at 100%~~company’s overall performance as described above for Pat Gallagher. In addition, the committee recognized Mr. Howell’s leadership of ~~target,~~expense saving initiatives critical to increasing our adjusted EBITDAC margin, successful debt placements including favorable debt-covenant modifications, the successful execution and ~~no portion~~financing of ~~a PSU is earned if the company fails to meet a minimum performance threshold. See page 20.~~ourbolt-on acquisition program using only cash and debt, and significant growth in ourtax-advantaged clean energy investments earnings.

•

Jim Gault		~~Target~~Compensation

Chairman – Global P/C Brokerage Age:65 Gallagher tenure:43 years		Based on Jim Gault’s and ~~cap~~the company’s performance, the Compensation Committee made the following compensation decisions for ~~cash incentives. Our annual~~2016: Base salary – remained the same, at $800,000. Annual cash incentive ~~program targets awards at 150%~~ – $1,200,000, the maximum award. Equity award – target value of ~~base salary~~$600,000, 50% PSUs and 50% stock options. Based on our 2016 performance (EBITAC growth of 17% against a 15% goal), 100% of his granted PSUs were earned. DEPP award – $400,000.
Performance
The Compensation Committee considered that Jim Gault’s division achieved 4.4% revenue growth, to $2.36 billion, and 27.1% EBITAC growth, to $523.3 million. In addition, the committee recognized him for ~~our CEO~~achieving substantial new business sales (an internal measure of new business production) and ~~100%~~ for ~~our other named executive officers. We cap~~his leadership of the annual cash incentive opportunity at 150% of target awards (i.e., 225% of base salary for our CEO and 150% of base salary for our other NEOs). See pages 15-16 for a discussion of performance measures and hurdle rates.division’s strong acquisition program.

•

Jim Durkin		~~Stockholder-friendly equity plan provisions~~~~. Our equity plans prohibit liberal share recycling~~Compensation

Chairman – Employee Benefit Consulting and ~~re-pricing, as well as~~Brokerage Age: 67 Gallagher tenure:41 years		Based on Jim Durkin’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2016: Base salary – remained the same, at $725,000. Annual cash ~~buyouts~~incentive – $1,087,500, the maximum award. Equity award – target value of $543,750, 50% PSUs and 50% stock ~~options~~options. Based on our 2016 performance (EBITAC growth of 17% against a 15% goal), 100% of his granted PSUs were earned. DEPP award – $400,000.
Performance
The Compensation Committee considered that Jim Durkin’s division achieved 10.6% revenue growth, to $889.2 million, and ~~SARs.~~8.4% EBITAC growth, to $233.7 million. In addition, the committee recognized him for his leadership in deploying a sales development program and his division’s strong acquisition program.

•

Tom Gallagher		~~Prohibition~~Compensation

CEO – Global P/C Brokerage Age: 58 Gallagher tenure:37 years		Based on ~~hedging.~~ ~~Executive officers~~Tom Gallagher’s and ~~directors are prohibited~~the company’s performance, the Compensation Committee made the following compensation decisions for 2016: Base salary – increased from ~~engaging~~$700,000 to $750,000, his first increase since 2011. Annual cash incentive – $1,125,000, the maximum award. Equity award – target value of $562,500, 50% PSUs and 50% stock options. Based on our 2016 performance (EBITAC growth of 17% against a 15% goal), 100% of his granted PSUs were earned. DEPP award – $400,000.
Performance
Tom Gallagher was promoted to his current role in ~~any hedging transaction involving~~November 2016. The committee assessed his performance based on his prior role as leader of the international brokerage division. In a difficult pricing environment, and with an adverse foreign exchange impact, that division declined 0.4% in revenue, to $1.19 billion, but through expense management and productivity initiatives, achieved 72.5% EBITAC growth, to $210.1 million. In addition, the committee recognized him for his leadership in overseeing improvements to our ~~common stock.~~governance and risk management processes in our UK business and instilling the Gallagher culture in our international operations.


NAMED EXECUTIVE OFFICER	TARGET PERCENT OF SALARY	TARGET GRANT AMOUNT	PERFORMANCE SHARE UNITS	STOCK OPTIONS	RESTRICTED STOCK UNITS
Pat Gallagher	125%	$1,250,000	60%	40%	—
Doug Howell	100%	$ 750,000	50%	25%	25%
Jim Gault	75%	$ 600,000	50%	50%	—
Jim Durkin	75%	$ 543,750	50%	50%	—
Tom Gallagher	75%	$ 525,000	50%	50%	—